Mercantilism & Heckscher-Ohlin Theory

Mercantilism is a trade theory that supports government regulatory efforts in international trade to protect domestic producers. According to this theory merchants and governments must work in tandem with the government helping local merchants in event of stiff competition. The government can help local merchants by imposing duties or raising duties on goods where local producers are finding it difficult to compete with international sellers. This theory in a way supports economic nationalism and legitimizes international trading only in goods which can create surplus for a nation. The theory argues that surplus can be used to further national growth while deficit trade should be prohibited (Brezis, 2003). The surplus can also be used to support method of production.