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Strategies for Global Value Added: Gains Comparative advantage - page 28 / 30

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28

Effect of costs of trade on product mix

X

X*

Country A

exports

Country B

exports

Nontraded

X**

Country A produces goods from 0 to X**

Country B’s produces goods above X*

gA/gB

WA*/WB

WA/WB*

gA/gB

Country B sees trade costs as if wages rise in Country A

Country A sees trade costs as

if wages rise in Country B

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