Business Administration Queenie, Essay Example

The law of comparative advantage operates where a country has the lowest cost of production of a commodity. The US cotton growers enjoy comparative advantage since they have knowledge in the production of cotton and the techniques employed ensure a reduced cost. The US cotton growers also have in place proper government regulations on the production of cotton. The economies of scale also play a crucial role in the establishment of comparative advantage of the cotton growers. These factors lead to the reduced cost of production, which relates to the low prices of the cotton produced.

The lifting of the textile quotas helped China in the production of textiles at a lower cost. The textile industry in china has a comparative advantage in the production of textiles; therefore, the quotas made the country sell the textiles at a lower price. The effect of lifting these quotas is evident in the reduced prices on textiles by China. Because of these relatively lower prices, the increase in the textile export from china to America and Europe has increased. The manufactures in these countries have complained of the Chinese textile and are seeking imposition of quotas.

The pros of the mitumba clothing and the effect on the African nations are that it helps provide a lively hood for the traders of the clothes. Many individuals employed in the mitumba industry. The local textile companies cannot satisfy the requirements of the citizens in these countries and the mitumba clothes fill this deficit. On the other hand, the cons of the mitumba business are that it kills the development of the local textile industry and discourages cotton farmers due to the collapse of the textile industries.