Question

Suppose Canada has just signed a new free trade agreement with Bangladesh. Wages of software designers in Bangladesh are significantly lower than those in Canada. Does this mean that Canada will necessarily lose jobs in software design to Bangladesh? Explain with reference to labour demand.

Answer 1

The factor costs would in certainty be evened out under facilitated commerce conditions, and this is referred to in financial aspects as the factor value balance theorem. This may mean, for instance, that worldwide exchange would cause pay rates for incompetent specialists to fall in the high-wage nation in connection to the rents accessible from capital and to a similar level as wages in the low wage nation, and for wages to ascend in connection to the rents accessible from capital in the low-wage nation and equivalent to the degree of the nation where work was less rich.

Among countries, rivalry over wages makes attractive enterprises and employments move from nations with higher expectations for everyday life and higher wages to nations with settle for the status quo of living and lower compensation. It is an inconsistent type of rivalry that clarifies a great part of the ongoing development of businesses and occupations out of the Canada, undermining our creation.

Low-wage countries can raise their ways of life to the detriment of our own in two different ways: trade their kin to the United States or import U.S. employments to their kin. The consequence of either approach would be the equivalent—our wages and way of life would tumble to coordinate the degree of the lower-wage country while, in any event incidentally, those of the lower-wage country would rise.

If there were free movement and really open outskirts, laborers from the lower-wage nations would stream into the higher-wage nations. These fresh introductions would vie for occupations, acknowledge work for lower pay, and power the current jobholders to acknowledge either lower wages or joblessness. Accurately therefore, obviously, nobody acknowledges or underpins the thought of free movement.

We do, But, acknowledge and bolster the idea of organized commerce, which has a similar impact. Rather than sending out specialists to the Canada, lower-wage nations basically import our employments and ventures to their laborers. As the higher-wage country endures reductions underway, disappointments of organizations, and misfortunes of employments, the market directs that laborers acknowledge lower compensation and a decreased way of life to coordinate the lower-wage outside challenge.