Newsgroups: alt.activism,talk.politics.misc,misc.headlines,alt.politics.elections,talk.environment,alt.save.the.earth,misc.jobs.misc,sci.econ
From: mfriedma@uucp (Michael Friedman)
Subject: Re: STUDY: NAFTA TO CAUSE U.S. JOB, INCOME LOSS
Organization: Oracle Corporation
Date: Fri, 14 Aug 1992 20:20:16 GMT
X-Disclaimer: This message was written by an unauthenticated user
              at Oracle Corporation.  The opinions expressed are those
              of the user and not necessarily those of Oracle.

In article <1992Aug12.153525.14298@ils.nwu.edu> hooker@aristotle.ils.nwu.edu (Bob Hooker) writes:
>In article <1992Aug9.102017.5190@leland.Stanford.EDU>,
>foster@leland.Stanford.EDU (Pablo Estrada) writes:

>> 	If you want to do some in-depth research yourself into free-trade and 
>> its likely effects on the different types of economies, I would recommend to 
>> you the topic of "Comparative Advantage," which should be covered by any 
>> worthwhile basic-economics text. 

>The Comparative Advantage theory,  that consumers in different countries
>benefit if they trade goods where each has a unique advantage, is so 
>simplistic I can't see how anyone could make decisison on trade based upon
>it.

>But lets say that I am a country that produces rubber very well.  Jobs in
>the rubber production pay like shit,  they are dangerous,  they pollute the
>country side and they do not require that my country educate people.

>I can buy tractors for rubber from a more industrialized country.  And if
>there is a competetive advatage I am better off in the short run buying the
>tractors and keeping my country a rubber producer.  

>The result is I have a poor, polluted, uneducated country.  If I want to
>start industry,  but my trading partners all have a comparative advanatge
>in industry,  I had better put up some trade restrictions of some kind, in
>order to protect by domestic market.

The point you miss is that although a few people will be better off -
for example the owner of the factory and the people who work in it -
many more will be worse off - tractor buyers, people who need things
that are produced using tractors, people who sell materials that are
used with tractors, etc.

What comparative advantage tells you is that the net result of all
this will be a loss of wealth from your country.  

Now where does it go wrong?

>Also,  many players in the world don't agree with free trade.  If I have
>few restrictions on imports and am trading with a country which have many, 
>the comparative advantage arguemnet menas nothing.  I lose one industry
>without a increase in another.

Incorrect.  Comparative advantage also says that no matter what
restrictions your partner has on trade you are better off with none.

(Note that comparative advantage theory doesn't address issues like
using trade restrictions as clubs to make your partners lower their
trade restrictions.  If you do that then everyone is better off.)

>In reality,  onme could think of dozens of examples where COmparative
>Advantage puts a country in a situation in which it would not desire being,
> or not even work at all,  like our trade relations with Japan.

Name one.



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