Theories and Facts of International Trade

In economics, a commercial transaction involves two types of flow: real flows and financial flows. The former, known as international trade, fall under the heading of international economics (as opposed to international finance). Having emerged from a simple analysis of two goods traded between two countries, international economics originally made assumptions that are difficult to accept today. Nowadays, the theory of international economics must account for the growing openness of national economies and the simultaneous internationalisation of trade, production structures and technology flows. It has now become more proactive and often heterodox compared with traditional thinking. When countries possess different goods, different needs, or both, trade that is beneficial to all parties is possible. No country can be entirely self-sufficient without sacrificing a significant portion of its standard of living. It is well established that, very often, trade between two partners proves less advantageous than multilateral trade, which involves more than two partners.