Economics and Comparitive Advantage in Switzerland

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RUNNING HEAD: SWITZERLAND AND COMPARITIVE

Switzerland and Comparative Advantage; Factors, Specialization and Protectionism in a Global Economy

ECO GM/ 561

International Economics

Douglas Gurney

July 3, 2010

Switzerland and the Concept of Comparative Advantage

While most in today’s hyper-competitive global economy look towards countries including; China, India, Taiwan, Vietnam, and others in search of lower production costs seeking the ever illusive comparative advantage, others have different ideas. Switzerland, a tiny land locked nation in central Europe surrounded by Alps with a relatively small population of 7,630,605 is one such country. It operates with its own comparative advantage in the industries of
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As Switzerland is unable to compete globally in the area of inexpensive goods and services including; toys, manufactured goods, and other products used in mass by today’s consumer it is advised that the nation continue to produce products it currently specializes in along with expanding its current services to attract foreign investment into the Swiss economy.

Industries of Specialization and Opportunity

As most already know, the Swiss are renowned for their production of high quality chocolates including those of the Toblerone and Lindt brands. “Switzerland has a comparative advantage in the production of chocolate. By spending one hour producing two pounds of chocolate, it gives up producing one pound of cheese, whereas, if it spends that hour producing cheese, it gives up two pounds of chocolate. Thus, the good in which comparative advantage is held is the good that the country produces most efficiently (chocolate). Therefore, if given a choice between producing two goods (or services), a country will make the most efficient use of its resources by producing the good with the lowest opportunity cost, the good in which it holds the comparative advantage, and by trading for the other good.” (Globalization101.org, 2010) While chocolates are one of this country’s specialties it’s not the only one. Other areas of specialty already realized and being readily utilized by the Swiss are the

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