Specialization-not free trade

Some supposed experts that take orders from NWO's vicious cabal, argue in favor of free trade and EU. Free trade is one of EU's fundamentals. All EU fundamentals are fundamentally wrong. Those supposed experts should be extremely cautious. Instead of getting visible, they should hide. Anti-NWO will find them and prosecute them with all NWO conspirators.

Their completely erroneous theories are crimes against humanity. They have caused an awful lot of damage to millions of decent, hard working people all over the world. If those supposed experts had common decency, they should admit publicly that they have been extremely wrong, apologize and ask for lenience. There will be no mercy, unless they admit they were wrong and apologize.

NWO's vicious cabal uses Ricardo's Comparative Advantage theory as an argument for their ridiculous free trade theories. According to Ricardo, specialization should occur even if a country does not have Absolute but Comparative Advantage. The irony is that Ricardo had to be a protectionist. In his Comparative Advantage theory, protectionism is necessary.

Ricardo wanted to explain with an oversimplified example something that is valid. England and Portugal could POTENTIALLY benefit UNDER CERTAIN CIRCUMSTANCES if they shift production to the sector that has higher productivity. Production efficiency was measured by hours of work necessary to produce one unit of product. Productivity is expressed as units or value produced by certain amount of labor. High production efficiency results in high productivity. They are very similar concepts.

Both Advantage theories are an argument for specialization, which requires trade but not free trade. Smith supported that a country should specialize in the sectors it is more productive, compared to the same sectors in other countries (Absolute Advantage). Ricardo argued that it should specialize in the sectors it is more productive, compared to the rest of the sectors in the same country (Comparative Advantage).

Let's take first Comparative Advantage case. Ricardo argues that England should specialize in cloth and Portugal in wine. Ricardo assumes that Portugal will not produce any cloth because it will shift all cloth production to wine. In this way, there will be no competition for English cloth. But this is not realistic. If there was free trade between England and Portugal, cloth and wine sectors in England would be eliminated.

We assume that the rest of production costs are the same and that both countries produce same quality products. English cloth and wine will be more expensive than Portuguese because one unit requires more hours of work. Consumers in both countries will not buy English cloth and wine because they can have same quality at lower prices. English cloth and wine will not be able to compete, domestic production and GDP in England will decrease enormously. Some protectionism will be required.

Let's look at Adam Smith's example. English cloth is cheaper than Portuguese and English wine is more expensive than Portuguese. If there is free trade between England and Portugal, English wine sector and Portuguese cloth sector will be eliminated. But this does not mean that both countries will benefit. We will explain this with a more realistic example. Economies do not produce only cloth and wine. They produce many other products.

For simplicity, we will assume that there are ten more sectors, twelve including cloth and wine. Instead of England and Portugal we will take country A and country B. They have the same GDP (400 billion) and roughly equal per capita income (GDP). Although overall they have roughly productivity, there are small differences in the productivities of different sectors. A has Absolute Advantage in half of them and B in the rest.

A is more productive (has Absolute Advantage) in sectors 1, 3, 5, 7, 9, 11. B is more productive in sectors 2, 4, 6, 8, 10, 12. The sectors' sizes in the two countries are not exactly equal but close. They are shown in Table A of Appendix 23. Suppose there is free trade. A will produce only in the sectors it has Absolute Advantage (odd) and export to B. B will produce only in even sectors and export to A.

Due to specialization there will be a small increase in the production. Because country A is more productive in odd sectors, when it will produce in these sectors instead of country B, there will be a 10% production increase. Likewise when B produces instead of A in even sectors, there will be a 10% increase. Overall there is an increase of production in all sectors due to specialization.

But country B is harmed. GDP decreases 17,5% to 330 billion. Country A benefits. GDP increases 28,2% to 512,7 billion. So although overall production increases due to specialization, this is no good for country B because it is harmed by free trade. Benefit from specialization is 42,7 billion. Country A gets all the benefit and even more, 112,7 billion increase in GDP due to free trade while B's loss is 70 billion.

Free trade is not a win - win situation but a win - lose situation, even if the two countries have roughly the same productivity. This is happening because the aggregate size of the sectors in which A is more productive is not equal to the aggregate size of the sectors in which B is more productive. In order for free trade to be a win - win sittation, the sectors A has Absolute Advantage should have roughly equal aggregate size with the sectors B has Absolute Advantage, something extremely rare.

It gets even worse in Table B of Appendix 23. Suppose that country A has higher productivity than B. If this happens, probably A will have Absolute Advantage or higher productivity in all sectors. Nevertheless, we will give to B three sectors in which it has Absolute Advantage (higher productivity), 2, 6 and 10. Production A+B without trade is the same like in Table A. Production A+B in all sectors increases due to specialization.

But B is harmed even more, compared to the previous example of Table A. GDP drops 54,9% to 180,3 billion. A benefits even more than previously. GDP increases 65,3% to 661,2 billion. Overall, there is a benefit of 41,5 billion due to specialization but this is not good at all for country B. For each county, what matters is if it benefits from free trade and this generally does not happen.

The conclusion is that although specialization can be beneficial under certain circumstances, free trade is rarely a win - win situation. Specialization should be attempted with extreme caution so that no country gets harmed. With free trade it is almost certain that there will winners and losers, even if countries have the same level of productivity.

Advantage deception   More deception   Free movement deception   EU is a multi-deception   Productivity deception   Convergence deception