Comparative advantage, being a dynamic concept, can provide an Essay

Comparative advantage, being a dynamic concept, can provide an economic argument in favour of short term protectionism. Discuss - Essay Example Below-mentioned graph shows world exports in terms of percentage of world gross domestic product for the year between 1970 and 2008. This indicates how flourishing has been the world trade in the last 40 years. To begin with, it would be prudent to know about the basic reasons for trades to take place between the nations. Suranovic (2010) mentions five basic reasons for any international trades to take place. Trades occur between the countries when they differ in their technological abilities to produce services and goods. The resources used are capital, labor, and land to deliver the output in terms of products and services. Each country will have varying ability to use the inputs in producing the given output. Again, each country will differ in their resource availability such as mines, minerals, water, and electricity. Heckscher-Ohlin model explains about the trades taking place due to difference in resource capabilities. Trades between the countries also occur due to difference in demands. Difference in demands may be rooted in their cultures, beliefs, customs or habits. There are the communities and countries who habitually consume more fish preparations compared to some who are pure vegetarians. Some make their houses using woods and some use more steel and cement while making their dwellings. These innate consuming habits tend to make the demand differences among the countries, which they would fulfill through exchange of goods and services. Economies of scale bring down the cost of production. Those who cannot operate at the level of economy of scale of production will be at disadvantageous situation. Global demand will rush to the country where the cost is lowest. The point is that the reason could be any one or many for the trade to take place; however, the theory of comparative advantage is in its root. There are long term benefits of free trade in goods and services to the consumers at large but still there are disputes and