Answer to Question #166051 in Economics for Manyela

Question

The New trade theory suggests that the ability of firms to gain economies of scale has shown significant implications for international trade. Trade is mutually beneficial because it allows for the specialisation of production in specific locations where final products are produced.

Critique the new international trade theory propositions and ways in which this situation would be improved? What are the major problems this arrangement poses to the generation and movement of raw materials and finished products? 

Answer 1

New trade theory also becomes a factor in explaining the growth of globalisation. It means that poorer, developing economies may struggle to ever develop certain industries because they lag too far behind the economies of scale enjoyed in the developed world.