Japan mainly exports manufactured goods, while importing raw materials such as food and oil. Analyze the effect on Japan's terms of trade of the following events:

a) A war in the Middle East interferes with the world supply of oil. (2p)

b) Korea is increasing its car production and is starting to export cars to Canada and the United States. (2p)

c) American engineers develop a fusion reactor that replaces power plants powered by fossil fuels. (2p)

(d) one for harvested crops in Russia. (2p)

(e) a reduction in Japan's duties on imported meat and citrus fruits; (2p)

--------

(a) The international exchange of goods and services in terms of foreign trade has increased faster than production in most countries. Ricardo explains foreign trade with comparative advantages. Explain this concept and compare it with the concept of absolute benefits.

b) Heckscher-Ohlin also works from the concept of comparative advantages, but the conditions for the trading model differ in some respects from Ricardo. At what point will Heckscher-Ohlins model differ in its assumptions from Ricardo?