Question

Why is it likely that the United States has an absolute advantage in goods and yet it still ends up importing them from other countries? is this a good thing? why?

Answer 1

United States can have absolute advantage in many goods but absolute advantage is not important in terms of international trade. To have gains from international trade the country needs have a comparative advantage. United States has comparative advantage in very few goods especially in capital intensive goods but at the same time it has comparative disadvantage in labour intensive goods such as software services oil extraction and other services. This is the reason why it was outsourcing for quite a long period of time until recently when automation increased the demand for robots. It has since then increased the production of capital intensive goods including robots.

Importing is not considered inefficient from an US perspective if it is not able to produce the same goods at efficient cost or at least reduced cost. It is always better to import when you are not able to produce them at a lower cost because importing will reduce cost of production and will increase the Welfare of the nation on the whole. But for this the import should be free or at least should be done at lowest possible tariff and other trade barriers.