There is a rich history of international trade and foreign direct investment (FDI) theory starting with Adam Smith arguing against mercantilism with his theory of absolute advantage and continuing today with Porter’s diamond and Dunning’s eclectic theory of international production. This active debate attempts to answer the question of why countries engage in international trade and foreign direct investment. What is your understanding of each theory? What are the pro and cons of each? Do these theories help answer the question of why countries trade and engage in FDI? Why or why not?