The essence of traditional international trade theory is that poorer countries produce goods and services with resources that they have in abundance, mainly low skilled labor and sometimes natural resources. They export these goods, and import goods from the richer countries that require skilled labor, and considerable physical and financial capital. This theory provides many insights, and must be followed if poor countries are to start on the path of economic development. However, it does not go nearly far enough in mapping out how countries can continue rapid development, and go from being poor to becoming middle-income, and eventually to becoming rich.
To continue their economic progress, developing countries have to move up the product ladder and start producing more sophisticated goods. To do this, they need to import technologies from the rich counties, and increase the training and education of their populations. Advanced technologies are partly acquired through foreign direct investment and from trade with rich countries. Along with the more sophisticated goods and services imported, developing countries also acquire some of the technologies developed in the economically advanced nations.
