To: Recourse
"Trade with China allows our economy to shift production to those products and services where we enjoy an even greater advantage, raising our overall productivity."
Can you name some of these products and services?
To: JohnSmithee
China's comparative advantage is a large, cheap labor pool for manufacturing, but a high human-to-land ratio. The United States' advantage is abundant farmland, which produces foods cheaply. These differences mean that U.S. food could be exchanged for China's manufactured products.
The benefits of trade are independent of cheaper wages in another country or the relatively cheaper price of imports. Think about it, if foreign governments chose to subsidize their exports to the United States (make them cheaper), they would, in effect, tax their own citizens to benefit US consumers.
There are always those producers that are more efficient, and those that are less so. For those high cost or inefficient producers and their employees, a protection such as a tariff is the perfect refuge from foreign competition.
This would thus ask consumers to pay higher prices for goods and services than are available to them through trade, thereby negating the potential expansion of trade benefits.
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