328 CHAPTER NiNE ■ InternatIonal Po lItI cal economy
Consider the production of cars and trucks in the United States and Canada. The
United States can produce both cars and trucks using fewer workers than Canada would
use, making production less expensive in the United States. Under the princi ple of abso-
lute advantage, the United States would manufacture both cars and trucks, and then
export both to Canada. However, under comparative advantage, each country should
specialize; the United States should produce the car, for which it has a relative advan-
tage in production, and Canada, the truck. By trading cars for trucks, each country gains
by specialization. Each state minimizes its opportunity cost. Each gives up something to
get something else. The United States gives up the production of trucks to gain car pro-
duction; Canada gives up the production of cars to gain more truck production. Each
country gains by shifting resources to manufacture more of the commodity it produces
more efficiently and by trading for the other commodity. Both countries can consume
more than if they remained in isolation, consuming only what they produced domesti-
cally. Liberal economics posits that under comparative advantage, production is oriented
toward an international market. Efficiency in production is increased, and worldwide
wealth is maximized.
According to the princi ple of comparative advantage, labor- intensive production will move
to countries where labor is cheap, while capital- intensive production (such as research and
development in technology or phar ma ceu ti cals) will move to countries with abundant capital.
China’s large population makes it attractive to labor- intensive manufacturers like Nike,
although that may be changing as Chinese wages increase.