"The United States is more productive in most activities than are most of other countries because it has an absolute advantage in the production of most goods and services

Question

Therefore we should restrict international trade as it only benefits other countries at the expense of the United States." Comment on this statement.

Answer 1

The United States may be more productive than other countries in producing most goods and services so that it has an absolute advantage in most products, but it sill has a comparative disadvantage in many goods and services. Thus the United States and can gain from buying these goods and services from other countries and selling to these other countries the goods and services in which the United States has a comparative advantage to them. For example, the United States can have an absolute advantage over China in producing both cars and grain, but if China has a comparative advantage in grain, it can produce grain with a lower opportunity cost, that is, fewer cars given up to get a thousand tons of grain, than can the United States. In this case, the United States can benefit by importing Chinese grain and paying for it with fewer cars then the United States would have to give up if the same amount of grain was produced domestically.