Question

Suppose that when trade with the rest of the world begins, country A begins to import textilesa low-skill, labor-intensive good. a) What is likely to be the effect of trade on wages of different types of workers in country A? Explain why in detail? (2 points) b) Which group of citizens in country A would you expect to support free trade and why? Why would oppose free trade and why? (2 points)

Answer 1

a) The effect of this trade on different types of workers in the country A will be negative as the wages of these workers will go down because the country imports low skill and labor intensive good from other countries which will make the situation difficult for employees in the country as they are deprived of work and employment y their own country and if we look at it closely we will observe that the situation is osmewhat similar like that in the US where the skilled and labor intensive jobs are taken care by other countries and organizations from other countries in teh supply chain of the particular country.

b) The business group of citizens in Country A are expected to support free trade because they will get the best quality of products and labor at the lowest possible cost and this will actually make their business profitable from all aspects in the country. So it is visible that free trade actually effects the country A by:

1. The government does not get any duty or tax based on the trade that is taking place

2. The residents of the country A actually are being deprived of work.

3. The organizations of all the countries planning to do trade with Country A can actually conduct trade at their will.