Under the scheme of globalization, the major concerns of international trade are no longer confined to pure export expansion and revenue growth. In our research, we focus on the study of the long-term sustainability of the overall dynamic economic advancement for countries in the balanced bilateral international trade. Specifically, we redefine the connotation of factor endowments in the framework of the modern economy and propose a new measurement of the level of factor endowments on the basis of total factors of production, which represents the strength of a country’s competitive advantage and has significant effects on the long-term economic development in its participation of international trade. In order to figure out the essence of dynamic trading disparities between two countries in a long-term balanced bilateral international trade, we undertake both the comparative point and intertemporal profit analyses. Different from the previous study, we take into account the part named as loss of trade instead of just the direct production costs for item exchange. The contents of loss of trade cover not only the production costs as the directly part but also the external part due to cost shifting in the procedure of trading competition such as social welfare decline and environmental deterioration. The latter part tends to have a long-term impact on the overall profit growth for a country considering its hysteretic and cumulative properties and has a close relationship with the level of factor endowments. On the basis of above discussions, we first construct and prove a series of theorems with existence of heterogeneity of factor endowments between two countries in a long-term balanced bilateral international trade, all of which are illustrated in the established “A-J” Model. In addition, we also investigate the opposite condition with homogeneity of factor endowments and propose the Theorem of Homogeneity of Factor Endowments presented as a benchmark for the policy analysis. Thus, according to our theoretical study, we could fundamentally analyze the intrinsic determinants for the occurrence of the tragedy of international trade and immiserizing growth among developing countries from the perspective of heterogeneity of factor endowments and contribute to reconsidering the existent neoclassical international trade theory as well as the new trade theory proposed by Krugman. In the end, combining our theoretical research value with the practical guidance for a country’s long-term dynamic economic advancement, we retrieve the corresponding series of policies including the path of enhancement of factor endowments, the adjustment of trading structure and trading volume as well as a country’s industrial development for decision making.
Heterogeneity of factor endowments
Theorem of Homogeneity of Factor Endowments
Loss of trade
Long-term trading sustainability