ABSTRACT
This chapter explains the main purpose of international trade to obtain gold and silver from foreign buyers, from the end of the sixteenth century. It prefers to consider international trade flows as the result of business decisions and specialisation shaped by the institutional environment that characterises a given area, an area normally defined as a country. In particular, a lack of high-tech companies is sometimes perceived a national dishonour, and their presence might even turn out to be a rewarding investment in future prosperity. This point about future winners also resonates in what is generally known as the infant industry argument. The chapter emphasises that business-friendly institutional environments tend to encourage specialisation in long-term projects that make use of skilled labour and sophisticated equipment. By contrast, a business-hostile institutional context restricts choice by forcing producers to select industries and segments less vulnerable to the vagaries of taxation, regulation, and ineffective law enforcement.
