COMPARATIVE ADVANTAGE: REAL OR MANIUPILETED?

Abstract

A country can gain comparative advantage majorly because of its cost i.e. at which a country is able to trade a product at the cheapest price. However, cost of a product is determined by factors like wages, exchange rates, taxes, transportation costs etc. Also the trade strategy and the trade bindings also play a significant role in determining the competitiveness of the product. Therefore, this paper shall talk about what is comparative advantage and how it can be manipulated for the country’s own interest. Further this paper will specifically look as to how china created a comparative advantage over its products over the years, which led china to become one of the major exporters worldwide. This paper is divided into various parts each talking about how china manipulated its various inputs, which majorly helps in determining the cost of the product, to create a comparative advantage over its products and thereby take its advantage. The last section of the paper will talk about how China’s comparative advantage over its production is affecting Indian economy, also, this paper will talk about the reason as to why India and China should not enter into the free trade agreement. At the end of the paper it will be discussed about what could be the possible measures to avoid the impact of china’s comparative advantage on Indian economy.