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Absolute theory of Adam Smith was born with three revolutions: the industrial revolution, the revolution the United States and the French Revolution. This theory builds on the theory of free trade, was developed in this period. According to Adam Smith, the nation will gain when engaging in international trade based on absolute advantage of that country.
The use of the concept of absolute advantage is the simplest explanation of how to trade processing. However absolute advantage only explain a small part of the current international trade, that trade between developing countries and developed countries. Much of world trade, especially trade among developing countries can not be explained by the absolute advantage.
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