1. Adam Smith's theory of absolute interests and David Ricardo's theory of comparative interests.
2. Heckscher-Ohlin's "factor ratio" and Leontief's counter-argument.
3. Protection trade theory.
International trade theory tries to explain why there is international trade, and how a country should treat international trade. The development of international trade theory has gone through four major stages: classical, neoclassical, new trade theory and emerging classical international trade theory.
Classical and neoclassical international trade theories are premised on assumptions such as perfectly competitive markets, emphasize the mutual benefits of trade, and mainly explain inter-industry trade.
