Comparative advantage is a key principle in international trade and forms the basis of why free trade is beneficial to countries. The theory of comparative advantage shows that even if a country enjoys an absolute advantage in the production of goods Normal Goods Normal goods are a type of goods whose demand shows a direct relationship with a consumer’s income. We analyze the implications for comparative advantage and trade in goods between two countries that differ in factor endowments and in technology of service provision. Moreover, we use the concept of the integrated world equilibrium to investigate trade in goods and services, also when services require foreign direct investments. INTERNATIONAL ECONOMICS ELSEVIER Journal of International Economics 42 (1997) 195-220 Producer services, comparative advantage, and international trade patterns Charles van Marrewijk'1, Joachim Stibora1', Albert de Vaal', Jean-Marie Viaene"'* Erasmus University and Tinbergen Institute, Department of Applied Economics, P.O. Box 1738, NL-3000 DR Rotterdam, The Netherlands bLondon School of