[ 3 / biz / cgl / ck / diy / fa / ic / jp / lit / sci / vr / vt ] [ index / top / reports ] [ become a patron ] [ status ]
2023-11: Warosu is now out of extended maintenance.

/sci/ - Science & Math

View post   
File: 760 KB, 1024x768, Penguins.jpg [View same] [iqdb] [saucenao] [google]
4443047 No.4443047 [Reply] [Original]

Can someone with economics knowledge explain this to me?

"... --> free trade could make a country worse off if its competitive advantage proved to be in a product whose export prices grew more slowly than the country's import prices <--"

why would either price grow?? /confused

Here's the quote in context:
"Export pessimists claimed to have found a major flaw in Free Trade theory, related to the 'lock-in' problem, that not all sectors were the same for development and that --> free trade could make a country worse off if its competitive advantage proved to be in a product whose export prices grew more slowly than the country's import prices <--"

>> No.4443069

the whole point of trade here would be obsolete. trading is good because both parties get something they value more than that which they are giving up. if country A is exporting something that isnt worth a lot, they have to export more of it. if country b is receiving this, they will essentially get more of the product paying the same price they did yesterday.

country a loses.

>> No.4443105

>>4443047
tyvm

>> No.4443121

Of course it's all theoretical and causes all kinds of problem when applied to the real world.

>> No.4443126

This doesn't explain why country a's product is going down in relative value. Just that it is.

Moral of the story, don't rely on exporting things that people care about less and less as time goes on.

>> No.4443128

Adding to>>4443069, you can think of this by considering that GDP, Y, is giving by:

Y = Consumption + Investment + Government Spending + Net Exports

Net Exports = Value of Exports - Value of Imports

Value of Exports = Price of exports * Quantity of exports

Value of Imports = Price of imports * Quantity of imports

So if P imports increases at a faster rate than P exports, then "Net Exports" decreases, which leads to lower GDP, making the country worse off. This is assuming all other things held constant.

>> No.4443142

>>4443128
>which leads to lower GDP, making the country worse off.

All good except GDP isn't a measure of well being.

>> No.4443159
File: 17 KB, 385x488, 1279795428754.jpg [View same] [iqdb] [saucenao] [google]
4443159

>>4443142

>All good except GDP isn't a measure of well being.

Right, but I'm guessing the potential decrease in GDP is what the quote is referring to when it states "free trade could make a country worse off."