International trade theory Essay Example | Topics and Well Written Essays - 250 words

International trade theory - Essay Example Therefore, a country should only specialize in the production of its efficient commodity. Interpreting this account to the illustration on chart 4-10, Ghana specializes in the production of cocoa for commercial purposes than Korea who takes its advantage based on rice. Ghana being 4 times more efficient in cocoa productivity than Korea who specializes in rice gives absolute advantage of each other in trade negotiations. Besides, the theory of comparative advantage illustrates that country’s exports should not be measured by quantity but efficiency to avoid market dominancy. For instance, if 4tones of cocoa were exchanged by 4tones of, rice from Korea then Ghana would be susceptible compared to Korea (Pomfret 107). Clusters or networks of similar companies in the same industry are always encouraged as this harmonizes competitive advantage of the countries involved by creating room for innovations otherwise improving productivity. Cluster is also very essential for the promotion f a particular good or service believed to be efficiently located (Pomfret