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Business
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| Number of pages / Number of words: |
8 / 2170 |
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Comparative advantage theory however doesn’t look at the long term implications of these policies, and in lowering the competitive pressures for the industry also lowers the efficiency of the output and production, and the main cause of the ‘Struggle of the US steel industry is largely due to its failure to modernise and restructure to fit into a fast-changing and highly competitive global marketplace’
Another policy that can be put in place is for governments to grant subsidies to industries to help them compete in the global market place, ‘and help the domestic economy adjust to the changes brought by shifting patterns of trade’ ...
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Comparative advantage theory can show you which of these industries within a country needs protecting, but does not look at any further implications these actions may cause. By granting subsidies to enable competition with a country with a greater natural advantage, it might disrupt any other trade agreements that are in place with this country and could lead to ‘cycles of retaliation and counter-retaliation’ and an overall detrimental effect...
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