Misconceptions About Comparative Advantage

1. Misconceptions About Comparative Advantage 1.Productivity and Competitiveness 2.The Pauper Labor Argument 3.Exploitation

2. Productivity and Competitiveness Myth1:Free trade is beneficial only if your country is strong enough to stand up to foreign competition. Gain profits only from absolute advantage. • Our opinion: not only absolute advantage but also comparative advantage • Trade between two countries can benefit both countries if each country exports the goods in which it has a comparative advantage.

4. Key: • The less efficient nation should specialize in theproduction and export of the commodity in which ithas a comparative advantage (where its absolutedisadvantage is less) • The more efficient nation should specialize in andexport that commodity in which it is relatively moreefficient (where its absolute advantage is greater).

5. The Pauper Labor Argument Myth2: Foreign competition is unfair and hurts other countries when it is based on low wages. • Our point of view: It is fair and this phenomenon is widely exist among the world. Because distinguished countries have its own cultures and characteristics. There must be some competitions. And in the same time competition can promote the development of most countries. • EP：Competition in Labor Labor↓ Productivity↑ Price↓ Benefit↓

6. Productivity and Wage Productivity, as percentage of U.S

7. Our opinion: It won’t make it worse off. One can not declare that a low wage represents exploitation unless one knows what the alternative is. Because compared the position with the similar one in their Home country, we can easily find the following advantages: Exploitation Myth3:Trade exploits a country and makes it worse off if its workers receive much lower wages than workers in other nations. Key: He cares about social security problems.

8. 1.The labors always gain more money in foreign country than in their Home country.

9. 2.In the same time, the foreign countries can get benefits from these labors. • Enroll different cultures • Promote the economics • Help some foreign workers get rid of poverty and decrease the potential danger