Discuss the extent to which trade theory can be used to explain the competitiveness of locations.

Competitions between countries striving for trade surpluses have led to a number of scholars to establish various schools of thoughts, which could be utilized by government and large multinational corporations to decide on trade policies and seek best business investment opportunities. In the 18th Century, Adam Smith published his famous Wealth of Nations (1776). Smith's theory, Theory of Absolute Advantage was the first to explain why unrestricted free trade is beneficial to a country. Free trade …

…diamond model is a good starting paradigm for analysing important determinants of global competitiveness. However, this model is incomplete, mainly because he doesn't adequately incorporate multinational activities. In conclusion, based on the above review, it shows the limitations of the theories and helps us to understand why no single theory can explain the competitiveness of locations in trade theory. Simply put, the subject is too complex to be explained with just one or two theories.