OVERCOMING ABSOLUTE AND COMPARATIVE ADVANTAGE: A REAPPRAISAL OF THE RELATIVE CHEAPNESS OF FOREIGN COMMODITIES AS THE BASIS OF INTERNATIONAL TRADE

David Ricardo indicated in his famous numerical example in the Principles that it would be advantageous to Portugal to import English cloth made by 100 men, although it could have been produced locally with the labor of only 90 Portuguese men. As the production of the cloth required less quantity of labor in Portugal, it has been commonly inferred that this country had a production cost advantage over England in cloth making. This inference will be proven wrong here by showing that the English cloth had a lower cost of production than the Portuguese cloth. This finding refutes the widespread belief that Ricardo had formulated a new law, principle, or rule for international specialization, known as “comparative advantage.” He used the same rule for specialization as Adam Smith in the Wealth of Nations. Thus, the popular contraposition of Smith’s absolute versus Ricardo’s comparative cost advantage has to be dismissed.

Economic Complexity Perspectives on Structural Change

Recent collaborations between economists and physicists have cleared the way for innovative research on the relationship between economic diversification, international specialization, trade and economic development. The resulting literature rests on the idea that the products that countries produce provide information about the non-tradable productive capabilities that countries have. These capabilities include infrastructure, institutions, regulations, and specific productive knowledge and skills. The greater a country’s capabilities, the greater the variety of goods a country can produce. Therefore, economic diversification is considered a quintessential characteristic of economic development. Within this framework a diversified economy is considered to be a complex one. This complexity is not simply due to the mere number of productive sectors but also to the interconnections that arise because of the shared capabilities that they require for production. To study these interconnections, the recent literature proposes and uses tools, methods, and measures of network theory and systems dynamics. This chapter summarizes this literature and links it to important debates on structural change.

The system of customs and tariff regulation of the EAEU in the context of globalization: problems, trends and prospects of development

Research background: Simplifying the system of foreign trade relations and providing advantages to individual States, allows you to increase the volume of foreign trade turnover and most effectively transform the structure of exports and imports of the country, taking into account its international specialization and competitive advantages. An integral component of the process of globalization is the strengthening of competition between national and foreign producers. In these conditions, it is important for the national economy to achieve a certain balance between protectionist measures and free trade instruments. Purpose of the article: The purpose of this article is to summarize the theoretical and practical experience of using the tools of customs and tariff tools and develop recommendations to improve the efficiency of their application within the EAEU. Methods: The research used methods of generalization, classification and comparative analysis of theoretical and methodological approaches to assessing the effectiveness of customs tariff instruments and their individual elements, methods of setting scientific hypotheses, grouping research depending on the conclusions and results obtained, and the possibility of using this experience to improve the system of customs and tariff regulation of the EAEU. Findings & Value added: As a result of the research, it was possible to identify the most acute problems of the customs and tariff regulation system of the EAEU, to identify their impact on the economy of the member States, to offer recommendations for improving the tools of customs and tariff regulation, and to assess the economic effect of the proposed recommendations.

OVERCOMING ABSOLUTE AND COMPARATIVE ADVANTAGE: A REAPPRAISAL OF THE RELATIVE CHEAPNESS OF FOREIGN COMMODITIES AS THE BASIS OF INTERNATIONAL TRADE

David Ricardo indicated in his famous numerical example in the Principles that it would be advantageous to Portugal to import English cloth made by 100 men, although it could have been produced locally with the labor of only 90 Portuguese men. As the production of the cloth required less quantity of labor in Portugal, it has been commonly inferred that this country had a production cost advantage over England in cloth making. This inference will be proven wrong here by showing that the English cloth had a lower cost of production than the Portuguese cloth. This finding refutes the widespread belief that Ricardo had formulated a new law, principle or rule for international specialization, known as comparative advantage. He used the same rule for specialization as Adam Smith in the Wealth of Nations. Thus, the popular contraposition of Smith’s absolute versus Ricardo’s comparative cost advantage has to be dismissed.

