International trade, investment, migration and global economy, effects in the daily life, our global is a world of economic relationships; one cannot leave the world behind, in multinational cooperation and world financial markets. There are special problem in developing international economics, for the deep analysis of the international economies, theories need to support and balance the internal relations or global economy. The theories of International Economics, I think support the dispute of Europe and global economy are absolute advantage theory and comparative advantage theory. These theories could be beneficial to sustain the international trade and global surroundings.
Comparative Advantage Theory:
Based on trade, any company could have competitive advantage; the country can get benefits after export its commodity or products, and if the country has inefficient ways of production, then country can import the products. Comparative advantage theory can support the economy and can lower or lessen the rate of disputes. If the company is producing higher number of products in lower price, then through comparative advantages, benefits and stability could be attain. However, if any country is producing less number of products in higher prices then import products on lessen prices, than country own production, will also give comparative advantages to the country. For example, if America is producing clothes at cheaper or lesser prices than in India, and India is producing crops (wheat) at cheaper or lower price than America, than comparative advantage can take place (Hantal, 2015).
In this way, relationship between both the countries could be better, and dispute rate around the world, on different issues could be resolved, it will also result in increase domestic opportunities and production, as the country needs to get reimbursement in future, from fewer input maximum fruit or output could be generated. Through comparative advantage, transportation cost could also be saved. If one country is less productive, then export can be helpful, world trade have laws and regulations to prolong this theory, natural environment could be sustain. As regarding to the health issues, to remove disputes, as country get many disadvantages of disputes trading is essential, economy of the country can also develop strong relationships with other country, and can help them and get help when needed.
Absolute Advantage Theory:
The absolute advantage theory, is based on the principle of specialization, the country need to be special in something, product, cost effective if want to implement the theory, the theory is very effective in managing the disputes and relationships with other country. Many countries laws and regulations are supporting the theory, as global sustainability, effectiveness, international trade, international investment etc, could be achieved. Efficiency and labor cost in involved in this advantage, according to theory, if one country is producing same number of items, using limited resources and workforce, than the other country then absolute advantage can take place. Example, America has 100 labors, 20 labors produce 80 units of product A and 80 labors produce 20 units of product B in a same time, however, in china 100 labors, 80 of them produce 20 of product B and 80 produce 20 of product A. In this both country can get absolute advantages and can support their economy through more efficient allocation of the resources (Hantal, 2015).
Fewer input is used to make maximum unit of products, labor, capital, land could also be used in an effectual way. As, European countries has banned the meat of beef regarding health issues, however, benefits country can get benefits in other ways, moreover, disputes should be resolved.
- Hantal, B. (2015). Theories of International Economics according to Peter Wilson. Retrieved April 4, 2016, from http://www.yourarticlelibrary.com/economics/theories-of-international-economics-according-to-peter-wilson/39777/