Sample Economics Essay Paper on Comparative and Absolute Advantage in International Trade

Comparative and Absolute Advantage in International Trade

Question 1

At some point, the United States engaged in manufacturing power. For instance, during the Industrial Revolution, the United States rarely relied on imports to produce local commodities such as clothing. Moreover, the U.S became the end destination for immigrants, and it remains a dreamland for many immigrants. The significant increase in immigrants within the country saw an increase in cheap labor and low wage payment. The U.S. also positioned herself as a global economic superpower. Over the last 50 years, other countries such as China and India have also emerged as economic superpowers producing same products as the U.S at low wages and prices. The acceptance of imports in the U.S has been of significant impacts. Importation of the raw materials into the U.S markets has significantly increased the profit margins. The U.S has accrued benefits such as accessing high quality and less priced goods due to the low labor costs and low taxes involved in the production processes. The U.S has also benefited from the highly efficient skills demonstrated by diverse people that are cheaply offered. Hence, the imports have created jobs for the foreigners as well as the Americans. The acceptance of the importation of goods into the U.S markets has also been disadvantageous. They have led to the erosion of the domestic and national economies especially with the occurrence of trade deficit. Moreover, the importation has also resulted in internal conflicts (Branson, Junz, Gordon, & Krause, 1971). The performance of some of the local industries has been adversely affected as a result of the low prices of the foreign goods as well leading loss of jobs by many.

Question 2

In the logistics industry, for instance, tariffs are often offered to clients who would rather not engage in signing a contract with a company to move their good. As such, tariff rates have several advantages to the customers. A customer is often not obliged to ship a specific amount of good the contract and is free to ship with any company and destination. Tariffs rates also protect the domestic manufacturers from competition with the cheap overseas goods within the U.S. market. Higher prices of the imported goods due to tariffs often lead to the low purchase of such goods hence the foreign competitors withdraw from the U.S markets. The disadvantages of tariff rate are that this rate is usually higher than the negotiated rate that a contract holder who ships goods usually hold (Clark & Bruce, 2006). The other disadvantage of tariffs is that the higher prices for the imported commodities is usually passed on to the domestic consumers making them to spend more on such goods.

Question 3

A free trade agreement is an agreement between two countries in which they tend to come to a common agreement of lifting tariffs, special fees, and other trade barriers that exist between them. This usually enables a fast and quick business transactions that is of significant benefits to both the countries. The free trade agreement has significantly benefited the U.S in many ways. The agreement has increased U.S sales and profits. The lifting of the trade barriers has led to easier trade of the consumer goods within the U.S markets (White, 2017). As such, the volume of U.S sales have increased. The free trade agreement has also created middle-class jobs. As a result of the increased sales and profits, increase in demand for the middle-wage jobs has been experienced. On the disadvantages of this trade agreement, it has resulted more in job loss than creation (White, 2017). Moreover, many of these free trade agreements turn out to be bad deals for the U.S. For instance, in 2007, in the Asia-Pacific Economic Cooperation (APEC), South Korea exported 700,000 cars whereas the U.S carmakers sold only 6000 cars in South Korea. Moreover, each party feels the ways they do about the issues because these agreements usually have little concern about trade. They do have the aim of greatly impacting the regulations and standards of the member countries.

Question 4

The culture that exists between America and other trade partners has benefited the U.S significantly. These countries despite being independent, they have appreciated the cultural differences of the other. Culture has so far encouraged economic competitiveness hence resulting in high-quality production of commodities to satisfy the preferences and needs of the citizens. Hence, involved countries have been in the forefront of developing and maintaining new forms of technology for the production processes. However, culture has resulted in several challenges within the foreign trade issues. Low pricing of certain commodities is being experienced in specific parts of the country because the commodities turn out not to be the preference of the society (Deari, Kimmel, & Lopez, 2008). Less revenue is accrued from the low volume of sales. Also, the United States need to appreciate the different cultures present. For instance, the immigrants have been of significance to the development of the U.S. for several years, and its high time the government appreciate their presence. People should accept the fact that the U.S. cannot self -support itself, and as such, the U.S. needs to engage in effective understanding and negotiations to build an effective partnership with the rest of the world.


Branson, W. H., Junz, H. B., Gordon, R. A., & Krause, L. (1971). Trends in US trade and comparative advantage. Brookings Papers on Economic Activity1971(2), 285-345. Retrieved from…/06/1971b_bpea_branson_junz_gordon_krause.pdf

Clark, D. P., & Bruce, D. (2006). On the incidence of US tariffs. The World Economy29(2), 123-135. Retrieved from

Deari, H., Kimmel, V., & Lopez, P. (2008). Effects of cultural differences in international business and price negotiation. Retrieved from

White, D. (2017, June 19). Pros & Cons of Free Trade Agreements. Retrieved from