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International trade enables countries to use their labor£¬ capital£¬ and other resources in the mostproductive manner possible. In this way they can enjoy a larger quantity and variety of goodsthan if they did not trade with one another. The classical model of economics£¬ however£¬ holdsthat to realize the greatest possible gains from international specialization and trade£¬ industriesmust be competitive and workers able to enter or leave occupations without difficulty£¬ andgovernment policies must encourage efficiency and promote competition. The tendency of countries to specialize in the production and export of things they canproduce best and relatively cheaply is called by economists£¬ the principle of comparativeadvantage. According to it£¬ countries specialize in some products and not in others because ofdifferences in their national factor endowments and technological capabilities. Factor Endowments A country's factor endowments include its stocks of physical capital£¬ human capital£¬ andnatural resources. Physical capital consists of machinery£¬ factories£¬ highways£¬ railways£¬harbors£¬ and other equipment and facilities used in production. Human capital representsinvestment in the labor and management force through education£¬ on-the-job training£¬ andwork experience. To understand what determines the kinds of products that a nation exports orimports£º a first step is to compare its factor endowments with those elsewhere. Japan£¬ forexample£¬ is relatively abundant in physicF1 and human capital but deficient in agricultural landand other natural resources. It thereforesells manufactured goods and machinery abroad inorder to pay for its imports of agricultural products and raw materials. ¡­¡­