Question

What are the pros and cons of comparative advantage and free trade? Provide at least two examples.

Answer 1

Pros of comparative advantage and free trade are-

1.it helps in gaining a substantial amount of market share and it also helps in even becoming a market leader.

Example-India in the field of call centres and Saudi Arabia in the field of oil extraction.

2.it helps in huge cash inflows leading into lesser of deficits and high on foreign reserve for a country.

Cons of comparative advantage and free trade-

1. It undermines the various trade restrictive policies and also abuse of power because it has the pricing power and it can produce the goods at the lowest possible price.

2. It is more focused at quantity rather than quality.