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Heckscher-Ohlin-Samuelson Model

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Answer questions based on the following excerpt from a speech given by Pascal Lamy, Director-General of the World Trade Organization, on Sept. 6, 2006

"China has fundamental interest in an ambitious outcome itn these negotiations. Givenits relative openness, it has an offensive interest in ensuring a decrease of tariffs for many of its key manufactures in many third countries. On agriculture, having become a net food importer, the Doha negotiations can help China ensure adequate supply of food for its growing population at affordable and stable prices. Further reduction of trade-distorting agriculture subsides in developed countries will also benefit China's agriculture production. A further opening of its services market can contribute to China's thriving economy in sectors such as banking, telecommunications, insurance, and transport services."

A) Lamy's comments suggest that China has a comparative advantage in which sector(s)? The comments also suggest that China does NOT have a comparative advantage in which sector(s)? Explain your answers.

B) Lamy's comments suggest that China is both an importer and an exporter of agricultural goods. Of the 5 models we've learned in class, which one(s) would support this existence of incomplete specialization? Which is (are) inconsistent with the incomplete specialization we observe in China?

MODELS LEARNED IN CLASS: Theory of comparative advantage(Ricardian Model), Specific Factors Model, Heckscher-Ohlin-Samuelson Model, Standard Trade Model, Imperfect Competition Model(New Trade Theory)>

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A) Lamy's comments suggest that China has a comparative advantage in which sector(s)? The comments also suggest that China does NOT have a comparative advantage in which sector(s)? Explain your answers.

According to Lamy's comments China especially have competitive advantages in the manufacturing sector due to its relative openness and, government's efforts to decrease tariffs. It is very clear that the government provides ...

Solution Summary

Heckscher-Ohlin-Samuelson Model is applied in China's case.

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See Also This Related BrainMass Solution

Use of Ricardian Model, Specific Factors Model, Heckscher-Ohlin-Samuelson Model, Stolper Samuelson Theorem, Standard Trade Model, and Imperfect Competition Model to determine tariff opposition by different groups.

1. You are an advisor to the government of Argentina. Argentina is considering placing a tariff on imports of cotton. Please prepare a report for the president that evaluates this proposal base on the criteria listed below. you may assume for the purpose of this exercise that the import tariff has an effect equivalent to closing off trade in cotton.

A) why would Argentina want to limit imports of cotton? What does this suggest about the natural free trade pattern of specialization in Argentina? i.e. would we expect that it would be a net importer or exporter? Is Argentina likely to have a comparative advantage in the production of cotton?

B) Which group(s) within Argentina will likely support this tariff? which will oppose it ? Please justify you answer by citing specific models learned in class.

C) Will the country as a whole be better or worse off with the tariff? Please comment on what each of the 5 models we've learned in class would say about the issue.

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