Why is it harder to identify comparative advantages in trade in services than in trade in goods?

Question

Why is the identification of comparative advantages in relation to trade in services regarded as more difficult to do, if compared to trade in goods? I don't get it. What makes it so hard to say that a country is better in a certain kind of service than other countries?

Answer 1

Many goods are homogeneous (sometimes even standardized). Services are usually not.

With goods, you can precisely determine requirements. When you buy, for example, rolled steel, you can easily verify whether it meets certain grade or not. So you can directly compare steel made in Germany with steel made in Brazil and make purchasing decisions on price, provided that the steel meets your requirements.

With services, no such grading exists in most cases. You may know that outsourcing technical support to India will cost you less than outsourcing it to Ireland. But even within India (or Ireland), there will be considerable variation in prices; some companies, for example, will require their employees to pass a region-neutral diction test (and will provide trainining in this area to employees that need it), others won't. So if you buy on price, you may end up with a contractor whose workforce speaks heavily accented English and/or uses expressions completely unfamiliar to your user base... For example, in India, 100,000 is often referred to as "lakh", while 10,000,000 is a "crore". This usage, while common in India and Pakistan, is generally unfamiliar to people outside South Asia...

Answer 2

In quick, unfastened exchange through comparative talents eventually advantages the purchaser even as forcing the trade to turn out to be extra aggressive. "Trade SUCKS WEALTH OUT of locations to deliver to the company elite" Actually, exchange creates wealth, that's why international locations in Africa, Asia, and South America are advancing so swiftly. Sure, firms do benefit, however that's the complete factor of strolling a company - to make money. And it is not like those CEOS and "company elite" are sitting again even as the employees paintings. Executives paintings 24/7.

Answer 3

Goods can be measured, weighed, counted etc. They are usually sold and bought through a middleman / broker who consolidates buyers and sellers.

Services, on the other hand, are intangible. Services are provided / sold and accepted / bought directly. You cannot consolidate services and therefore difficult to measure.