A New Framework Of Analyzing Gains From Trade In Consideration Of Risks

Risks and uncertainties have always been excluded from the discussion of gains from trade in classic theory of international trade in which there has been an overview that gains from trade is one of the most important trade motivations. However, risks in trade and gains from trade are interacting in a real international trade system, which should not be ignored. Risk in trade arises from various uncertainties during the whole process of trade, and has a great influence on gains from trade by generating additional costs and loses in transaction. Besides, by changing the way in which risk is shared among different parties, risk management actions also affect interest-sharing pattern in trade. In order to have a better understanding of trade patterns and policies adopted by different interest groups in international trade, the study in this paper focuses on the interacting mechanism between risk in trade and gains from trade. In this regard, a new framework of analyzing gains from trade in consideration of risks is put forward here, and is used for further discussion in demonstration.