Republic of the Philippines

COLEGIO DE SAN LORENZO RUIZ DE MANILA, INC.

J.P. Rizal Steet, Catarman, Northern Samar

INT’L TRADE & AGREEMENT

CHAN, ZARINA B.
BSBA-3
NOVEMBER 17, 2022
ACTIVITY #6

1. What do you mean by classical theory of comparative

advantage?
 When used to describe international trade, comparative
advantage refers to the products that a country can
produce more cheaply or easily than other countries.

2. Explain your example of the theory of comparative advantage.

Give an example where two countries are both not benefited.
 As an example, consider a famous athlete like Michael
Jordan. As a renowned basketball and baseball star,
Michael Jordan is an exceptional athlete whose physical
abilities surpass those of most other individuals. Michael
Jordan would likely be able to, say, paint his house
quickly, owing to his abilities as well as his impressive
height.

 Hypothetically, say that Michael Jordan could paint his

house in eight hours. In those same eight hours, though,
he could also take part in the filming of a television
commercial which would earn him $50,000. By contrast,
Jordan's neighbor Joe could paint the house in 10
hours. In that same period of time, he could work at a
fast food restaurant and earn $100.

 In this example, Joe has a comparative advantage, even

though Michael Jordan could paint the house faster and
better. The best trade would be for Michael Jordan to
film a television commercial and pay Joe to paint his
house. So long as Michael Jordan makes the expected
$50,000 and Joe earns more than $100, the trade is a
winner. Owing to their diversity of skills, Michael Jordan
and Joe would likely find this to be the best arrangement
for their mutual benefit.

 It is not possible for a country to have a comparative

advantage in all goods.

3. Is free international trade favorable to the less developed

countries? Explain.
  The classical trade theory states that the gains from
international trade accrue to the nationals of trading
countries. In case of most of the less developed countries,
this has not materialised.
 It is obvious that the classical principle of comparative
cost advantage has little relevance to the conditions of
less developed countries. It is important for these
countries, at least in the early stage of their development,
to pursue protectionist policies to develop and diversify
the industries rather than to allow the unrestricted flow
of cheap products to flood their markets and disorganise
completely their whole structure of production.

4. What is economic nationalism?

 The definition of economic nationalism states that it is
a means to control the nation’s economy. Advocates of
this concept are completely antagonistic towards
globalization. The general belief is that globalization
promotes excess international trade and investment
policies, thus leading to diminished nationalism.

5. Is economic nationalism compatible with international trade?

Why?
 No, because mercantilism or economic nationalism, in
spirit and practice, is the exact opposite to free trade.
Indeed, mercantilism conveys that a country must
accumulate wealth by limiting imports and increasing
exports. In addition, mercantilism implies the
colonialization of other countries so that raw materials
are obtained cheaply, and manufactured items are
exported to colonies at high prices. Mercantilists, indeed,
had a dark view of international trade and were driven by
raw nationalism.