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Lamberti leaves out perhaps the strongest arguments for international trade: comparative advantage and financing doing it yourself. Just as it is cheaper for a company to outsource the production of certain goods and services for reasons such as economies of scale and specialisation, it may be cheaper for a country to do the same. This is why basic and relatively labour-intensive industries such as clothing have moved from countries such as USA & SA to countries that can produce garments cheaper. Substituting low-cost goods for high-cost ones leaves consumers with money to buy other goods or services, enjoying a better lifestyle. The other reason, and it applies particularly to countries like SA with poor infrastructure and insufficient savings (capital), is the amount of finance required to produce everything locally. For instance, pharmaceuticals require an enormous investment in research and equipment. Trying to create such industries would bleed the country. There is also the lack of skills, which combines cost (of labour) and financing the education of specialists
Loudly South African
Saturday, July 09, 2011