Question

Explain how trade with low-wage countries affects jobs in the United States. How can the United States pay its workers higher wages than foreign nations and still be competitive in foreign markets? 80words

Although people may grow grapefruit in Idaho, why do they purchase most if their grapefruit from California and Florida?

Answer 1

Trade in US has been an important part of its economy started with less than 10% of the GDP, it has grown to be close to 30% now. As a result, both exports and imports are high; US goods are high in demand in foreign markets and foreign goods are imported at cheap prices. In some cases, cheap raw materials are imported so that US domestic goods can be produced in low cost.

The trade scenario in US is quite lucrative but it has certain drawbacks as well. Foreign companies providing cheap labor tends to dictate the wage paid to American workers so competing with low wage countries is unfair for US workers. A possible remedy to this can be to introduce tariff on goods bought to US which is equal to the difference in wages paid to foreign workers and American workers.

These differences in wages is due to differences in productivity and the fact that some countries specialise in the production of certain goods because of endowments etc.

b) Grapefruit is a seasonal good and has a long gestation period. It requires a high temperature zone and there are some varities prefered than others like Red grapefruits are preferred to white. The oldest grapefruit clone are grown in Florida and California.

Hence, adaptive climatic conditions and diversification of grapefruit gives advantage to California and Florida to produce grapefruit at cheaper price than Idaho and one should specialise in the production of goods which it can produce at lower cost or having lower opportunity cost