Development Of Colombia’S Economy According To Comparative And Absolute Advantage Theories

Development of Colombia’s economy according to comparative and absolute advantage theories

Introduction

The development of worldwide technology runs by leaps and bounds (robotization-automatization, digitalization, artificial intelligence, among others), a situation that directly impacts society by imposing new challenges adjusted to the requirements a promoted economy a promoted economy a promoted economy For technology, communication and mobility.

Colombia has at least ten free trade agreements with different countries that are currently favoring Colombians in the automotive sector in the cost of cars up to 20% less. In the case of the US, ten years are available and with Europe seven years reach a zero tariff. Today with the only country that this condition is met is Mexico. However, the implementation of new technologies in the automotive field not only brings challenges, but impacts and consequences, which force the government to strengthen state policies to encourage industry growth, protect dignity at work, reduce inequality and poverty from the workers.

Developing

Economists since the time of Adam Smith in 1790 have shown that free trade generates economic well -being, the theory that was widely accepted, and from that moment it can be understood that a government can optimize economic well -being by stimulating imports and exports, facts that favor the flow of wealth of a country. However, in this specific case if we talk about the theory of absolute advantage proposed by Adam Smith in the 18th century, which infers that when a country is more efficient in the production of a merchandise but less efficient in the production of another , then in an exchange situation it can be beneficial for both countries, taking into account that each of them specializes in the production of the merchandise that represents its absolute advantage, in this specific case in the free trade agreement, Brazil, Brazil, Europe and Mexico mainly export industrial products such as machinery and cars, while on the Colombian side products such as coffee, banana, flowers and mineral resources are mainly exported, which reflects that there is a complemented bilateral trade existence, in which the exclusivity of their products between these countries and their strong sectors within the context of the application of the free commercial treaty would result being beneficial for everywhere.

Analyzing the potential of Colombia, there is a wide variety of agricultural goods, clothing, processed foods, with which the possibilities of marketing with other countries where there is the need for these products is extended. A commercial opening between two or more countries is beneficial for all, from the theory of comparative advantage according to David Ricardo, it is considered:

"In distribution. Foreign trade does not exert, in principle, any direct influence on distribution, because it does not modify the amount of work used in the internal production of the goods, nor alters the amount of salaries and, therefore, also does not affect the rate of benefits and income. However, if foreign trade provides cheaper foods, then, indirectly, it affects distribution, because it reduces nominal wages and, consequently, business benefits increase."

"In real income. According to its value theory, foreign trade does not alter the relative values ​​of internal production, but the greatest availability of goods, which enables foreign trade, improves real income. This advantage of foreign trade can be extended to all citizens, because, as consumers, their possibilities of enjoying more goods increase ””.

It is concluded that the theory of comparative advantage promises greater production and economic consumption as they specialize the well that reports a greater competitive advantage and importing the good that offers them a comparative disadvantage, that is why, from This commercial co -responsibility, efficiency and total consumption, will increase with free trade.

The process of industrialization and machinery equipment is what the Colombian State points to, directing its objectives towards economic technification and development, evolution in industrial terms generating more competitiveness globally, to which David Ricardo supported that "The machines greatly increase production which lowers prices and contributes to the general increase in the standard of living of the entire population", What in a certain way could affect the working working class, displacing the workforce by automated machines, but David Ricardo makes a great contribution by inferring that the adaptation and adaptation of said technology to the country will be a process that took a certain time, for GIVE TRANSIT TO THE REBSORCTION OF THE WORK IN OTHER PRODUCTIVE SECTORS, also in implementing new technologies, entrepreneurs will seek other business alternatives creating new products, in parallel to the demand for labor that will never be scarce.

For Adam Smith “Commerce and industry are indispensable instruments for change, they are also the great support for its concept of division of labor where the specialization and different skills of man are encouraged in an environment in which there is economic mobility and freedom of enter positions not closed " Hence the importance of having a free trade agreement, which promotes the activity of buying and selling, as well as generates the opportunity to acquire new knowledge specializes in continuous improvement, promotes the qualified labor, as Adam Smith Smith sustains referring that "Only expanding the markets can fully carry out the integral benefits of the labor division".

For Adam Smith "Foreign Trade meets an important function because it opens a market for surpluses of products in the domestic market and generates opportunities for the use of accumulated capital above the needs within a country", in general, it is pertinent To say that Colombia has greatly advanced in the issue of commercial opening, remembering that only from the end of the 20th century, the great step of performing this practice was carried out effectively and efficiently, there are many challenges but establishing profitable bilateral relations You can think of improving the high economic potential of Colombia and its current and possible commercial partners.

CONCLUTIONS

1. Commercial relations between Colombia with countries such as Mexico, the US, the Union Europe. However, there is still much to reinforce commercial ties and deepen multilateral relations, which shows the Free Trade Agreement as a favorable alternative for the increase in the exchange of commercial volume between nations.
2. Based on the different international trade theories such as the absolute and comparative advantage of Adam Smith and David Ricardo respectively, they apply very well to the case due to countries such as Mexico, the US and Europe, mainly we have exported industrial products including machinery and cars, in So much so that on the side of Colombia, products such as coffee, flowers and mineral resources are exported by situation that reflects that there is a complementary bilateral trade existence in which the specialization of these two countries in their strong sectors and in the context of an application From a free trade agreement it will be beneficial for both parties.
3. The contributions made by David Ricardo on the industrialization and machinery processes, are reflected in the implementation of the Free Trade Agreement, specifically this is given by the Colombian side, because the final objectives are foreign industrialization and investment, you can inferring that finally from these theories Colombia has the great opportunity to benefit by receiving products along with technology (cars-maquinaria) that do not have a large production and/or assembly scale in Colombia; In short words it is clear that international freedom of trade encourages development and allows from the concepts of Adam Smith that there is parity in the types of changes so that there are voluntary transactions therefore it is essential to keep in mind that both economic freedom and political are The hand for the full functioning of the free market.
4. Colombia must create new inclusive and expansive public policies, to properly encourage non -traditional exports, and increase production levels and also, to replace imports of goods that I could generate in our country, come in large quantities from abroad.