When A Rich Country Enters Into A Free Trade Agreement With A Poor Country

Gomory and Baumol note that, to the extent that countries can create a comparative advantage for products with lower production costs, there are many possible outcomes for business models: “These results differ in their impact on the economic well-being of the countries concerned. Some of these results are good for one country, some are good for the other, some are good for both. But it is often true that the results that are best for a country tend to be bad results for its trading partner. [26] Fourth, Western economic theory assumes that trade will be reasonably balanced over time. If this is not the case, it indicates that the deficit country will introduce products for which it would normally have a comparative advantage; If these products operate in sectors where production costs are falling, the sector could lose its competitiveness in global markets over time. When foreign products from low-cost countries arrive in a country without trade barriers, they are sold cheaply, giving consumers a greater choice of products and the opportunity to save money. Domestic companies often find it difficult to compete with these low prices – they need to find ways to be more efficient. This often involves investing in new technologies, and layoffs can result. Economists are not concerned about these cyclical trade deficits or surpluses. Moreover, they are not worried when there is a deficit, because the country borrows heavily abroad to finance investments that will then be repaid. During the 19th century, the United States remained in this position, when it invested heavily to build railways across the continent, steel mills and other long-term investments.

That is not the situation in the United States today. Today, it borrows many other countries to finance short-term consumption, such as the newest and largest HDTVs in Japan or South Korea, and these purchases do not generate income to pay off their debts in the future. The benefits of an economy resulting from increased exports as a trading partner improve market access.


The International Conference on Digital Image Computing: Techniques and Applications (DICTA) is the flagship Australian Conference on computer vision, image processing, pattern recognition, and related areas. DICTA was established in 1991 as the premier conference of the Australian Pattern Recognition Society (APRS).

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