ANHEUSER-BUSCH: ISSUES ASSOCIATED WITH COMPETING IN THE SOUTH AFRICAN BEER MARKET

Absolute Advantage, Comparative Advantage, and Competitive Advantage

The basic model of international trade is structured around the concept of comparative advantage. The theory of comparative advantage holds that mutually advantageous trade between countries will always be available, because trade patterns will be based on relative prices, as opposed to absolute prices, which is based on the theory of absolute advantage, wherein mutually advantageous trade between countries might not always be possible. The reasoning behind the theory of comparative advantage is that no single country can have comparative advantage in all commodities. Initially, the theory was based on labor-cost differentials. Today, it is recognized that both supply and demand factors are at work in the determination of relative prices that establish a basis for a mutually advantageous exchange between countries. In spite of significant changes in economic thought since the eighteenth century, the theory of comparative advantage still stands as an example of sound economic reasoning. Barriers to trade are obstacles that prevent goods and services from moving freely between countries. Most trade barriers are imposed by national governments, although they are most often imposed at the insistence of or with the support of domestic industry and labor organizations. The major formal barriers to international trade are ta