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The advantage of free trade

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In order to protect consumers, the United States has taken action to restrict the imports of certain Chinese goods, such as toys that contain lead and seafood that does not meet certain health standards. Some say that this is a double standard. If the United States is willing to restrict goods on these grounds, shouldn't there be restrictions on the import of goods produced with badly paid labor? Is this argument valid or invalid? Why? Explain a political argument for both sides of this argument.

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The argument on restriction on importing of goods produced with badly paid labor is invalid as long as the production is done legally in the exporting country. The argument on "badly paid labor" is subjective. Comparing with the US standard, maybe the wages of production operators are low, but not so according to the exporting country. The labor market in that particular exporting country is different from the US labor market, unless labor mobility is allowed. If that happened, US workers may have to compete with these ...

Solution Summary

Any country will produce goods that they have comparative cost advantage and trade with other country for goods that they do not have cost advantage. By specializing in producing goods based on their comparative advantage, then trade with other nations will eventually benefit all nations that involved in such activities. This is basic argument for free trade, that is all nations involved in trade without any barriers (such as tariff) will gain by cheaper products and creating more employments in all countries. Therefore, importing goods from countries with badly paid labor is not wrong, unless the production is done illegally. As long as the production is done in according to the law of the host country, it should not be a concern of the importing country regarding labor situation there. Labor markets in the exporting country and the importing country are different, unless labors are allowed to move freely, which may create different kind of problem. Even though labors are paid cheaply in the exporting country, the price of labor is the equilibrium price in that particular labor market. That price is their hard-earn money to feed their family. Therefore, the importing country should not impose their labor standard to other countries with regard to trade. In the long run, the act of trade will benefit all countries involved and eventually labor price (as well as standards) are equalized around the world.

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