Look anywhere around your home or office and you are sure to find products from every corner of the world. Even products that may be labeled as “Made in (fill in the blank)” are generally assembled from components made in many other countries. The grocery store is another excellent place to observe the phenomenon of global trade. Let’s discuss this! Identify one product in your home that is made elsewhere. Why was this product imported? (Hint: think comparative advantage and mutual gains from trade) Some oppose free trade. What are their reasons and how does this apply to the product you identified in our first prompt? If a trade restraint (i.e. a quota or tariff) were imposed on the product you identified what affect do you think this would have had on you and your purchase?

Look anywhere around your home or office and you are sure to find products from every corner of the world. Even products that may be labeled as “Made in (fill in the blank)” are generally assembled from components made in many other countries. The grocery store is another excellent place to observe the phenomenon of global trade. Let’s discuss this!

Identify one product in your home that is made elsewhere. Why was this product imported? (Hint: think comparative advantage and mutual gains from trade)
Some oppose free trade. What are their reasons and how does this apply to the product you identified in our first prompt?
If a trade restraint (i.e. a quota or tariff) were imposed on the product you identified what affect do you think this would have had on you and your purchase?

 

answer:

The product taken for discussion is the mobile phone that is manufactured in China and it is being sold in my country. The product is manufactured in China due to many reasons as it gives comparative advantage to the company to opt for China to establish a manufacturing setup. The first reason is the favorable policy of the country where China is much ahead and it facilitates the manufacturing process. The second reason is low cost labor and economy of scale in operation that brings down the overall cost of operation. So, the cost of manufacturing is much lower than the cost of manufacturing in my country. It gives a comparative advantage. The third reason is the technological development and the suitable climate for implementation of technology. It is better in China. So, the product is manufactured in China and imported in my country as well as many other nations across the globe.
It gives mutual gains to both the economies as products manufactured in China is being sold in my country that generates revenue for the company. At the same time, the company pays taxes on revenue earned in the country of import to the authorities. So, it creates a win-win situation for all the parties.

Some people oppose free trade. The first reason of opposition is the ruining of the domestic industry that is still not competitive. The second reason is the transfer of forex to the overseas nation where the company is located. In the case of mobile phones, opposition to free trade is not prominent as people demand for superior products and government has not imposed specific restrictions regarding the import of mobile phones.

If any kind of trade barrier is implemented, then I have to opt for the products that is manufactured in our own country or the same product what I use will be available at higher prices. I have to pay high prices for not so good products. For existing handset, spare parts will be sparingly available. Thus, the government will become successful in applying restriction on demand of imported mobile handsets.

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