International Trade Paper
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- Category: Politics: Economics
- Date Submitted: 08/30/2010 09:44 PM
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International Trade Paper
This paper will focus on comparative and absolute advantages, effect of import quota and tariff on international trade, and the World Trade Organization and its role in international trade. International trading among countries allows one another access to goods and services typically unavailable domestically. Countries may find trading on an international level beneficial because goods and services can be obtained cheaper.
International trade can bring both consumption and production gains to a country. International trade promotes productive efficiency by encouraging a reallocation of resources away from areas of the economy best served by imports into industries which the country itself has a comparative advantage over trade partners. (International Trade, 2006)
The ability of an individual, business, firm, or nation to engage in production of a specific good or service at a lower opportunity cost than another entity is referred as comparative advantage (U. S. Bureau of Labor Statistics, 2008). The term comparative advantage also denotes how trade creates values for all parties involved even if only one party can make a product or provide a service with fewer resources than any of the other parties involved. This is the basis of the term “gains from trade”, which mainly refers to the net benefits of comparative advantage. Gains from trade are the principles of the theory of international trade. At the same time, trading involves some costs which may significantly reduce some benefits such as comparative advantage.
Comparative advantage does not necessarily serve as a way of resolving deficits originated from trade. As a matter of fact, making comparative advantage attainable may originate a trade deficit. Comparative advantage is a very useful tool to determine what goods and services should be obtained through trade, and what goods or services should be produced. On the other hand, absolute advantage refers to an individual,...
This paper will focus on comparative and absolute advantages, effect of import quota and tariff on international trade, and the World Trade Organization and its role in international trade. International trading among countries allows one another access to goods and services typically unavailable domestically. Countries may find trading on an international level beneficial because goods and services can be obtained cheaper.
International trade can bring both consumption and production gains to a country. International trade promotes productive efficiency by encouraging a reallocation of resources away from areas of the economy best served by imports into industries which the country itself has a comparative advantage over trade partners. (International Trade, 2006)
The ability of an individual, business, firm, or nation to engage in production of a specific good or service at a lower opportunity cost than another entity is referred as comparative advantage (U. S. Bureau of Labor Statistics, 2008). The term comparative advantage also denotes how trade creates values for all parties involved even if only one party can make a product or provide a service with fewer resources than any of the other parties involved. This is the basis of the term “gains from trade”, which mainly refers to the net benefits of comparative advantage. Gains from trade are the principles of the theory of international trade. At the same time, trading involves some costs which may significantly reduce some benefits such as comparative advantage.
Comparative advantage does not necessarily serve as a way of resolving deficits originated from trade. As a matter of fact, making comparative advantage attainable may originate a trade deficit. Comparative advantage is a very useful tool to determine what goods and services should be obtained through trade, and what goods or services should be produced. On the other hand, absolute advantage refers to an individual,...