Pairs of Trading Relationships

Pairs of Trading Relationships


Although the theories regarding country differences and similarities help to explain broad world trade patterns, such as between industrial countries and LDCs, they do little to help us understand specific pairs of trading relationships. Why, for example, will a particular industrial country buy more from one LDC than another? Why will it buy from one industrial country rather than another? Although there is no single answer to these questions that will explain all product flows, the distance between two countries explains more of these world trade relationships than any other factor. This is especially true for products for which the transport cost is high relative to the production, _cost.
Cultural similarity, as expressed by language and religion, also helps to explain much of the direction of trade. Apparently importers and exporters find it easier to do business in a country that they perceive as being similar. Likewise, much of the trade between specific industrial countries and LDCs is explained by historic colonial relationships. Importers and exporters find it easier to continue business ties than to develop new distributorship arrange> ments in countries where they are less experienced.

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