With
regards to the idea of countries having a comparative advantage, it is
extremely important for countries to specialize in what they are comparatively
good at it in order to maximize production and increase production and
consumption (Lecture). However another thing to consider is the fact that just
because a country can produce certain products at cheaper costs does not mean
that it will benefit their specific country, it would only benefit the
consumers.
According to the US Bureau Labor
Statistics, the United States currently has a comparative advantage in agricultural products and processed food, and high-tech manufacturing.
When thinking about why certain countries have comparative advantages in
certain products things to consider are is it a result of not having free
trade, do they have better production strategies, or is it a result of cheap
labor. In the case for the US it is a result of not having agricultural free
trade as well as efficient ways of production. These aspects are important to consider
because for example in countries like Japan where labor laws are not a
prominent focus and t-shirts can be cheaper to produce because they are not
paying their citizens a decent wage.
The US Bureau Labor Statistics also mentions that the US
has a global comparative advantage because we have the ability to produce so
many products in our country and still sell them here. Americans want
American-made products, they are high in demand and we have a comparative
advantage in that aspect as a result the amount of goods exported surpass that
of the goods that are imported which aids significantly in the success of the
American economy. In addition to this,
the US is fortunate to have the benefit of being a good seller of financial
assets which will go a long way in benefitting the country in the future. This
will benefit the United State’s future because these financial assets are
foreign assets.
There has been constant discussion on the rise in China
and the comparative advantage that they have because of the fact that they are
able to develop a great deal of products at a quick rate for such a cheap
price. China is able to export a significant amount of products and make a
profit because of this, which is aiding in their success. However, though they
have an advantage with the development of their products, unlike the United
States, China does not have the ability to have as much of an internal surplus
selling to their citizens because it is still in the process of developing.
The notion of the benefits of the topic
of comparative advantage is questionable just because of the fact that some
countries can win significantly in this process and others may lose.
Hypothetically speaking, comparative advantage can be extremely prosperous
because everyone is producing what they are best at. However since trade is
international, there is no international government, as a result there are not
any specific rules for how to produce products ie there are no international labor
laws. Also as seen in this article, though the US has stricter labor laws than
China, we still have the dominance with production/ selling of products.
"What Are the U.S. and
China's Current Comparative Advantages?" China Global Trade.
Web. 11 Nov. 2014. <http://www.chinaglobaltrade.com/article/us-and-china-current-comparative-advantages>.
I agree with the points that you make about comparative advantage. Just because a country is good at making a product and producing it efficiently does not mean that is the best method for the country because a lot of times this efficiency comes at the expense of basic human rights.
ReplyDeleteYou make good points. I believe that the U.S. wants more American made goods. If this happens then China will soon be on a decline. There are more buying consumers in the United States which will boost the economy in the long run. Even though more American made goods are in demand, the real question lies in whether businesses would be willing to lower profit from foreign distribution to meet U.S. demands.
ReplyDeleteIt's always interesting to see the effect laws and regulations have on a country's comparative advantage. The United States, if it absolutely wanted to, could very likely increase its comparative advantage relative to other countries by doing away with safety standards. This, however, isn't a world anyone would like to particularly see. Regardless, it proves that comparative advantage and production capabilities come down to more than just the number of workers or factories a particular nation has at its disposal. When looked at from the macroeconomic perspective, the difference in comparative advantage between the U.S. and China are more easily understood.
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