Comparative Advantage: Comparative Exploitation

["g kohler" <kohlerg@xxxxxxxx>]

This article takes a textbook example of comparative advantage and stands it
on its head. Full text online at:
http://www.atimes.com/atimes/Global_Economy/EA29Dj02.html

The article shows that, due to the global wage-price differential (levels
0.5 and 1.0 in the example), the payoffs of free trade do not conform to the
promises of comparative advantage at all. On the contrary, Table 3
illustrates that: 1. for the low-wage country, trade may be worse than no
trade; 2. only one side may gain from trade, while the other side is
exploited; 3. free trade and international specialization of production may
lead to comparative disadvantage for one side. 4. The claim of comparative
advantage is false and is a mask of unequal exchange, if the wage-price
levels of the trading partners are significantly different.

Gernot Köhler