Comparative and absolute advantages

225 views 4 pages ~ 951 words
Get a Custom Essay Writer Just For You!

Experts in this subject field are ready to write an original essay following your instructions to the dot!

Hire a Writer

In general, competitive advantage refers to a situation in which one country may obtain one asset while foregoing the other. Relative marginal opportunity cost, on the other hand, is the incremental cost of a service in the industry in order to manufacture more goods. Years before, the United States was well known for producing its own products due to the abundance of garment mills. Notably, China and Japan have emerged as manufacturing powerhouses, resulting in increased imports of their products. These countries will manufacture products that are comparable to those produced in the United States by spending much fewer resources. This way, they end up exporting goods to the US at a lower cost hence more profit than that made by US for similar products. US was the home of slaves, this way, they worked for low wages which made the company_x0092_s they were employed in sell their goods at high prices in US and the entire world. Importation of goods can have advantages and disadvantages to the countries importing and to those exporting goods.

Notably, according to the economic policies of the government in the United States, tariff was placed on the imported goods. Clearly, this affects the world market as it has its advantages and disadvantages for those involved including the consumers, producers and the demand. In order to compensate for the tariff that has been placed on some of the imports, producers have been forced to lower the price of their products so as to cope with the new policy. In any case, the producer does not reduce the price of his goods rather he promotes the American products which will be less costly than the imports. Bearing this in mind, the consumers will go for the cheaper option meaning they will buy the American products thus promoting the American companies. In addition, placing of tariffs on foreign goods increases the government revenue enabling the US government support its functions.

On the other hand, it discourages trade as businessmen and foreign governments will evade taxes. Likewise, the American people will opt to buy American products at lower prices thereby discouraging foreign products. This way, the foreign producers are forced to reduce their prices in order to compete with the American producers. Some choose not to trade with US and take their products elsewhere where no taxes are included. Placing of tariffs reduces the diversity of the products available in the market thus reducing the consumers_x0092_ choice (Cavusgil, et al, 2014).In case, the American companies do not produce similar products with those available in foreign countries, the consumers lack what they want due to tariff placement.

Equally clear, trade agreements are treaties between nations. This makes it simpler for the nations to import and export due to the reduction in tariffs. This way, it becomes advantageous for the member nations as their exports are much cheaper and trade is increased at low tariffs. Considering tariff policies, no nation is imposed a higher tariff than the other. In addition, all countries have similar trade deals and this is more advantageous for those countries emerging in the market. In case the trade barriers are reduced in any of the countries, this means it would apply to all the other countries imports creating an equal competition. Importantly, if any of the party_x0092_s imports increases it displaces imports from other nations or causes trade creation.

In some cases, trade balance is likely not to be experienced; this is evident in the case of US and Mexico. There were estimations that the increased US-Mexico trade which resulted from NAFTA only increased US GPD by a small amount therefore it was more beneficial to the Mexicans (Gantz, 2009). In addition, there are higher transportation costs with those countries that do not border the US. On the other hand, the other partners with fewer economies than the US are more likely to benefit than the US especially the developing countries.

However, there are difficulties in trade negotiations due to the increase in the number of members especially from the developing countries which have interests not similar to that of US. The US also feels that the FTAs would be beneficial to the small countries and have little impact on them. Interestingly, the critics argue that there will be creation of large competition between the US and the western hemisphere (Collins, 2015) .They also think that the United States will have an advantage over the developing countries.

Notably, the small businesses have benefited from the trade agreements since the trade barriers have been reduced though there still remain some obstacles. The participation of the US in the trade agreements thus reducing the tariffs has enabled the small countries to create jobs and increase their imports (Hoekman, et al, 2011). These trade agreements should consider going modern through the use of internet services to reach their consumers and partners rather than just making the physical appearances. Importantly, they should also ensure they include all sectors of trade and make investments in all types of services and do away with all the trade tariffs.

Trade among countries is important as it strengthens the social ties between the members. It also promotes growth as the countries are able to come together and exchange what they are not best in producing .Trade is important as it enhances peaceful correlations and existence among nations.


Gantz, D. A. (2009). Regional trade agreements.

Collins, M. (2015). The pros and cons of globalization. Forbes, http://www. forbes. com/sites/mikecollins/2015/05/06/the-pros-and-consof-globalization.

Hoekman, B., & Nicita, A. (2011). Trade policy, trade costs, and developing country trade. World Development, 39(12), 2069-2079.

Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L. (2014). International business. Pearson Australia.

November 23, 2022



Work Asia Personal Finance

Subject area:

Opportunity China Money

Number of pages


Number of words




Writer #



Expertise Money
Verified writer

Nixxy is accurate and fun to cooperate with. I have never tried online services before, but Nixxy is worth it alone because she helps you to feel confident as you share your task and ask for help. Amazing service!

Hire Writer

This sample could have been used by your fellow student... Get your own unique essay on any topic and submit it by the deadline.

Eliminate the stress of Research and Writing!

Hire one of our experts to create a completely original paper even in 3 hours!

Hire a Pro

Similar Categories