Imperatives of global digital platform management

The article critically analyses the phenomenon of global digital platforms, which have become key actors in the international movement of factors of production and studies the approaches to their management. The methodological basis of the research includes the main provisions of the emerging theory of ecosystems and digital platforms, questioning the postulates of theories of international business and strategic management. The article uses the methods of comparative, structural and system-based analysis in the context of their application for assessing digital transformation and managing global digital platforms. The study shows that universal determinants and competitive advantages of global digital platforms are the following: the ability to overcome trade barriers; providing liquidity through transactions; low marginal cost; more efficient use of assets and attraction of investments; and the ability to significantly enhance international specialization. The authors propose an approach for differentiating traditional business models and platform business models based on avoiding linear optimization of internal processes and centralized exchange of value. We establish the conceptual aspects of the expansion of global digital platforms’ business activities. This is due to the emergence of new components of the digital infrastructure that modifies the principles of international business and the administration methods of transnational corporations, which are no longer focused on location. The paper identifies the management problems and risks experienced by traditional companies when creating platforms: dependence on key platforms, increasing costs incurred in market entry, and difficulties when functioning within the lightweight asset model. The formation and development of global platforms not only affect the system of economic relations, but also stimulate changes in corporate governance models and technologies.

International trade as a factor of ensuring positive dynamics of export of ukraine

The subject of the research is a set of institutions and mechanisms of a system of effective foreign trade activity in the world and in Ukraine in the conditions of crisis and state regulation. The goal of writing this article is to develop prac- tical, scientific, and methodological recommendations to improve the efficiency of foreign trade of Ukraine. The methodology of the work is a system-structural and comparative research (to understand the logic of the functioning of international institutions regulating trade in the world); monographic analysis (when studying the problems of improving the model of international specialization of the Ukrai nian economy); statistical and economic analysis (in assessing the status and pros- pects of export-import operations of the Ukrainian economy). Results of work–it was revealed that the modern model of international specialization of the Ukrai- nian economy is unpromising and unstable to crisis phenomena. It is proposed to systematically increase the manufacturability and innovativeness of domestic ex- porters, which will contribute to sustainability and competitiveness in foreign markets, even during times of crisis. In addition, it is necessary to introduce an updated state macroeconomic and financial investment policy in Ukraine to reduce the impact of crisis in the economy and improve the export-import balance of trade. Conclusions–a targeted policy is needed to support the export activity of Ukrai- nian enterprises and focus on innovation and finding new markets. In this context, a combination of macroeconomic and financial-investment state support for export promotion is necessary; as well as the introduction of tax and customs instruments for export support, trade facilitation and regulatory requirements to reduce the transaction costs of exporters, the intensification of technical assistance and fi- nancial support for exports, the development and institutionalization of mechanisms for information, legal and methodological support for exporters.

International Trade Since 1914

Long-distance international trade for hundreds of years stemmed primarily from differences in climate. Generally free-trade policy and reduced transport cost superimposed another pattern by 1914; one of greater international specialization based upon land and labor abundance or scarcity. The broadly open trading world of the beginning of 1914 broke down first under the impact of war and then of the Great Depression. By 1945 the United States had emerged as the most powerful nation, committed to establishing a world order that would not make the mistakes of the preceding decades. The promotion of more liberalized trade among the wealthier nations, over the following decades hugely expanded the volume of trade. Trade in manufactures—based on skill endowments and preference diversity—came to dominate that in primary product. Services strongly increased in importance, especially with the rise of e-commerce. Oil displaced coal as the world’s principal fuel, redistributing income to those countries with substantial oil deposits. The greatest threat to the continuing expansion of world incomes and trade came from the Great Recession of 2008–2009, but the World Trade Organization regime discouraged the mutually destructive trade wars of the earlier period. However, the WTO was less successful 10 years later in restraining the damaging United States–China trade conflict.

Conventional Theory’s Relevance: Evidence from Japan

The formidable surge in the volume of international trade after 1960 stimulated surveys designed to ascertain to what degree the commercial flows among nations reflected the structure of their economies, in other words, how tight was the correlation between international exchanges and the specific attributes of participating nations. In fact, scholars were keen to test the relevance of the conventional Heckscher-Ohlin theory, that is, to what extent did nations’ exports reflect their endowment with factors of production, more specifically, whether their exports used their abundant factors intensively. I try to show that, although most of the tests reached their purpose in that they confirmed the conventional theory’s predictions, in certain cases such as Japan, whose economy is arguably idiosyncratic, factor specificity is more relevant than factor intensity in explaining, not only the country’s international specialization but also the premises of its uncanny 20th century ascendance to the top of the world economy.