The presence or absence of natural resources could easily be fitted into the Heckscher-Ohlin model. The Heckscher-Ohlin model stresses the differences in relative endowments. A generalized version of the model can be used by adding natural resources as a factor.
The originality of this non-availability approach lies in its second aspect, that is, in the reasons put forward to explain international differences in relative availability. There are basically two reasons for relative unavailability: technological progress and product differentiation.
A. Technological Progress
Kravis observed that the stimulus to exports provided by technological change is not only confined to the reduction costs. It also includes the advantages deriving from the possession of entirely new products and the improvements of existing types of goods. In such cases, technological progress creates an almost instantaneous demand abroad for the products of the innovating country. This demand generates international trade.
B. Product Differentiation
For product differentiation, the idea is to extend to international trade to the results of the theory of monopolistic competition. Many countries produce similar commodities or commodities that are not substantially different from each other for their use. Some examples include clothes, automobiles, watches, cameras, and cigarettes.
These commodities, however, due to different industrial designs, past excellence, advertising, real or imaginary secondary characteristics are considered different by consumers. This difference creates, on the one hand, a more or less limited monopolistic power of the single producing countries, and on the other a consumers’ demand for foreign commodities that they believe different from similar domestic commodities. Thus international trade is created.