Role of Technology in National Gain From International Trade

This paper analyses how the technology transfer and development influence the country’s benefit from international trade. Knowledge developed in one country has positive effects on other countries through trade. Trade leads to the spread of international technology for three major reasons. First, technologically more sophisticated intermediate goods become available for production. Second, the technological specifications of intermediate and final goods developed abroad can be studied and the intrinsic knowledge can be acquired. Finally, trade favours person-to-person communication as an important vehicle of knowledge transfer. However, countries have different abilities to absorb technology developed elsewhere. A wide range of policies can be used to foster technological progress at the national level. The multilateral trading system (and international organizations more generally) can play a role in facilitating international technology transfers