International trade involves across border exchange and this increases the cost of trading. Factors like tariffs, restrictions, time costs and costs related with legal systems of the countries involved in trade make the international trade a costly affair; whereas the extent of restrictions and legal hassles are considerably low in case of domestic trade.
When it comes to the comparison between international trade and domestic trade, the factors of production assume a crucial role. There is no denying that mobility of factors of production is less across nations than within the domestic territory. The incidence of trade in factors of production like labor and capital is very common in case of domestic trade; while in case of international trade exchange of goods and services contributes the major share of the total revenue.
International trade theory has always been a preferred field of research amongst the traditional and contemporary economists. The international trade models attempt to analyze the pattern of international trade and suggest ways to maximize the gains from trade.
Among the different international trade theories, the Ricardian model, the Heckscher-Ohlin model and the Gravity model of trade are worth mentioning.
The Ricardian model of international trade is developed on the theory of comparative advantage. According to this model countries involved in trade, specialize in producing the products in which they have comparative advantage.