In order for global businesses to carry out their economic activities, trade theories are explored to help them strategize their means of operations beyond borders. Trade theories enable global companies to decide what, how much, and with whom to import and export. There are business theories that involve a lot of government intervention in business activities, such as mercantilism, and others that practice less government intervention, such as the theory of absolute advantage. This article will compare these two theories of international business and the impact of government intervention on global businesses. Say no to plagiarism. Get a tailor-made essay on “Why violent video games should not be banned”?Get the original essayThe first commercial theory of mercantilism took place in the 16th century, where it allowed the government to intervene and encourage commerce as a means of generating wealth for the motherland. Wealth was generated by exporting more goods than by importing. The goal was to encourage a trade surplus while the government limited imports and subsidized uncompetitive products to increase the country's overall revenue. European countries, particularly Britain and France, became a dominant force that embraced mercantilism. The British government ensured that its American colonies would provide raw materials like oil and grain to the mother country while exporting finished goods to others. This favorable trade surplus was intended to increase national wealth through the exchange of gold and silver. Because the American colonies were heavily dependent on Britain, they were further restricted by the British government due to increased taxes and inflation. This caused great colonial distress and limited the growth and freedom of colonial enterprises. They could not conduct foreign business with other countries, which is a great disadvantage because no country has all the natural resources, favorable geographic conditions, and technology necessary to produce everything a country needs. Countries in the 18th century focused more on reducing trade barriers. movement of trade and production. This allowed products to be competitive with others, leading to increased efficiency and a greater variety of goods and services at a lower price. Free trade theories such as absolute advantage paved the way for the import and export of specialized goods and services to other countries. This notion is based on Adam Smith's statement that the wealth of a country is based on the goods and services available. His theory of absolute advantage held that instead of mercantilism, free trade promotes a thriving economy and country. He also reasoned that other countries can produce different goods more efficiently than others, meaning consumers should not be forced to buy locally produced goods when they can instead buy cheaply locally. 'stranger. Specialization gives countries a competitive advantage resulting in higher global production. For example, thanks to Ecuador's natural geographic advantage, they can produce large, long-lasting roses that play a central role in their million-dollar global rose trade. Another example is Taiwan tea leaves, which was their main export. Taiwan's high altitude gives.