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Question:

Explain in detail how nations can benefit from trade under the theories of absolute and comparative advantage.

What are the primary motives that drive governments to intervene in trade? Describe the instruments governments use to promote and restrict trade.

Response:

Some of the benefits of trade for a country are that they give the countries a better selection of goods and services, it helps create jobs, and it can help raise the standard of living for those people.

Starting with a choice of goods and services, international trade will give countries that have less of one object of service the chance to get objects they would not normally have (Wild & Wild, 2022 pg 152). Coffee is a great example of this. Brazil is the number 1 largest exporter of coffee bean in the world, and send their coffee beans all over the world, to places like the US, Republic of Korea, China and many others. The US, however, is only the 10th. Brazilian beans are imported into the US from Brazil, but we are also able to get beans from all over the world, while we can export cars and airplanes to these countries. (if anyone wants Boeing right now.) (Workman, n.d.) Soy is another example of products that can be exported from the US to countries, like China. China gets the higher soy, and the US will import clothing from China or any other product.

Job creation is another example of the benefit of trade. Due to the trade between countries, this opens the opportunities for the companies that do the trade to hire more people. With the trade, more outside money comes to the company, and they have a higher quantity of goods being sold, which means they need to hire more people. (Wild & Wild, 2022 pg. 152) (Nina & Nina, 2023).

Lastly it will help raise the standard of living for all those involved, especially those who are accepting the trade. If one country is technologically advanced or has technology that another doesn't have and ship them to a less developed country or country in need of those products can help make life easier (Wild & Wild, 2022 pg. 153). The US relies heavily on Taiwan for the import of computer chips. During the spike of COVID, chips were in short supply, causing cars to not be made, and a shortage of phones, decreasing the standard of living for millions of people around the world. (Miller, 2022)

The primary motives for governments to intervene in trade are job security for their citizens national security reasons, and to motivate other countries to be more compliant with their wishes. (Wild & Wild, 2022 pg. 176). The national security aspect is seen in the US with Huawai from China. The US has denied Huawai the ability to install 5G in the US, because of fear that they might use the technology to spy on Americans and our government. (Raj, 2021). Former President Trump attempted to us Tariffs on China, due to what he called unfair trade practices with the US and other countries. (Wild & Wild, 2022 pg. 177). The protection of jobs is another reason for intervening in trade. While this may not work well in the long run, in the short term, politicians normally worry about their reelection prospects and try to protect the jobs of those they want to vote for them. This is done by sourcing good from US companies with labor forces in the US, or increasing tariffs on imports, causing people to buy US.

Raj, A. (2021, September 28). US is actually paying telecom providers to remove Huawei 5G infrastructure - TechHQ. TechHQ. https://techhq.com/2021/09/us-is-actually-paying-telecom-providers-to-remove-huawei-5g-infrastructure/

Miller, C. (2022, October 5). The Chips That Make Taiwan the Center of the World. TIME. https://time.com/6219318/tsmc-taiwan-the-center-of-the-world/

Nina, E., & Nina, E. (2023, June 23). International Trade: An Engine for Job Creation and Economic Recovery - International Trade Council. International Trade Council - Solving Trade-related Issues. https://tradecouncil.org/international-trade-an-engine-for-job-creation-and-economic-recovery/#:~:text=International%20trade%20serves%20as%20a%20catalyst%20for%20job,into%20larger%20markets%20and%20expand%20their%20customer%20base.

Workman, D. (n.d.). Most Popular Hot Drinks Exports. https://www.worldstopexports.com/coffee-exports-country/

Wild, J. J., & Wild, K. L. (2022). International Business (10th ed.). Pearson Education (US). https://ccis.vitalsource.com/books/9780137653379

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