Question

16. Which one do you agree, “trade is a zero-sum game” or “trade is a win-win situation”? Explain your answer.

Answer 1

A zero sum game in trade generally mean when a country export it will gain and if it imports it will be at loss. This is what classical economist like Adam Smith believed. Although what classicals did not consider are the perks gained by an importing country. If two countries have a trade agreement, country which have a comparative advantage in producing one product can export that product at cheaper prices to the importing country. So, here even importing country is getting benefits of trade which Adam Smith did not consider.

Even trade between a developed country and underdeveloped country can gain from trade, an underdeveloped can get technological advancements due to trade, where as developed nations can get cheap labor and also raw materials from under developed countries. Due to this many countries have surpassed industrial phase in development and directly advanced as major powers with technological advancements. One example can be India, India's story of development from 1991 made remarkable advancements in technology in India. From the trade USA also benefitted using cheap labour of India. Infact, India is called as back office of many developed countries.

It is true the benefits of trade are gained by people who held larger wealth, but one cannot disagree with the fact that trade have uplifted many millions of people out of poverty. So , yes trade is a win-win game rather than zero sum game as said by classicals.