PART ONE
Heckscher-Ohlin theory differ from Ricardian theory in explaining international trade patterns as the multidimensional generalization of the standard Heckscher-Ohlin theory, there issues of international trade that consider changes that may affect unequal numbers of goods and factors while the Ricardian theory implies technological differences and multiple patterns of specialization and that in this theory, refinements matter in explaining the sources of comparative advantage and that considerable progress has been made in understanding the causes of specialization and understanding the factor content of trade is critical to understanding whether our models of general equilibrium "hang together’’ about the factor content of trade needs to gather better and more extensive datasets, to more carefully consider the role of traded intermediates, cross-country differences in demand, the role of trade costs and so other matters. Heckscher-Ohlin theory demonstrates how trade affects the distribution of income within trading partners as well as in explaining international trade patterns in such a way that countries have the same constant returns to scale production functions for each good, but different amounts of capital relative to their labor supply. In the absence of trade, goods which require large amounts of labor relative to capital would be relatively cheaper in the more labor abundant countries and relatively be of diverse economic transition of comparative advantage that countries export goods would have lower relative prices in the absence of trade as this theory is one that is likely to occur to many economists as they approach the problem, one in which contains labor, land and capital is exogenous to a small country in terms of prices. Moreover, Heckscher-Ohlin theory can be equal to the number of domestically determined factor prices as determined by the commodity prices with effects of tariffs on factor prices are determinate and can be calculated by the goods-prices equations and will have a horizontal supply curve of non-tradables. The theory also explains the consequences of international trade for the distribution of income within countries. The Heckscher–Ohlin theory suggests that countries privilege the exportation of commodities that exploit comparatively abundant factors of production again labor or capital are prime examples. In this context, labor abundant capital poor countries export labor-intensive goods and import capital-intensive goods. The Heckscher–Ohlin trade theories assume that these specializations apply to different goods and that the production of any good requires more than one factor of production. In other words, no specialization is complete. It holds that an increase in the availability of a factor increases production of the commodity that uses it intensively, while the production of other commodities decreases. Subsequent work on Heckscher–Ohlin trade theory has sought to relax its restrictive assumptions and to improve its ability to analyze multiple factors, commodities and countries. The Leontief paradox challenges the overall applicability of the factor-endowment model in having exports that were slightly more labor-intensive than its imports as viewed to be paradoxical because the Heckscher-Ohlin model of international trade led people to expect that US exports would be capital-intensive and its imports would be labor-intensive. Two possible explanations for the paradox are: the simple Heckscher-Ohlin theory ignored the role of natural resources in affecting trade and that because of its large investments in human capital which gave it a highly skilled labor force; the effective US labor supply was much larger than the mere numbers of workers would suggest. Furthermore, in the Heckscher-Ohlin theory there are arguments that a country privileges the exportation of commodities that make intensive use of the factors of production in which it is comparatively well endowed. (1953) discovered that American exports were more labor intensive than American imports involving a paradox in light of the assumption that the United States is comparatively capital abundant and labor poor (1953), some of which emphasizes technological differences, tariffs, and a potential capital bias in American consumption habits. A country that is well endowed with labor is expected to produce and export labor intensive goods in exchange for capital intensive goods. Key assumptions of H-O theory include perfect competition, identical technologies across countries and constant returns to scale in production. (1993; 1996). There are two explanations of international trade patterns that is for manufacturers and another for primary goods this means that the international trade has accepted expansion of goods and services with an aspect of economic growth and development being accompanied by increasing cross-border flows of investment and manufacturing of agricultural goods for a particular country and created an increase of demand for manufacturing and agricultural services in lieu of changing patterns of the global trade on the basis of comparative advantage, the developed economies have relatively strong exports of manufactured goods for which production processes are more human-capital and technology intensive, tend to import unskilled labor-intensive manufactured goods and show balanced trade in such goods. Specific tariffs prohibit partially geographical competition for various products and injure the consumers within the “protected” area, who are prevented from purchasing from more efficient competitors at a lower price. They also injure the more efficient foreign firms and the consumers of all areas, who are deprived of the advantages of geographic specialization. In a free market, the best resources will tend to be allocated to their most value-productive locations. Thus, blocking trade will force factors to obtain lower remuneration at less efficient and less value-productive tasks. As compound tariffs inspired a profusion of economic speculation and argument to prove that the consumers of the protected area are not exploited by the tariff. To subsidize new plants would be to injure consumers by depriving them of the advantages of historically given capital. The truth is that the establishment of an infant industry is advantageous from the economic point of view only if the superiority of the new location is so momentous that it outweighs the disadvantages resulting from abandonment of nonconvertible and nontransferable capital goods invested in the older established plants. The tariff amounts virtually to a subsidy which the consumers are forced to pay as a compensation for the employment of scarce factors of production for the replacement of still utilizable capital goods to be scrapped and the withholding of these scarce factors from other employments in which they could render services valued higher by the consumers.
