The economic law of comparative advantage states that when people and nations pr

Question

The economic law of comparative advantage states that when people and nations produce goods for international trade, they give up making other things they could have produced because those goods can be produced cheaper somewhere else. So, for example, things are cheap at Wal-Mart because they are often made in China, not the U.S., where labor costs are high and more stringent environmental regulation, among other factors, make them more expensive to produce. In your forum post you

have a choice: (1) you may offer arguments for why sourcing products from low-cost countries like China produces a net gain for both Chinese and Americans; or (2) you may take the position that foreign sourcing exploits Chinese workers and destroys good manufacturing jobs in the U.S

Explanation / Answer

My position would be the second one i.e. the foreign sourcing exploits Chinese workers and desteoys american jobs. This is how it works-

Now, Since 1980's the American companies are targeting the labour costs and in order to get cheap labour, they're shifting their manufacturing units to the other countries in order to rival with the foreign good and cheap imports. China, Mexico and Singapore are the preferred destinations.

Now, the units in the USA are completely being closed killing the job opportunities and the units are completely being shifted to the cheap labour countries, where the cheap labour is exploited.

Additionally, it may be beneficial for the company as a whole that it saved so much labour costs, but overall, it took away many jobs by closing down the units in the home country.

Also, it kills the competitive environment within the home country, as the units in the other countries of the homa company is considered as an outsider in a way.

Also, it produces the immigration problems and the wage imbalance in the labour market, as the labour in the home country stays unemployed and the cheap labour gets the low wages. In a way, double edged sword for the labour market.

The outsourcing and offshoring both increase the trade imbalance in the economy.

Hence, The comparative advantage approach is costing too much to the American jobs as the companies just for the sake of labour cost savings, are either outsourcing (moving a portion of work) or offshoring (shifting completely).

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.