Discussion Question

2-2 Simulation Discussion: Comparative Advantage

In your responses, comment on at least two of your peers’ posts. Critique the arguments made in each peer’s article by weighing the costs of FTAs against the benefits. Support your position with sources from the news or the textbook.

Renee Biggins - The United States could benefit from specialization and trade such as the United States having more fertile soil than Japan. In this case, Japan can produce cars just as fast as the United States at the rate of one car per month, but since the soil is far more fertile in the U.S. this allows for the production of 2 tons of food to be produced to Japan’s 1 ton of food due to the struggle with the infertile soil. Since Japan can produce cars just as fast as the U.S. but the U.S. can produce more food than Japan, this would be an opportunity to enter into a trade agreement, where Japan can focus on the production of cars, while the U.S. focuses on the farming of food. This would allow Japan to produce enough cars for themselves and allow time to produce extra to export to the U.S., meanwhile the U.S will do the same with food. Together, they can be much more efficient in producing needed items, and opportunity costs would be maximized.

In the article “Are Trade Agreements Good for Americans” in the New York Times, the argument that economists make is that free trade agreements in fact benefit the U.S. a great deal. The U.S. is already in a good position as far as engaging in trade with other countries. While exporting does eliminate some jobs, it creates more specialized jobs, which brings labor rates up. The U.S. also benefits because the raw materials are cheaper when imported from other countries, allowing the overall cost of the product to be lower while the quality of the product stays consistent. The U.S. could improve on labor rates and job training so that the workforce does not suffer when some jobs are exported and we continue to benefit as an entire country so that American workers don’t have to face job loss and can just overall shift their focus to a specialty and earn a higher wage.

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Lindsay MacTavish - Recently, Britain and Australia announced their plans of a free trade agreement. This agreement would eliminate tariffs on a variety of goods in hopes for the UK to expand its trading network after its exit for the EU. The FTA is expected to enhance exports of British products, such as Scotch Whiskey, and boost imports from Australia (i.e., lamb). The UK anticipates that this will increase their opportunity for trade throughout the Asia-Pacific region. For Australia, “Australian farmers may be one of the biggest beneficiaries of the deal as agricultural goods account for about 14% of the country’s total exports,” (Kirka, 2021).

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