China And Saudi Arabi A Comparative Advantage

Trading with other countries was efficient because it got rid of any unnecessary or too much products for other products they needed or wanted to have. The Exchange opened new opportunities for other countries it offered them to grow and expand to make other products. An example would be is, “European settlers brought with them cattle, pigs, horses, wheat, and… that became the foundation for modern food and agriculture in the Western Hemisphere” ( Grennes 1). With this new trading with various countries the countries could develop or invent new products. Europe or Asia is also sending products that is developed in European or Asian countries and sending it to the New world or America to make money. An example would be, “Europeans brought technology that included iron tools and wheels.” (Grennes 2). With the technology advancing and trading the technology to different countries to make money, and it brings in profit to other countries. It is a win-win solution for the two or more countries that are trading with each other one of countries is making money to selling the product or selling the technology. The traded revolutionized how various countries are making money and still the trading still goes on toady but with more effective and modernized technology.

According to Colander, "The reason two countries trade is that trade can make both countries better off" (2004, p. 416). In economics, the theory of comparative advantage clarifies why it can be advantageous for two countries to trade, even though one of them may be able to produce every kind of item more cheaply than the other. What matters is not the absolute cost of production, but instead, the ratio between how easily the two countries can produce different kinds of goods. The basic idea of the principle of comparative advantage is that as long as the relative opportunity costs of producing goods differ among countries, then there are potential gains from trade.

If each country specializes in areas where its advantages are greatest or disadvantages are least, the gains from trade will make each country better off than it would be if it remained self-sufficient. [3]

Trading is very important economic factor. Trade between different countries depends upon different factors. There are some factors due to which bilateral trade between two states is enhanced. On contrary, there are some factors which restrict or reduce the trade between two countries (Meyer, 2011). Factors which enhance trade include different cultural, political, geographic and economic aspects which are common between the 2 countries involved in bilateral trade with each other. While trade is reduced or restricted, if two countries are completely different culturally, politically, geographically and economically (Siegel, 2011). For example, trade between two countries, having common boarder, currency, per capita income et cetera, will be lot more high than those countries which do not share these factors common with each

There can never be any country in the world which can survive on its own without being involved in international trade with other countries. Even the United States a super power can not have an economy which is growing or even raise the wages of our citizens unless we extend our trade beyond our borders and sell products and at the same time buy products from the rest of the population outside our country. We import a lot of goods from other countries. There are instances whereby there can be surplus in the goods that are imported in the United States. For instance the United States is a huge importer of automobiles. A surplus in the imported automobiles can have certain consequences on businesses as well as consumers. This will lead to a price drop of the automobiles. This is good news to the consumers as they will purchase them at lower prices. On the other hand this is bad news to the businesses since the price drop will make them incur a lot of losses.

The reason trade makes life easier is because of a principle called comparative advantage. To illustrate what comparative advantage is, I’ll use two countries: country A and country B. Let’s say that country A is good at producing food, but not good at producing shoes. Country B excels at manufacturing shoes, but is lacking in the food processing industry. Both countries, by themselves, will have a harder time living until they decide to trade with one another. Since country A is better at making food, and B is better at manufacturing shoes, they should specialize in what they do best and trade with one another to both benefit. Country A can produce far more food when they don’t have to worry about shoe production, and country B can manufacture more shoes when not worrying about planting and harvesting food. This is the principle of comparative advantage. Trade allows countries to specialize in producing goods that they have the advantage in, while still having other commodities purchased by trading their manufactured goods. This principle works great for countries with good economies and many resources, but what about in developing countries where they don’t have comparative advantage in anything? Wheelan answers this question in his book Naked Economics. He says, “Workers in Bangladesh do not have to be better than American workers at producing anything for there to be gains from trade. Rather, they

Because Japan has the comparative advantage in producing computers in that example, free trade would maximize both country’s production by having Japan specialize in producing computers and Canada specialize in producing cars. Then, both countries could trade the products they specialize in for the other, at a fair rate to be determined separately. Without free trade, each country had a bigger limit on what good they could produce. With trade, both countries still have a limit to what the countries can produce, but since they are trading what they are best at producing, they are maximizing the total numbers of goods in the country. Thus by trade at a fair, un-taxed rate, they are capable of having more goods and services in their country and any given time. Both countries are able to produce the best they can and thus from trade, they receive the most of the other good as they possibly can. This is known as the law of comparative advantage (Mankiw, Kneebone, McKenzie & Rowe 55).

