Factor Endowment Theory, Strategical Trade Policy And Development Of Dual Economy

Factor endowment theoryis the crucial part of modern internationaltrade theory, and strategical trade policy theory is a importantcontentofthe "New Trade Theory". The debate on whether comparativeadvantage strategy or strategical trade policy should be adopted in Chinatoday reflected the divergence between these two theories. This dissertation argued that the comparative advantage strategybased on the factor endowment theory is more feasible to China'sdualeconomy than the strategical trade policy, and the criticism on thecomparative advantage strategy, based on the strategical trade policytheory, is not very persuasive, which, to a great extent, results fromsome misreading of these two theories. This dissertationalsoarguedthatmany questions in the debate should be very clear without muchillustrationoncewe investigated the theories which support the differentopinions and acquired a comprehensive and exact understanding ofthem. Under this background, this dissertation reviews both the factorendowment theory and the strategical trade policy theory, and thenillustrates that factor endowment theory, and, accordingly, thecomparative advantage strategy, are more feasible to the dualdeveloping countries than strategical trade policy theory and thestrategical trade policy respectively; the strategical trade policy cannotbecome the theoretical basis of the developing counties'foreign tradestrategy and policies because of its defectiveness both in theoreticalandempirical facets. Lastly, this dissertationproposes several pieces of briefpolicy advice on how to implement comparative advantage strategy inChina's dual economy.