Assume that labor is relatively scarce in the United States.According to the factor price equalization theory,America labor may opt for trade barriers once trade opens up.

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The factor price equalization theory suggests that when trade opens up between countries, factors of production (such as labor) will experience adjustments in their prices to equalize across countries. In other words, if labor is relatively scarce in the US (compared to other countries), its price will rise relative to other factors of production, making US goods more expensive. This could lead US labor to advocate for trade barriers to protect their jobs and wages.

Assume That Labor Is Relatively Scarce in the United States