Tuesday, February 11, 2020

International Trade and Comparative Advantage Essay

International Trade and Comparative Advantage - Essay Example In the short run, farmers may be able to gain profits from planting tobacco but it must be kept in mind that the buyers of their crop are a very specialized group of companies. In the long run, their product can not be sold to everyone since even a smoker would have little use for raw tobacco unless it has been refined, packaged and sold as a finished product. This means that with time, the tobacco companies will be able to dictate the price at which they will buy tobacco or not. Additionally, if the farmer has taken a loan from the tobacco company then the dependency of the farmer on the company is doubled. The company will be able to push the price downwards or ask the farmer to bring more area under the cultivation of tobacco. In domestic terms, since the farmer will not be producing as much food crop, the prices of other food items would be expected to rise due to their relative scarcity. This comes across as a negative practice but for the tobacco companies, this is smart business which is not blocked by the American government (U.S. Department of Commerce, 2006). Acme Motors makes engines in the Nuevo Laredo facility simply because the assembly and manufacture of engine parts is much cheaper in the region. Engine assembly is an extremely labor intensive process and since labor is not that expensive in the region the overall cost of the engine is lowered. The other parts which are bolted on to the engine to complete the car are handled with automated robots to a large extent therefore the engines can be shipped back across the border to finalize the production of the car in America. This is a part of the international trade that is supposed to bring a better understanding for people around the globe and improve the human condition (UNCITRAL, 2006). Acme motors gains two significant advantages with this situation. First, the cost of

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