Factors that limit the principle of cooperative advantage.
- Assumes two countries while there are many countries /dealings with many trading partners/ multilateral trade
- Assumes two commodities but there are many commodities in Uganda/diversification of export products.
- Existence of trade restrictions in international trade.
- High transport costs/ ignores the transport costs.
- Currency restriction s and changes in exchange rates /ignores the existence of different currencies used.
- Preference of monetary exchange to barter trade in Uganda /assumes barter but in the real economy of Uganda, there is monetary exchange.
- Uganda does not experience constant costs of production
- Existence of excess capacity in production/absence of full employment in Uganda/wrongly assumes possibility of full employment which is nonexistent in Uganda
- The desire (need} for self-reliance/reduce dependence in Uganda.
- Existence of increasing and diminishing returns/ ignores the existence of the law of diminishing returns.
- The price elasticity of demand for product produced in Uganda is not perfectly elastic/ is inelastic / it assumes elastic demand yet demand for agricultural products in Uganda is inelastic.
- Technology is not constant in Uganda / variations and changes in techniques of production /assumes constant technology but in Uganda technology is ever changing.
- Variations in the price(s) , quality and demand for commodities /diversification of products for export assumes immobility of factors of production externally but internally mobile which is not the case for Uganda / some degree of labour mobility internationally and immobility (geographically and occupationally) internally.
- Supply of resources in Uganda is not static.
- Would lead to poor terms of trade (T.O.T) for Uganda to specialize where it has comparative advantage in agricultural products.
CATEGORIES Economics
TAGS Dr. Bbosa Science
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