Trade Advantages

Tyler Cowan has an excellent Post today on Trade. Be sure to read the Overview on Comparative advantage. One needs to read Tyler's last paragraph on the relevance of Fixed Costs in consideration of Trade. Fixed Costs in Trade include all the immediate Production Costs involved in obtaining the Trade Goods, the Distribution Costs of trading these Goods, and otherwise finalized Communication Costs of Trade. These things must all be considered in terms of Trade Cost, but there are additional elements which also must be studied.

The Variable Costs of Trade must also be fused into the equation of Trade Advantage. What are the Variable Costs of Trade, you may ask. Well, the answer is We start to drift into Space! The Variable Costs are certainly present, but are hard to catalogue. The probable easiest to list is the Educational Cost required to retrain Labor after a shift to specialized Goods for Trade. Previous Employment contracts as old technology is discarded; creating loss of Labor Income, Retraining Costs, and substitute Welfare payments to replace lost Income. Another element here resides in a basic conponent shift in Labor rolls, the new technology necessitating a greater or lesser Labor force (almost universally Labor reductions with complement Welfare payment increases). Trade Advantage can easily be canceled by the Educational Cost of Trade alone.

There is also the Cultural Cost of Trade. What is this? Introduction of Trade levels past a certain extent alters the basic Wage/Salary/Profit ratio of the entire economy. Increase of Trade changes the Wage scale of not only the Labor involved in the Direct Trade area, but the Cost of Professional fees, special Skill Labor, and shifts the Income attainment of Propertied Interests tied to the pre-Trade mix of Economic activity (not to forget the Static Income elements whose Income was tied to Pensions, etc., of the old technology Products). Other Costs derive from revision of old Income allotments (like Insurance premiums, basic Utilities Costs, medical treatment Costs, etc.).

There are the Economic Costs of Trade. Elements here include increased Infrastructure Costs to distribute Trade products--almost always borne by the Communities, not the importing industry. Materials Costs increase or decrease relative to being Complementary or Competitive to Trade Goods manufacture, again shifting the Wage/Salary/Profits ratio of native competing industries. There is a final Cost in the required Skill level required for advanced Trade, where a certain segment of Labor cannot attain the advanced Training. Trade is an Icon of Economists, but can definitely be the Enemy of Labor and Management. lgl