The Evolution of International Trade Models: A Review of Theoretical Perspectives

Abstract

The evolution of international trade theory represents one of the most enduring intellectual trajectories in economics, reflecting successive attempts to explain the organisation, distribution, and dynamics of global exchange. From Smith’s (1776) foundational articulation of Absolute Advantage to the complex digital trade frameworks emerging in the 2020s, theoretical progress has mirrored structural shifts in production systems, technological capabilities, institutional architectures, and firm-level behaviour. This study undertakes a systematic synthesis of major trade theories from 1776 to 2024, integrating classical, neoclassical, New Trade Theory, New–New Trade Theory, Global Value Chain (GVC) perspectives, and emerging digital trade models. Using a structured review methodology grounded in transparent inclusion and exclusion criteria, the paper compares the assumptions, mechanisms, and empirical relevance of each theoretical strand. The analysis highlights a progressive movement from country-level explanations to firm-level heterogeneity, network-based fragmentation, and data-driven value creation. The review further contextualises the evolution of trade theory within contemporary policy environments, including India’s expanding engagement with multilateral and regional trade frameworks, digitalisation strategies, and participation in global production networks. The synthesis reveals significant conceptual advances but also identifies gaps relating to sustainability governance, digital trade regulation, and value chain restructuring. By consolidating dispersed theoretical developments, the study contributes an integrated perspective that advances scholarly understanding and informs future research on the determinants and direction of global trade.