The 2011 APEC convention will take place in Honolulu in a matter of days, and as leaders from 21 Pacific Rim Countries arrive to discuss trade and economic ties in our region of the world, O’ahu residents are saddling up for some serious traffic. Some island residents, as well as mainland visitors, are also decrying the perceived pomposity of the event, reminding us that many citizens of APEC member countries live in squalor and poverty while their government officials “take a Hawaiian vacation”. In light of some of this sentiment, it might be important to look at some of the actual economic benefits that all countries experience as a result of trade. This is not to diminish the importance of protecting domestic jobs, indigenous peoples, and industries. However, a primary purpose of the APEC convention is to promote trade and economic prosperity in the Asia-Pacific region, and could be over-simplified into the following Wikipedia definition of “Absolute Advantage”:
“In economics, the principle of absolute advantage refers to the ability of a party (an individual, or firm, or country) to produce more of a good or service than competitors, using the same amount of resources. Adam Smith first described the principle of absolute advantage in the context of international trade, using labor as the only input.
Since absolute advantage is determined by a simple comparison of labor productivities (and availability of necessary resources), it is possible for a party to have no absolute advantage in anything; in that case, according to the theory of absolute advantage, no trade will occur with the other party. It can be contrasted with the concept of comparative advantage which refers to the ability to produce a particular good at a lower opportunity cost.”
In light of this simple Wikipedia definition, we should encourage our leaders to make wise decisions on how to manage trade relations between countries. It is not naive to say that if trade policy is done correctly, it can benefit all countries involved while helping our own wounded economy.
Aloha, Torey Jenkins