Question

In principle, the benefits of international trade to a country exceed the costs, no matter whether the country is importing or exporting. In practice, it is not always possible to compensate the losers in a country, for example, workers who lose their jobs due to foreign imports. In your opinion, does that mean that trade should be inhibited to prevent losses?

Short answer

Trade should not be inhibited to prevent the losses because:

1. Comparative cost theory
2. Dissimilarity in the opportunity costs
3. The gains from trade.

Step-by-step solution

Step 1. Meaning of Trade.

Trade is the buying and selling of goods and services, with compensation paid by a buyer or a seller, or the exchange of goods and services between two parties.

Step 2. The advantages of trade.

Trade has been favored by economists. The cost of a product depends on the availability of the product, availability of the diversity of the goods and services, the stability in the prices of goods and services.

Step 3. Why should trade not be inhibited?

Trade should not be inhibited to prevent the losses because:

1. Comparative Cost Theory -Trade should not be inhibited to prevent losses because of the availability of goods and services which cost comparatively less. This includes specialization.
2. Dissimilarity in the opportunity costs - Gains or profits arising from the existence of diverse domestic exchange ratios for any of the two goods in any of the two countries, which is associated with the production conditions of both countries.
3. The gains from trade - The country should produce the good in which it specializes to improve production and also increase the earning for both the countries.