Assignment 1 1. PPF   Dynamic comparative advantage means that a country does not have to depend only on its natural resources or the skills...

Assignment 1

Dynamic comparative advantage means that a country does not have to depend only on its natural resources or the skills that the labour force already has.  Governments often take action to develop comparative advantage.  This doesn’t always work.  A notable case was in Scotland were there was an attempt to develop a region of specialisation in high tech electronics – it was referred to as “Silicon Glen”.

In 2003 it contributed one-seventh of Scotland’s gross domestic product, directly employed 45,000 workers and accounted for more than half the country's exports. 

Not so any more. Most of the big companies (like Motorola) set up in Scotland to take advantage of government support (low taxers and subsidies) and left when these supports were removed. Most of the jobs have gone in this sector. 

2.Gains from trade

a)

According to theory, prove that there is a basis for trade.  What should that trade be? [4]

b)Put this information into PPFs and show the gains from trade. [2]

c)The Canada–U.S.A softwood lumber dispute is one of the largest and most enduring trade disputes between both nations.[1] This conflict was given rise in the early 1980s and its effects are still seen today. British Columbia, the major Canadian exporter of softwood lumber to the United States, was most affected, reporting losses of 9,494 direct and indirect jobs between 2004 and 2009.[2]

The heart of the dispute is the claim that the Canadian lumber industry is unfairly subsidized by federal and provincial governments, as most timber in Canada is owned by the provincial governments. The prices charged to harvest the timber (stumpagefee) are set administratively, rather than through the competitive marketplace, the norm in the United States. In the United States, softwood lumber lots are privately owned, and the owners form an effective political lobby. The United States claims that the Canadian arrangement constitutes an unfair subsidy, and is thus subject to U.S. trade remedy laws, where foreign trade benefiting from subsidies can be subject to a countervailing duty tariff, to offset the subsidy and bring the price of the commodity back up to market rates

https://en.wikipedia.org/wiki/Canada%E2%80%93United_States_softwood_lumber_dispute

3.GDP