As a result, companies in certain sectors, such as electronics and chemicals, have become multinationals and have begun to buy and produce parts and materials in a number of countries. Every time these parts and materials cross a border, an international commercial operation has taken place; and then, when the last property is exported, there is another international trade transaction. The comparative advantage theory starts from a world where trade between countries is balanced or, at the very least, where countries have a trade surplus or trade deficit, whether cyclical and temporary.  The easing of the assumption that “international trade between nations is balanced could lead a loss-making nation to import certain raw materials in which it would have a comparative advantage and which would in fact export with balanced trade,” says Dominic Salvatore. But he doesn`t see it as a major problem, “because most trade imbalances in relation to GNP are generally not very large.”  Geza Feketukuty, the leading U.S. negotiator for services in the Uruguay Round, gives a wonderful anecdote about the early efforts to begin negotiations on trade in services: “The Swiss delegate . . . trade in services by pointing out how impossible it was for him to have his hair cut in another country by a hairdresser.
The chairman of the committee. . he replied that every woman in Germany had benefited enormously from French exports of hairdressing services, and she was convinced that the delegate`s wife would confirm that this was the case in Switzerland.  Smith and Ricardo considered only work as a “factor of production.” In the early 1900s, this theory was developed by two Swedish economists, Bertil Heckscher and Eli Ohlin, who took into account several factors of production.  The so-called Heckscher-Ohlin theory basically states that a country will export products produced by the factor it has in relative abundance and that it will import products whose factors of production require factors of production where it is relatively less abundant. This situation is often presented in economic manuals as a simplified model of two countries (England and Portugal) and two products (textile and wine). In this simplified presentation, England has relatively abundant capital and Portugal has relatively abundant labour, and the textile is relatively capital-intensive, while wine is labour-intensive.