International Trade Operations - Latvia Essay Example | Topics and Well Written Essays - 500 words

International Trade Operations - Latvia - Essay Example plained that a country will export the goods and services that it is able to produce at a lower opportunity cost and import those goods and services that it would otherwise produce a higher opportunity cost (Pugel, 2003, p. 39). Eli Heckscher, a Swedish economist, developed the core idea in 1919 about the international trade pattern. According to him, a country would export the products that use its abundant factors intensively and import the products that use its scarce factors intensively (Pugel, 2003, p. 39). To be more succinct, as Fedotovs (2010, p. 52) noted, a country will export goods whose production is intensive in factors that the country is abundantly endowed. Fedotovs (2010) explained international trade patterns of Latvia, based on the evidences of Latvia’s access to European Union and related how both the theories, comparative advantage and Heckscher-Ohlin theorem explain the case of Latvia. His work has proved the validity of both the theories and concluded that both the theories can be said to be applicable to the case of Latvia. A comparison between the major sectors of minibuses, cement, timber and Livestock etc of both Latvia and European Community, it can be observed that Latvia could claim to have comparative advantage in some areas despite the fact it lagged behind the EC. The productivity of Latvia in some sectors like milk, livestock, grain and meat has proved 17 to 25 times below the level of EC, and same time the productivity in some other sectors were found to be only 5 to 6 times less, and therefore, it can be explained with the theory of comparative advantage. Fedotovs (2010) has given Timber as an example for Latvia’s export to European Market, because Latvia gained comparative advantage in producing timbers as the productivity ratio to other countries was higher than in other industries. Between the periods of 1920s and 1930s, timber was the major export of Latvia and, during this period, the market share of timber has been