ucture and production possibilities. For example, a country with abundant land and labor tends to be an efficient producer of agricultural goods, whereas an abundance of capital and a scarcity of labor encourages efficiency in sophisticated manufacturing that requires laborsaving machinery. Since international trade today is much more sophisticated than in simpler times when wine was swapped for cloth, many economists now accept a fourth and even a fifth factor of production: technology and managerial talent. The ability of a given country to be efficient in certain industrial products (e.g., Japan in electronics and the United States in computers) cannot be explained adequately only in terms of land, labor, and capital.
The theory of international trade is, therefore, dynamic. It must be continually modified to accommodate changes in business conditions, and especially to adapt to the increasing role of foreign trade of multinational corporations. A growing volume of trade in manufactured goods is being done on the basis of an intracorporate transaction, not an arm's-length sale between nationals of two different countries.
The essential elements of modern international trade are still intact. The theory holds
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