Which Of The Following Is Most Accurate In Regards To The Asian Free Trade Agreements

In fact, economists consider this comparative advantage law to be fundamental. As Dominick Salvatore says in his basic economic manual International Economics, the law of comparative advantage remains “one of the most important and always undisputed laws of the economy. The law of comparative advantage is the cornerstone of pure international trade theory. [5] Gomory and Baumol note that there are many possible trade patterns, as countries can create a comparative advantage for products with falling production costs: “These results differ in their impact on the economic well-being of the countries concerned. Some of these results are good for one country, some are good for the other, some are good for both. But it is often true that the results that are best for a country tend to be bad results for its trading partner. [26] In addition, a number of economists argue that state intervention can be effective in promoting a particular sector, but that macro-economic industrial policies that benefit the economy as a whole are not effective. In any event, Western economists and policy makers today reject almost everywhere the idea that the United States should pursue an industrial policy that chooses winners and losers. Opponents of a possible U.S. industrial policy argue that such a policy would be subject to political pressure under the U.S. system that would guarantee failure.

Under certain conditions, productivity gains in a country can deteriorate its terms of trade. For example, if Japanese television manufacturers become more efficient and reduce selling prices, Japanese commercial conditions will deteriorate as more TVs are needed to exchange for aircraft. [29] See z.B., ibid., 54: “The comparative advantage theory assumes that trade is balanced (i.e. exports of imports of equal value) and that work is fully occupied. If trade is not balanced, the surplus country must export certain products for which it has no “real” comparative advantage. Free trade advocates argue that introducing import barriers, even if other countries do, is tantamount to shooting a gun in the foot. The opportunity to place the other foot on the trade barriers of other countries is based on an economic argument understandable by adam Smith in the 18th century: consumption being the only end of production, the interests of consumers are placed before the interests of producers, especially relatively inefficient producers.