Question

  1. How do different environmental standards affect industry location and international trade?

a. What are the benefits of intra-industry trade?

b. How does a tariff lead to production cost inefficiencies?

c. How can trade be based on technological gaps and product cycles? Your answer should include

   an explanation of each.

d. What would happen to the US standard of living if the United States withdrew completely from

   international trade?

Answer 1

1. Different environmental standards affect industry location and international trade . Environmental standards refer to the levels of air pollution , water pollution , other kinds of pollution that a nation allows. Environmental pollution results whenever the industry/environment is used a convenient and cheap dumping way for all types of waste products arsing from the production, consumption of goods or services. This leads to serious trade problems because the price of traded goods or services doesn't fully reflect the social environmental cost. A country/nation with lower environmental standards can in effect use the environment as a resource endowment or factor of production in attracting polluting firms from abroad and achieving comparative advantage in polluting goods or services.

2. Intra-industry is a trade of products that belong to the same industry.

Benefits of intra-industry trade :

(a) Intra-industry trade increases the variety of products under the same industry and it increases the range of products which is highly differentiated.

(b) It also gives the opportunity for businesses to benefit from economies of scale and also use their comparative advantage .

(c) It also stimulates innovation in the industry and can assist the economy in cases of short term economic fluctuations.