“Dutch Disease” in terms of Russia’s Economic Development

Sample Solution

In economics the law of comparative advantage states that economics should specialise in the goods that they are comparatively better at producing (Economic for business, 2007). Comparative advantage and the gains from trade are very influential arguments and provided many governments with a reasonable motive for freer international trade; a problem with comparative is that it raises economic output for the world which does not necessarily make improvements in the economic state of individual nations. E.g. In trading with the UK, if Germany decided to abandon car manufacturing and began to focus more on the production of T.Vs employees from the car manufacturing will be left jobless and will not be skilled in the area for manufacturing T.Vs so in this case German car makers will not find appeal to the comparative advantage. On the other hand with uncompetitive industries the government can be asked to provide protectionist measures; these are put into place in order to reduce the competitiveness of international rivals (Economic for business, 2007).

Non- Tariff barriers

Trade can be restricted in other ways by the government one of which is by a quota. A quota can control trade by limiting the amount of a product that can be brought in into a country for example; a copper quota may limit the importation of copper to 300 million tonnes a year. Due to the fact that a quota limits international supply the price is usually increased. * Reason for protecting trade- Governments may wish to support an industry that has strategic value for example copper could be very important for China. The Ch