A Study On Comparative Advantage Of Total Cost In International Trade

Since the international trade comes into being, comparative advantage theory hasbeen regarded as one of the instruments to explain the patterns of international divisionof labor, conduction of trade and distribution of profit. With the economic globalizationproceeding, and WTO driving the development of world trade liberalization, it haspresented new requirements of means of exchange, ecological environment andsustainable development for every nation, especially for the developing countries andthe countries with the resource endowment advantage. In consequence, every nationshould integrate their own factor advantage with the trade costs, environmentalprotection and sustainable development, and reevaluate the comparative advantagebased on the factor endowment.This dissertation conducts an analysis of comparative advantage in theinternational trade by employing the measurement index of comparative advantage, andon the basis of traditional theory of comparative advantage, it elaborates the importanceof trade costs, environmental costs and inter-generational costs in the foreign trade. Bydeduction of theoretical model, this dissertation attempts to prove that full costcomposed of four sub-costs, can weaken or strengthen the comparative advantage basedon the production cost, even can reverse it. Then this paper analyzes the developmentpatterns of rubber tire industry, and discusses the impact that special protectionist tariffsimposed by America exert on Chinese economy under the new context of internationaltrade. And through the case study, it’s proved that the nations should not only rely onthe advantage of production costs, but also take means of exchange, environmentalprotection and sustainable development into consideration,In the end, it’s concluded that when formulating the strategies and policies fordevelopment of foreign trade, the nations should lower the cost on the one hand bydeepening division of labor, promoting technical advancement, taking advantage ofabundant factors and giving effect of scale economies into full play, etc., and on theother hand, by deepening the reform of the management system of foreign trade,building up a good credit system, implementing the measures for the sake of tradeconvenience, advancing the construction of free trade zones, and promoting practices ofinternational trade, etc. Meanwhile, the nations should lower the environmental costs byupgrading technology, exploiting new energy, developing new products, establishment of compensation fund for rare resource, etc, and lower the inter-generational costs bypromoting adjustment of industrial structure and improving human capital structure. Ina word, the nations should seek the comparative advantage based on the full cost on thebasis of attaching great importance to environmental protection and sustainabledevelopment.