Factor mobility is the ability to move factors of production like labor, capital or land, out of one production process into another. According to our textbook, “when the factor proportions vary widely amount countries, pressures exist for the most abundant factors to move to countries with greater scarcity, when they can command a better return.” (Daniels, Radebuagh & Sullivan, 2018). Not every country can produce all the goods it needs, so countries must trade with each other to obtain the goods its citizens need. Factor mobility is the ease in which countries can trade goods and services with each other. For example, if a country is bountiful in sugar cane, it may be profitable for that country to export manufactured sugar to a country that cannot grow sugar cane, for a higher cost than it can charge domestically (due to abundance), therefore the company that exports benefits and the company who pays for sugar is meeting the needs of their citizens.

For my hypothetical trade agreement, I am choosing to create a trade agreement between the United States and Switzerland. Both countries have established democratic governments that can create and adhere to a free trade agreement. Switzerland is a smaller country than the US and they do not have natural resources, other than hydropower, and so they must import goods and services from other countries (Feulner, 2018). Switzerland is a country known for their stable government, economic freedom and advanced free market economy, making them a great partner for the United States. In 2022, Switzerland exported over $65.06 billion dollars in goods to the United States, the majority of that number coming from exported pharmaceuticals, steel and aluminum products(www.tradingeconomics.com). The US exports around $64 billion to Switzerland annually, which comes from our export of tobacco, tree nuts, beef, and alcohol (www.ustr.govLinks to an external site.). With the amount of trade both countries are doing with each other, it would be in both countries interest to establish a free trade agreement. The theory of factor mobility applies to this trade agreement because Switzerland cannot produce all the agricultural products its citizens need, and the US relies on Switzerland for medicine and steel. With a free trade agreement in place, this would ease the mobility of these products to and from each country, benefiting both countries.

My free trade agreement between both companies would eliminate tariffs on that Switzerland pays to the US when they export pharmaceutical, steel and aluminum products. In turn, Switzerland would agree to eliminate tariffs the US pays for exporting tobacco, nuts and beef.

QUESTION1 :

Respond to at least two of your classmates by commenting on their posts with constructive comments that move the conversation forward. Though two replies are the basic expectation for class discussions, for deeper engagement and learning you are encouraged to provide responses to posts by other students and to respond to any comments or questions from other students. In addition, responding to the instructor’s questions or comments is mandatory. Continuing to engage with peers and the instructor will further the conversation and provide you with opportunities to demonstrate your content expertise, critical thinking, and real-world experiences with the discussion topics.