Question

How would you respond someone who is arguing in favor of greater protection of domestic industries against free international trade? Justify your arguments with a trade model of your choice.

Answer 1

In this regard I would take the example of comparative advantage trade model where it is given by David Ricardo, David Ricardo suggested that if the opportunity cost of producing a product is less for one country then the another it is having a comparative advantage and it should continue to produce that product import the product in which it is having a comparative disadvantage so that finally the quantity consumed at a given budget would be more in both the goods then without trade as a result of which the people are better off and in order to do that it would be better to shift the production from one industry to another industry so that the employment also moves from one industry to another industry and ultimately employs also will adjust to the trade scenarios and that is the reason why trade would be a better option than no trade