Trade is a very important factor in making a country successful, and it has certainly helped many countries for many years. Back when there was no concept of countries, trade simply meant moving certain materials from one place to another, and when people needed access to things they could not find where they lived, they'd simply travel and find it aboard. Eventually territory was owned and people could no longer keep peace when it came to taking things from elsewhere. That was when the word trade came into existence, and people began to make agreements to transfer goods for something in return, whether that meant other goods or money. In 1855 when Canada was in the hands of the British, free trade was agreed

Some might say that trading can lead countries to have surpluses or shortages that will harm their economies, however, by balancing importations and exportations the countries involved in trade benefit their own communities by providing them with foreign products that consumers will be willing to purchase allowing the country’s economy to grow. Some people like our current president might oppose against this idea, “…he has condemned the 22-year-old North American Free Trade Agreement with Canada, the U.S., and Mexico, on the shaky argument that it’s costing American jobs” (Epstein, 2016), however, by further analyzing statistics and facts, a country cannot deal with its own without having the necessity of trading and communicating with other countries. It is unlikely possible for a country to survive with an economy where only national products and produced and consumed. A possible concern about the idea of trading might be losing national jobs created for the country’s own society, but a country like the U.S has a history of continuous mass of immigration from different countries around the world that have helped sustain the country’s

The projected free trade agreements between Canada and China relates to the major economic concept of international trade and gross domestic product. Why do nations prefer to trade instead of attempting to become more self-sufficient? Nations buy goods from other nations because no nation can afford to be totally self-sufficient. Productivity increases if a nation can

Nations trade with one another because it is mutually advantageous for both parties when one is more efficient at producing a certain good and at a lower cost, and the other is proficient at producing a different good or service more efficiently. This is based on Ricaro’s theory of comparative advantage.

Being able to trade is when you give a product to someone and they give you something in return. People trade for a reason and the reason being that either they don’t know how to produce a similar product or that it would be easier to receive the product in a trade. “ ...tailor does not attempt to make his own shoes, but buys them from the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor….” (Invisible Hand). People are born with a special talent or maybe more than one special talent but not everyone is good at everything, therefore they depend on someone else to produce something that they need or want. Everyone is taking advantage of the fact that someone else other than them can make a similar product better so they don’t even bother trying. Relying on one another can be useful tactic like Adam Smith says, “ If a foreign country can supply us with a product cheaper than we ourselves can make it, better buy it from them with some part of the produce of our own industry” ( Invisible Hand). Adam believes that it is more logical to buy a product from a different country if they can make it using less money. There is no point in making a product but knowing that someone else can make it cheaper in return for a product that the foreign country desires. One thing lead to another and soon enough countries were trading with everyone. Trade started out within individual industries and became an international

International trade is based on having a comparative advantage. Countries produce products that are easier for them to produce, then

Economic analysts say trading among other countries with no stipulations improve global efficiency in resource allocation (Tupy, 2005). Free Trade delivers goods and services to those who value them most and allows partners to gain from specializing in the producing those goods and services they do best; according to Tupy’s findings, Economists call that the law of comparative advantage. Tupy also states when producers create goods they are comparatively skilled at i.e. Germans producing beer and the French producing wine, those goods increase in abundance and quality. Trade allows consumers to benefit from more efficient production methods, for example, without large markets for goods and services, large production runs would not be economical. Large production runs, in turn, are instrumental to reducing product costs while lower production

The country can maximize their wealth by putting the resources in the most competitive industries. Government created comparative advantage rather than free trade because now easier moves the production processes and the machines into countries that can produce more goods (Yeager & Tuereck, 1984). However, many countries now move to new trade theory suggests the ability firms to limit the number of competitors associated with economic scale (reduction of costs with a large scale of output) (Krugman, 1992). The comparative advantage occurs when two-way trade in identical products, it will useful where economic scale is important, but it will create problem with this model. As a result, government must intervene in international trade for protection to domestic firms (Krugman, 1990)