Anna Swartz, Paper 1, MBA723-E1WW, Professor Ed DeJaegher, August 14, 2012 TO: MBA Professor Ed DeJaegher From: Anna

Swartz Subject: International Trade Debate Date: 08/14/2012 Business Brief The Theory of Comparative Advantage When International trade occurs between countries using the theory of comparative advantage a country is specializing in producing goods efficiently at a lower opportunity cost than another country in which they conduct trade (Boyes, 2012). When countries trade they need to consider the pros and cons of international trading and how it will affect their country. Pros and Cons of International Trade Using the Theory of Comparative Advantage Pros Cons 1. 2. 3. 4. Treat to small business Dependent on few products could hurt the economy if demands fall Treat to domestic manufacturing/ industry jobs Stop producing a product and become dependent on another country, which can threaten national security because a country does not have access to material to build products to defend their country. 5. Treat to a country cultural, when exposed to another country cultural 6. Countries lose their comparative advantage when a company builds factories in low-wage countries ( Hann, 2011& International Trade, 2012) Produce products that they excel at Economic growth Higher living standards Increase prosperity New markets Larger selection of products More buying power for low-income families Improve relationships between countries Competition promotes lower prices Production efficiency, pproductivity increases when countries produce goods and services in which they have a comparative advantage. Export jobs can pay more than other jobs Living standards can go up faster( Hann, 2011& International Trade, 2012)

Anna Swartz, Paper 1, MBA723-E1WW, Professor Ed DeJaegher, August 14, 2012 How Trading Internationally Affects a Countrys Economics Property rights define economic growth because when people own property they have the incentive to increase the value and invest which helps a nation prosper. When a country prospers, they are more likely to be involved in trading internationally which affects a countries economics growth in positive and negative ways (Boyes, 2012). Positive Ways It can benefit a country economics growth by increasing prosperity, which creates a higher standard of living. It can create new jobs and gives countries access to new markets for their products so they can compete in a global market place. It gives consumers a larger selection of services or products to purchase. It creates competition and lowers prices, which gives families more buying power. (International Trade, 2012).

Negative Ways Internationally trading can also have a negative effect on a countries economics. It could cause a country to lose jobs and cause small businesses to have a hard time starting and staying in business because of the competition that is create because of trading internationally (International Trade, 2012).

Argentina is a country that trades internationally with other countries to create an economy that continues growing and prospering in todays global market by exporting their excess goods and importing products their country uses and needs. Argentina International Trade Patterns Compared to their Partners Argentina estimated they exported $83.71 billion in 2011. Their exports include soybeans, gas and petroleum, vehicles, corn, and wheat. The countries top three export partners are: Brazil 21.5% China 7.4% Chile 5.6% (Central Intelligence Agency, 2012).

Argentina imported $71.73 billion in 2011 and their imports include machinery, motor vehicles, petroleum and natural gas, organic chemicals, and plastics. The countries top three import partners are: Brazil 33.2% US 14.4% China 12.4% (Central Intelligence Agency, 2012).

Anna Swartz, Paper 1, MBA723-E1WW, Professor Ed DeJaegher, August 14, 2012 When comparing Argentina imports and exports with their trading partners imports and exports a pattern emerges, you notice that they import goods that are scarce to their country and export goods that they can produce better and for less than another country, which results in a gain from trade. Argentina trading patterns follow the same patterns of their trading partners. The trading partners imports goods and services that are scarce in their country, export goods and services that they have in excess and can produce at for less than another country. An example is the United State exporting computer technology to Argentina and China importing corn from Argentina and the United States. Why International Trade is good for a Countrys Economic International trading is good for a country economics because countries will be able to require good, which are scarce in their country. When country produce goods or services at a better cost than another country and then trade, it will take less to buy items you need and this increases income, which creates gains from trade (Boyes, 2012). The benefit of trading internationally is greater than not trading internationally. The benefits of trading intentionally are: Lower Prices Improvements in manufacturing quality and productivity because of competition Create faster growing nations Higher income growth Higher standard in living Longer life expectancy Better schools Increased GDP from trade Higher wages for skilled workers Employment opportunities created in developing countries (International Trade, 2012).

Anna Swartz, Paper 1, MBA723-E1WW, Professor Ed DeJaegher, August 14, 2012 Reference Boyes, W. (2012). Managerial economics: Markets and the firm. (2nd ed.). Independence, KY: South-Western Cengage Learning. Central Intelligence Agency. (2012). The world factbook. Retrieved July 12, 2012, from https://www.cia.gov/library/publications/the-world-factbook/geos/rs.html Hann, P. (2011).Principle of comparative advantage: Explaining with examples. Retrieved August 14, 2012, from http://www.brighthub.com/office/finance/articles/122792.aspx International Trade. (2012, July 14). Retrieved July 14, 2012, from http://www.americansworld.org/digest/global_issues/intertrade/support_trade.cfm