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下面为大家整理的一篇优秀essay范文- Free Trade and Comparative Advantage，供大家参考学习，这篇论文讨论了自由贸易与比较优势。在当代，自由贸易和比较优势理论在主流经济学中处于领先地位，与进出口贸易和经济发展密切相关。一些国家从自由贸易和比较优势中获益，但另一些国家则蒙受巨大损失。适当的应用和监督是当前国际贸易的关键因素。自由贸易与比较优势紧密相连。具有比较优势，国际社会中的各方都可以相互进行贸易，它们都可以从自由贸易和比较优势中获益。

In the contemporary age, theories of free trade and comparative advantage are in a leading position among mainstream economics, which are closely related with the export and import trade and the development of the economy. Some countries benefit from free trade and comparative advantage but others suffer great loss. The apposite application and supervision are key factors in the current international trade.

Introduction of Free Trade and Comparative Advantage

For free trade, its definition of mainly reflects in two sides. On the one hand, it refers that the government of a country does not intervene in international trade policy in the form of tariffs, quotas or other forms. On the other hand, free trade refers that one country cancels restrictions and barriers on import and export trade, cancel all kinds of import and export preferential treatment and privileges, import and export commodities without interference and constraints and apply trade policies of free competition in the domestic market.

For comparative advantage, it refers that a producer, company or country has advantages over other producers, companies or countries. Opportunity cost is a key focus of comparative advantage. If the opportunity cost of a producer is lower than another producer of goods or services, the producer with lower opportunity cost has comparative advantage.

Free trade is closely connected with comparative advantage. With comparative advantage, all parties in the international community can carry out trade with each other and all of them can benefit from free trade and comparative advantage.

Analysis of Free Trade and Comparative Advantage

According to Adam Smith’s theory of invisible hand, there is an invisible hand in the market and the development of the economy can be put forward by the invisible hand. (E Rothschild, 1994) Free trade and comparative advantage verifies this theory. Free trade and comparative advantage has obvious benefits for the international trade.

First and foremost, labor and resources are properly allocated. Comparative advantage can allocate resources according to the situations in different areas and countries. Meanwhile, all resources can be better made use of. For example, in Mexico and Thailand, labor cost is very cheap and the labor resources can be widely used by giant companies from home and abroad. In Mexico and Thailand, the employment rate can be increased. Each country can specialize in a certain aspect and each country can benefit from this specialization. Meanwhile, free trade allows labor and resources can be allocated both in domestic country and the international range. After continuous process, the allocation of labor and resources reaches to a status of equilibrium. At this point, free trade and comparative advantage solves the problem of labor specialization and resource allocation.

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Secondly, capitals will be flown freely in the international market. Due to proper labor and resource allocation, a large amount of fund will be investment in the countries with comparative advantage. Resulting from the effect of free trade and comparative advantage, there is freedom in capital injection and capital flow. At this point, the problem of capital flow is solved. Proper investment can be made with good yields.

Thirdly, time and cost is saved and efficiency is increased. Free trade lowers the trade barriers and countries can carry out international trade quickly. With less strict restrictions and constrains, the efficiency is increased. Comparative advantage reduces the opportunity cost for companies. At this point, the problem of time and cost is solved.

Fourthly, cooperation between nations is strengthened. In an era of increasingly openness, international trade activities have strengthened the interdependence among countries. When tackling international affairs, all countries can make contributions according to their specific situations. Through cooperation, all related parties can make great progress.

However, a coin has two sides. Free trade and comparative advantage also has drawbacks.

In the first place, the domestic small entities suffer great loss. For small and medium enterprises, they don’t the ability and power to compete with international companies. Free trade brings convenient trade and comparative advantage brings lower cost and less time, which can be obtained by international companies instead of small and medium enterprises. As a result, they cannot compete with large companies and finally break down. In some extent, free trade and comparative advantage makes small entities suffer more difficulties than before.

Secondly, the number of trade disputes increases. Free trade makes trade carried out quickly. During this process, some flaws about the products and prices can lead to trade dispute, which will have a negative impact on the development of the economy. Moreover, anti-dumping is also an important aspect. With low cost and prices, a large number of products will be imported or exported to other countries and greatly influence the local economy. Anti-dumping cases will result in high tariffs and trade protection, which is opposite to the initial goal of free trade and comparative advantage.

Thirdly, the unemployment rate is increased. Once the companies set up factories in other nations with lower labor cost, the local worker will be laid off. For them, they haven’t other skills and they have difficulties to find other jobs.

From the above analysis, free trade and comparative advantage have positive and negative impact on the economic development and people’s life.

My Thought about Free Trade and Comparative Advantage

I support the economic theories of free trade and comparative advantage. On the one hand, it can make resources properly used. Time and cost can be saved and efficiency is enhanced, which can accelerate the development of the economy.

However, laws and regulations should be implemented to guide trade disputes and regulate the market. Local government should also formulate rules to protect small and medium enterprises to reduce local unemployment rate.

Conclusion

Free trade and comparative advantage is important economic theory, especially in the international import and export market. Proper application and regulations can make the theory show its unique functions.

Reference

S Goyal and Sumit Joshi. (2006). Bilateralism and Free Trade. International Economic Review 47(3):749-778(30)

E Rothschild. (1994). Adam Smith and the Invisible Hand. American Economic Review 319-322

B Hindley. (1984). Comparative Advantage and Trade in Services. World Economy 7(4):369-390

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