How is free trade beneficial to the UK if foreign goods outcompete local ones

HucktheForde

and causing unemployment?

economist come explain.

Reply 1

HaramBae

Comparative Advantage - David Ricardo

Look it up

Reply 2

Maker

OP sounds like a Trump supporter

Reply 3

HaramBae

Ok. I save you the work.

David Ricardo is a British economist who wrote Principles of Political Economy and Taxation in 1817.

He came up with the idea of Comparative Adavantage.

In his model Ricardo excluded all countires except Britain and Portugal,.and all products apart from wine and clothes.

Obviously, if each country makes one thing more efficiently, it makes sense to specialise and trade. For example imagine in Britain a worker makes 1 cask of wine or 4 bundles of clothes per year and in Portugal a worker makes 4 casks of wine or 2 bundles of clothes a year.

Now lets imagine Britain is just plain inefficient. Does trade still make sense? Common sense says no. For example imagine in Britain a worker makes 2 casks of wine or 4 bundles of clothes per year and in Portugal a worker makes 4 casks of wine or 6 bundles of clothes a year.

But wait: if Britain switches say 100 workers from making wine to making clothes, you will make 200 fewer casks of wine but 400 more bundles of clothes. Send Portugal 380 bundles of clothes and you will still have 20 more than you started with. Then if Portugal switches 60 workers from clothes to wine, you will make 360 fewer bundles of clothes but thats ok because the British are sending you 380. And the 60 workers will make 240 more casks of wine. Send 220 cascks Britain and everyone has more than they started with!

Britain -
-200 wine / + 400 clothes
+ 220 from P / - 380 to P
= + 20 / + 20

Portugal -
+240 wine / -360 clothes
- 220 to B / +360 from B
= + 20 / +20

Make sense?

(edited 7 years ago)

Reply 4

Pulse.

It's all good citing Ricardo and Smith, but both really underestimate the transitory costs of unemployment as economic resources move towards production in goods and services where an economy moves towards comparative advantage and specialisation. Remember economic theory is for the most part riddled in caveats such as fluid mobility of labour and capital, this is not the case in reality. The duty of government should be to strategically insulate the economy as it is in the national interest. Sure free trade is in the long run is beneficial, but the short term consequences are far too great.

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Reply 5

HucktheForde

Original post by HaramBae

Ok. I save you the work.

David Ricardo is a British economist who wrote Principles of Political Economy and Taxation in 1817.

He comes up with the idea of Comparative Adavantage.

In his model Ricardo excluded all countires except Britain and Portugal,.and all products apart from wine and clothes.

Obviously, if each country makes one thing more efficiently, it makes sense to specialise and trade. For example imagine in Britain a worker makes 1 cask of wine or 4 bundles of clothes per year and in Portugal a worker makes 4 casks of wine or 2 bundles of clothes a year.

Now lets imagine Britain is just plain inefficient. Does trade still make sense? Common sense says no. For example imagine in Britain a worker makes 2 casks of wine or 4 bundles of clothes per year and in Portugal a worker makes 4 casks of wine or 6 bundles of clothes a year.

But wait: if Britain switches say 100 workers from making wine to making clothes, you will make 200 fewer casks of wine but 400 more bundles of clothes. Send Portugal 380 bundles of clothes and you will still have 20 more than you started with. Then if Portugal switches 60 workers from clothes to wine, you will make 360 fewer bundles of clothes but thats ok because the British are sending you 380. And the 60 workers will make 240 more casks of wine. Send 220 cascks Britain and everyone has more than they started with!

Britain -
-200 wine / + 400 clothes
+ 220 from P / - 380 to P
= + 20 / + 20

Portugal -
+240 wine / -360 clothes
- 220 to B / +360 from B
= + 20 / +20

Make sense?

yea if britain makes nothing well then we just shut off all trades then?

Reply 6

HaramBae

Original post by HucktheForde

yea if britain makes nothing well then we just shut off all trades then?

Did you even read what I wrote? :facepalm2:

Reply 7

HucktheForde

Original post by HaramBae

Did you even read what I wrote? :facepalm2:

Last edited by HaramBae; 2 minutes ago at 17:49.

u edited it :angry:

Reply 8

HaramBae

Original post by HucktheForde

Last edited by HaramBae; 2 minutes ago at 17:49.

u edited it :angry:

Yes I did. Good observation skills!

I just changed a sentence that was wrongly written in the present into the past.

Cant you understand what I wrote? I guessed so.

Reply 9

HucktheForde

Original post by HaramBae

Yes I did. Good observation skills!

I just changed a sentence that was wrongly written in the present into the past.

Cant you understand what I wrote? I guessed so.

ur wrongly written part confused me. after editing it i can understand it now.

Reply 10

dan.lunnux

last i checked unemployment is at 5%. yep, really high, sack Theresa, sack Parliament!!

Reply 11

HucktheForde

Original post by Maker

OP sounds like a Trump supporter

It is a well known economical fact that free trade is exposing your country to rape.

Reply 12

jamesthehustler

free trade is beneficial if it stuff we don't or can't produce ourselves like regional items and materials found underground
f**k it I'm done with this I know it 7AM but I am getting myself a scotch but I haven't slept so it's fine

Reply 13

viffer

Original post by dan.lunnux

last i checked unemployment is at 5%. yep, really high, sack Theresa, sack Parliament!!

http://www.telegraph.co.uk/news/politics/georgeosborne/10734852/What-is-full-employment.html

The Bank of England and the Office for Budget Responsibility, the Government's independent forecasters, both deem “full employment” to be when unemployment is about 5 per cent.

Reply 14

yudothis

Stop free trade and soon everyone would be whining about the prices of everything. But hey, better be self sufficient, that has always been a great aim in history.

Reply 15

dan.lunnux

Original post by yudothis

Stop free trade and soon everyone would be whining about the prices of everything. But hey, better be self sufficient, that has always been a great aim in history.

ok...would you be self-sufficient in growing chocolate?

Reply 16

yudothis

Original post by dan.lunnux

ok...would you be self-sufficient in growing chocolate?

You can grow chocolate?

Reply 17

dan.lunnux

well if you ban free trade many things people buy would be far more expensive and inaccessible.

Reply 18

Rakas21

Original post by HucktheForde

and causing unemployment?

economist come explain.

The answer of an economist is that the disinflationary benefits of free trade generate far more jobs than they destroy.

Basically by abolishing tarrifs on say steel we would destroy about 10,000 jobs in the steel industry however because steel would now be cheaper, consumption of steel would increase generating new jobs in construction, engineering and the steel equivalent of retail.

This is why automation in general has not been correlated with long term higher unemployment (and why i think people are too scared of the future), because the disinflationary benefits of a factory having machines produce tinned beans have generated far more jobs in retail than they took in the tinned bean factory.