When added value equals a specified percentage, the goods acquire origin in the country where the manufacturing or processing was carried out. The value added may also be calculated by reference to the materials or components of foreign or undetermined origin used in manufacturing or producing the goods. The goods retain origin in a specific country only if the materials or components do not exceed a specified percentage of the value of the finished product. The value of the goods as exported is normally calculated using the cost of manufacture, the ex-works price or the price at exportation. The main advantages of this method are its precision and simplicity. The value of constituent materials imported or of undetermined origin can be established from available commercial records or documents. Where the value of the exported goods is based on the price at exportation, as a rule both prices are readily ascertained and can be supported by commercial invoices and the commercial records of the traders concerned. The disadvantage is that such elements as cost of manufacture or total cost of products used, which may be taken as the basis for calculating value added, are often difficult to establish and may well have a different make-up and interpretation in the country of exportation and the country of importation for those involved in international trade. Interest of consumer is safeguarded since their viewpoints are incorporated at the stage of tariff change and non economical goals benefiting the consumer are being met. The cost having been fixed on basis of performance remains unchanged for the prescribed tariff order.
PART TWO
Canada is a major contributor to the U.S. non-goods trade surplus, concentrated in manufacturing, natural resources and the Canadian financial sector. Canada is the largest export market for U.S. goods. U.S. exports of private commercial services to Canada were $24.3 billion in 2002 and U.S. imports were $18.4 billion. The trade restrictions for this country involves complex aspects of their trade relations to the neighboring countries one good example is the United States as the business of doing business could get harder and expensive as political laws of protectionism challenge natural law of supply and demand but perhaps the bilateral dispute with the biggest potential fallout in the seafood business involves the world's two largest trading partners. Canada exported some $1.76 billion worth of fishery products to the U.S. representing 32% of the market. Some 8.2% of American seafood exports, valued at $180 million, were sold north of the border. The Canadian government delays in implementing some important provisions of the U.S. Canada free trade agreement and have demands the lifting of trade restrictions on unprocessed West Coast salmon and herring. Failure to do so could result in U.S. retaliation against a broad spectrum of Canadian fish exports ranging from turbot and halibut fillets to frozen salmon, lobster and fish sticks. The GATT panel ruled in favor of the U.S. and Canadian officials announced that they would accept the ruling and remove export prohibitions.
NAFTA has enabled U.S. fresh vegetable exporters to benefit from the expanding opportunities in the Canadian market, stemming from increased demand in the food service sector and higher fresh market sales to Canada's growing number of immigrants, despite the high tariff rates on over-quota volumes and the creation of certain value-added dairy products that were either excluded from the list of products which would apply the conversion from quotas to U.S. exports of dairy products to Canada have been tripled. The two countries - the United States and Canada will possibly be benefited of such reality in a way that business and agricultural trade will experience a better status for sales and profits of goods and services but Canada have settled their dispute over beer market restrictions in Canadian provinces as the agreement will allow Ontario to keep a 10 percent (Canadian) per can environmental levy. U.S. brewers have said that the levy is discriminatory, most U.S. beer is sold in cans in Canada while Canadian beer comes in bottles. The Free Trade Agreement objective is to lay down new rules of economic order in the hemisphere, and consolidate the American sphere of dominance, The FTA can be seen as an instrument to promote and guarantee continued policies of economic reform in Mexico. The NAFTA is also an opportunity to reopen and |improve' the Canada-US deal in such areas as intellectual property rights and create economic union that would strengthen the federal government's ability to enforce the provisions of the Free Trade Agreement to the efficient functioning of the internal market. The business sectors within the process of its manpower might lose with the trade restrictions as there was unemployment rolls, pushing the official rate up from 7.8 per cent to 10.5 per cent as there are unemployed workers who have ceased looking for jobs because they can't find full time work and the UI rate would exceed 15 per cent. Thus, trade restrictions on U.S. imports of Canadian cattle and beef resulted in lower export values for Canada's leading agricultural exports. Besides the market opportunities created by zero tariffs, NAFTA has given Canadian consumers greater freedom to determine the demand for high-value agricultural products in a more competitive marketplace. Canada's wholesale, retail and food service industries are watching with acute interest developments in U.S. packaged and processed foods and service trends. Canadians learn about new and innovative U.S. food products about as soon as U.S. consumers do via the media and frequent business and personal travel to the United States. These information sources create an immediate demand that helps ensure the success of U.S. high-value food products.
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