Countries trade because it is to their advantage, from a cost standpoint, to produce such goods and services, which it can produce most cheaply and trade for the rest, thus reducing total production costs. This concept, known as comparative advantage, explains why nations like the United States, no longer specialize in producing textiles or other labor intensive, products as other nations have a comparative advantage for labor intensive production, the US and other developed countries (like Japan), however, have a comparative advantage for the production of goods and services which require a high degree of technical expertise. It is for this reason that much of the world’s software development is centered in Silicon Valley and not in Mexico. Comparative advantage works best with limited government interference, especially with regard to protectionism, which only results in higher costs for consumers and reduced efficiency. For decades, nations like France (and to a lesser extent, the United States), have violated the tenets of comparative advantage by subsidizing domestic agriculture. In fact, many countries are guilty of this practice, but none more so than France, who funnel billions to farmers with such reckless abandon. French farmers are notoriously inefficient, when compared with agriculture in the US, Canada, Australia and Brazil. This inefficiency leads to higher prices for French consumers and a waste of government resources. It is no surprise that Europeans spend a much larger percentage of their income on food than Americans. What the French farmers lack in productive efficiency they make up for in political clout. The French government wouldn’t dare of offending this powerful political voice in France. As a result, France has continued to throw up roadblocks in to the EU effort to negotiate a trade deal in Hong Kong in the coming weeks. France, it must be remembered is a socialist nation at heart and therefore efficiency and lower prices are less important than the power of the state and its control over the economy, such a power is a drug for French politicians, who are no more inclined to give that up than they are to give up philandering and cheating on their wives.
http://news.bbc.co.uk/2/hi/business/4369778.stm
