Navarro is the obverse of economists who somewhat euphorically believe that trade will bring about peaceful relations with other countries, and he poses the opposite problem: He’s a hard-line mercantilist who insists that military confrontation with some trading partners is almost inevitable. In this, he throws Economics 101 out the window. The classical economist David Ricardo offered a fundamental insight at the heart of the case for free trade—the theory of comparative advantage. He noted that if one country can produce a good at a lower marginal cost than another, they can each focus on what they manufacture best for mutual gain—exactly what is happening today. Navarro will have none of this. He’s a zero-sum economist, who, like Trump, believes that every item not made in the U.S. represents the theft of an American job.
Even the most hostile critics of the Ricardian system have granted that at least David Ricardo made one vital contribution to economic thought and to the case for freedom of trade: the law of comparative advantage. In emphasizing the great importance of the voluntary interplay of the international division of labor, free traders of the 18th century, including Adam Smith, based their doctrines on the law of "absolute advantage." That is, countries should specialize in what they are best or most efficient at, and then exchange these products, for in that case the people of both countries will be better off. This is a relatively easy case to argue. It takes little persuasion to realize that the United States should not bother to grow bananas (or, rather, to put it in basic micro terms, that individuals and firms in the United States should not bother to do so), but rather produce something else (e.g., wheat, manufactured goods) and exchange them for bananas grown in Honduras. There are, after all, precious few banana growers in the US demanding a protective tariff. But what if the case is that clear-cut, and American steel or semi-conductor firms are demanding such protection?
Until recently, it has been universally believed by historians of economic thought that David Ricardo first set forth the law of comparative advantage in his in 1817. Recent researches by Professor Thweatt, however, have demonstrated, not only that Ricardo did not originate this law, but that he did not understand and had little interest in the law, and that it played virtually no part in his system. Ricardo devoted only a few paragraphs to the law in his , the discussion was meager, and it was unrelated to the rest of his work and to the rest of his discussion of international trade.
Summarily, international business can be considered as the congruence of various areas of business activities. Importantly, international trade involves the comparative analysis of business operations in different economic systems as well as management in similar firms in different international. This paper gives a precise discussion of whether the law of comparative advantage forms the basis of international trade. The paper further elucidates David Ricardo and Heckscher-Ohlin theories and the extent they explain and affect the patterns of trade in the real world (Lowenfeld, 2008).
Free international trade Essays and Papers - …
The law of comparative advantage is an idea that was conceptualized and attributed to David Ricardo. In his book 'on the principles of political Economy and Taxation' which was published in 1817 he exhibited a precise example pertaining England and Portugal. In his illustration he explains that it is possible to produce cloth and wine in Portugal at less labor as compared with producing the very quantities in England. But he quickly mentions that the relative costs in both countries are completely different (Lautzenheiser & Hunt, 2011). In England producing wine is quite a hard affair and likewise cloth production is moderately difficult.
Free international trade papers, essays, and research papers.
It is important to understand the reasons why we need Fair Trade in the first place. Classical free trade theory, which originates from Adam Smith’s and David Ricardo’s theory of comparative advantage, claims that countries specialize in and export what they are relatively good at producing and they import what they cannot produce sufficiently. Since for example the climate in Germany does not allow for the production of coffee and since the infrastructure and the technological advancement for the manufacturing of cars is not developed in Bolivia, both countries benefit from opening their markets for mutual trade. In theory, free trade is a win-win situation in which everyone benefits. But social reality proves the opposite: international trade (among other things) has contributed immensely to the present situation of devastating poverty for the majority of humanity (McMichael, 2004). And instead of increasing the wealth of both trading parties, the relations between producers and consumers in commodity markets like coffee or bananas can be described as a “perverse transfer of wealth, by some of the supermarkets, from farmers and farm workers of developing countries to the consumers of developed countries” (Tallontire & Vorley, 2005: 5).
According to a survey undertaken recently, most economists' supports restrictions to free trade, such quotas, reduced economic welfare, and tariffs. The comparative advantage theory creates the basis for free trade support and structure. This law was delineated in the 1800s by David Ricardo. Until today, the law is a vital component in introducing macro and micro-economics courses and falls under the applications of opportunity cost concept. The law encourages specialization especially for the increased output. Similarly to the majority economists take on the survey, David felt that England was not exercising its economic well being by restricting trade but rather the economy was suffering (Lautzenheiser & Hunt, 2011).
Sustainable Development, Globalisation and Africa: Plugging the holes
Meanwhile, at the very time when this comparative cost ferment was taking place among his friends and colleagues, David Ricardo displayed no interest whatever in this important line of thought. To be sure, Ricardo weighed in to second his mentor Mill's attack on Malthus's support for the Corn Laws, in his , published in February 1815. But Ricardo's line of argument was exclusively "Ricardian," that is, based solely on the distinctive Ricardian system. In fact, Ricardo displayed no interest in free trade in general, or in the arguments for it; his reasoning was solely devoted to the importance of lowering or abolishing the tariff on corn.