COMPARATIVE ADVANTAGE

Comparative Advantage of Trade Flows of Canada & Honduras

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Abstract

This paper aims to examine the theory of comparative advantage in context to Canada and Honduras. Arguments are intended to show top five exports, imports and trading partners of both countries as well as provides rational of trade flows and comparative advantage theory.

Comparative Advantage of Trade Flows of Canada & Honduras

Introduction

Hill (2005, pp. 100-122) defines comparative advantage theory stated that countries must produce those goods and services that they can produce most competently. Hence, the country is said to be have comparative advantage in producing such goods and services.

The trade of Canada bounces back with the change in global market conditions in 2010. The top five exports products of Canada in 2010 are motor vehicles and parts, industrial machinery, crude petroleum, aircraft, telecommunications equipment; chemicals, plastics, fertilizers; wood pulp, timber, natural gas, electricity and aluminum. The top five imported products of Canada in 2010 include machinery and equipment, motor vehicles and parts, crude oil, electricity and durable consumer goods. The top five trading partners of Canada are United States 62.65%, China 11%, Mexico 5.5%, United Kingdom 4.1% and Japan 2.8% (Leamer, 1984, pp- 12-250).

The top five exports products of Honduras in 2010 are apparel, coffee, shrimp, wire harnesses, cigars, bananas, gold, palm oil, fruit, lobster and lumber. The top five imported products of Honduras in 2010 machinery and transport equipment, industrial raw materials, chemical products, fuels, foodstuffs. The top five trading partners of Honduras are US 50.7%, Guatemala 8.2%, Mexico 5.3%, El Salvador 4.6% and Germany 4%, in 2010.

Discussion

Every country posse's comparative advantage in different products such as Canada has a comparative advantage in producing 200 extra barrels of oil if it manufactures one less car and employs the resources that is freed-up into the production ...