coconut64
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https://imgur.com/a/pEqz2

Hi,

The link above shows the section of the textbook that I don't quite get. This is about the effect of internation trade, and I gather that negative effect is created to certain group of people in the nation. However I don't get the part about the strong effect on distribution income and the example provided.

Thanks.
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The Financier
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(Original post by coconut64)
https://imgur.com/a/pEqz2

Hi,

The link above shows the section of the textbook that I don't quite get. This is about the effect of internation trade, and I gather that negative effect is created to certain group of people in the nation. However I don't get the part about the strong effect on distribution income and the example provided.

Thanks.
The crux is that trade is a 'catch-all' term when applied nationally, and that different segments of firms and stakeholders get different levels of benefit from it.

The first example suggests that firms supplying an 'upstream value chain' (basically someone who uses what the firm supplies to make something else) that faces a lot of international competition cannot diversify away, and therefore as their customers suffer from greater competition, they suffer as well. This may be due to loss of demand, price pressures etc.

The second example notes that the benefits of trade are not given equally amongst stakeholders. A worker for example, may not gain much more in wages whereas a factory owner will gain a lot more revenue from exporting the goods the factory makes, significantly increasing his company's financials and therefore likely his pay.

Hope this helps
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