Limitation of International Trade One limitation of International Trade is "dumping." The Investopedia states that, "dumping in international trade occurs when one country exports a significant number of goods to another country at prices lower than in the domestic market (Investopedia. 2010)". For example, if a country decides to sell exported products cheaper than it does to its residents, the process is known as dumping. Romadia has to decide whether to impose tariffs, or set a quota on its import products. Dumping has created a probability that an adverse effect can happen because the result of the adverse effect is a shortage and increases in the prices of the products. Price increases lower the demand for the products. The
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Dumping is the fourth. Dumping is predatory pricing used in the context of international trade law. Many governments impose duties up to the margin of dumping determined. This defends their domestic industries against dumping. "The Apple Case of 1989, in which the Canadian government determined that United States Apples "final product were sold in Canada at prices below production cost (Carbaugh & Wassink. 1992)" is an example.
Absolute and Comparative Advantage The Glossary of Political Economy Terms defines "Absolute advantage as the ability of an individual, a household or a firm to produce some particular good or service with a smaller total input of labor, capital, land, etc. per unit of output than other economic actors. In analyzing the theory of trade and economic specialization, it is important to distinguish absolute from comparative advantage, since it is comparative advantage that determines the potential welfare gains from specialization and trade, and not absolute advantage (Investopedia. 2010)." For example, the United States has the absolute advantage in sweet potatoes production over Europe because the United States can produce sweet potatoes better than Europe because Europe's sweet potatoes is not a common staple, while in the United States, the sweet potato is a native staple. The United States has capability to produce sweet potatoes at a lower absolute cost than