Explain how Paul Krugman trade theory is different from Heckscher-Ohlin Model and also explain the recent trends in global trade.

The Heckscher-Ohlin theory is formulated with labor and capital as the two factors of production. According to the Heckscher-Ohlin theory, what determines trade are differences in factor endowments. Some countries have much capital, others have much labor. The theory says that countries that are rich in capital will export capital-intensive goods, and countries that have more labor will export labor-intensive goods. However, in the 20th century, an ever larger share of trade occurred between countries with similar characteristics, which were difficult to explain by comparative advantage. Krugman's explanation of trade between similar countries involves two key assumptions: that consumers prefer a diverse choice of brands, and that production favours economies of scale. He explained that each country may specialize in producing a few brands of any given type of product, instead of specializing in different types of products. Recent Trends in global trade The global trade in the year 2014 was disappointing. Developing countries saw an uptick in growth this year, boosted in part by soft oil prices, a stronger US economy, continued low global interest rates, and receding domestic headwinds in several large emerging markets. After growing by an estimated 2.6 percent in 2014, the global economy is projected to expand by 3 percent in the year 2015, 3.3 percent in 2016 and 3.2 percent in 2017. Activity in the US and the UK is gathering momentum as labor markets heal and monetary policy remains extremely accommodative. But the recovery has been sputtering in the Euro Area and Japan as legacies of the financial crisis linger. China, meanwhile, is undergoing a slowdown.