International Trade and Comparative Advantage

International Trade and Comparative Advantage

International Economics

The study of international trading between or among countries has always been a great source of controversy in the field of economics Economies of different trading countries are as closed as ever due to the exchange of goods and services , transport of labor and human resource , and the imports and exports of the raw materials abundant to the trading partner or partners . These new issues regarding the environment of international economics have been used by both the developed and developing countries as a form

of increasing the income of their own countries and as a national economic policy . Also , they are used as a business strategy to make advantage of the profuse resources common to their place by exporting them to the other places in need of these materials and to export in return resources that are locally scarce in the country (Krugman Obstfeld , 2000

Benefits from trade are one of the most vital insights on international trading . This means that when two countries , for example , agreed to sell goods and services to one another , they always make it to a point that both parties would gain from their agreement . It is always based on the mutual benefit that would be generated with one another (Salvatore 2000

In the case of the United States , investing and subsidizing on foreign countries with regard to the short run costs production of tobacco would mean a guaranteed longer period of partnership between the United States and their trading country , just like in India

Subsidies and Opportunity Costs

India , which is the world 's third greatest producer and supplier of tobacco in different countries , is being subsidized by the United States in for the local tobacco farmers in their country would continue to plant and produce tobacco . As for those who do not know , India has been coming out and formulating different regulations on how to reduced the production of tobacco as to inhibit the growth of the smokers in their country . Since 2001 , national policies on banning public smoking smoking on minors , and imposing an increase on tax on producing tobacco and cigarettes have been regulated (Hunt , 2002

With India as one of the main suppliers of tobacco in the United States the country has to provide additional incentives and benefits for the Indian tobacco farmers for continuous production and in return continuous supply of tobacco in the United States because of the different barriers imposed by the government of India . These subsidies are just additional payments of the United States to import the sufficient supply needed in the country (Shimkhada , 2003

Dornbusch (2001 )cited that opportunity cost also plays a very good reason why the United States subsidizes , in this case , those local tobacco farmers . In a way , the country pays the farmers an amount that would ease out the value of the best-forgone alternative rather than planting tobacco

Through investing and providing inducement in the short run costs of producing tobacco , fixed inputs...