Let us consider a world economy that consists of two countries as major players: the U.S. and China. The U.S. is relatively capital abundant while China is relatively labor abundant. Suppose that producing textiles requires labor (L) and capital (K) and it is relatively intensive in labor in the production process compared to the other major industry, automobiles. The production technology in each industry demonstrates constant returns to scale with diminishing returns of marginal product of each factor and factor complementarity. Both countries share the same production technologies and consumers in all countries have identical homothetic preferences. Assume that capital can be reallocated across industries without cost. For part (i) and part (ii), support your answers by referencing the results derived from the relevant framework in endowment-based models. You do not need to prove it.

According to the predictions of the specific factors model, who will be in favor of the import tariffs or quotas in the U.S. in the short run where workers cannot move freely across sectors?

Who will be in favor of the import tariffs or quotas in the U.S. in the long run where workers can move freely across sectors? What is the relevant theorem in factor endowment models of trade that speaks to this prediction?