International ideally will spend the money saved on other

International trade is vital to the
U.S. economy and without it many Americans would be “priced out” of products
they need or want. While most people want to buy American, the truth is without
goods and services from other countries the prices of everyday items would not
be affordable. Just like other countries the U.S. cannot supply the country
with all its wants and needs and those products must come from somewhere. If a
country can get an item for less than what they can produce it for then the
people benefit from that lower price and ideally will spend the money saved on
other goods and services within the U.S. economy.  

 

               If
the European euro was to increase in value it would make it harder for the
French to sell wine in the United States. The increase in the value of the euro
means it will take more dollars to purchase euros, which increases the cost of
the wine. With an increase in the cost of French wine the U.S. will purchase less
wine thus creating a decline in sales for the French.

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               In
planning a trip to Paris, the cost of the trip would increase as it would take
more money to purchase euros. The increase in the value of the euro drives up
the cost of everything on the trip since you will have to pay for goods in
euros, assuming the French have not lowered prices to offset the increase in
the euro value.

 

There are three major factors
that contributed to the rapid growth of world trade, the first being, transportation
technology. Transportation is key to world trade, to trade with other nations,
you need to ability to move the goods. Improvements in transportation have
decreased the cost of moving goods and have streamlined the process making it
easier to get from point A to point B. The second factor is communications
technology, computers (internet), telephones and fax machines. With the ability
to check currency exchange rates at any given movement and to be able to
exchange money quickly (via the internet) has helped the world trade market.
Traders can easily connect with each other and make deals in an instant thanks to
technology advancements. The third major factor is the general decline in
tariffs, the excise tax or duties paid on imported items. Since 1940 the
tariffs on imported goods has dropped from 37% to around 5% making it much more
affordable to trade around the world. The combination of these three factors
are a direct link to the increase of world trade, providing lower costs and
more efficient movement of goods.

Governments restrict imports
by utilizing protective tariffs, and placing limits on imports using import
quotas.  Protective tariffs are an excise
tax that is attached to imported goods and their purpose is to protect domestic
producers from foreign competition. They restrict imports by causing prices to
rise and demand moving back to domestic products. Imports are also restricted
by quotas which limit the number of goods, either in value or quantity, that
can be imported. Unlike a tariff, which increase the good cost, quotas place a
cap on the quantity or value and once that quota has been met all imports are
cut off. Nontariff barriers are made up of licensing requirements, unreasonable
quality standards, and unnecessary import procedures including delays in
customs procedures. There are nations that not only require a license to import
goods but they also place limits on the number of license they issue which
restricts imports especially if you are unable to obtain a license.

               Governments
promote exports by using export subsidies, which are made up of payments to
producers of domestic goods. These payments help reduce the cost of production,
which in turn lowers the cost to the goods allowing for an increase the amount of
exports in the international marketplace. Subsidies allow for export industries
to compete with one another in the world market.

With an evolving economy,
advances in technology, the quality in land and the quantity of natural
resources what a nation produces today may not be the same in 5, 10 or 15 years
from now. These changes can lead once protected industries extremely vulnerable
with a disruption in business or even complete failure. An example of this
given in the reading was the American steel industry, once the leader in the
steel industry it is now a dying business that has left many U.S. workers
unemployed. To protect U.S workers that are caught in these collapses the
United States enacted the Trade Adjustment Act of 2002. This act helps workers
that have been impacted by the changes in the international trade patterns. This
act provides additional cash assistance, going beyond standard unemployment, specifically
for worker that have been displaced because of overseas relocation of manufacturing
plants and/ or to imports. In addition to cash assistance, tax credits are available
to help offset the cost of health insurance and if a displaced worker is over
the age of 50 they are eligible for wage insurance. Wage insurance helps bridge
the gap in wages from their old (displaced job) to their new job if there is a
difference in pay. Not everyone feels that the act passed in 2002 is a good
idea, many would argue that since this type of displacement only effects around
4% of the population it is unnecessary.

At first glance, the idea of
free trade may seem like the end of all production in the United States, with
no tariffs attached to the goods the cost to produce in other countries and
import to the U.S. would be cheaper and cause job loss. However, in 1993 when
the U.S., Mexico, and Canada entered the North American Free Trade Act (NAFTA) employment
in the U.S has increased and so has trade between the three countries. With employment
increasing the standard in living has also increased which is good for all
countries involved. While protection cannot be guaranteed for every worker when
it comes to free trade most do benefit from it because without additional
expenses on products the over cost for consumers is less. With the Trade
Adjustment Act in place to help those workers affected, free trade is beneficial
to all involved.

 

 

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