Navigating the Shifting Tides: A Critical Assessment of International Trade Theory and Policy in the Era of Emerging Trade Agglomerations
Jadhav Chakradhar and A V Manjunatha
Abstract
In recent decades, significant changes have fundamentally altered the global trade landscape. In this paper, a comprehensive examination of trade theories is attempted, spanning classical theories like comparative advantage to modern perspectives incorporating economies of scale, trade costs, product differentiation, imperfect competition, and new economic geography. Categorising these theories into traditional, new, and 21st-century paradigms, their theoretical and empirical developments are explored in detail. The motivations behind regional trade agreements are depicted from a trade policy perspective. The established gravity model is critically examined, considering theoretical and recent advancements. Further, the diminishing significance of distance and critiques associated with gravity models are discussed. Finally, the concept and operations of trade agglomeration emerging in world trade are illustrated, offering a nuanced perspective on the dynamic landscape of global trade theories and their applications.