Write a page paper on international trade between the US and other countries
International trade means to exchange goods and services between different countries all over the world. The total trade is calculated by imports plus the exports. In the year 2018, the U.S. exports were 2.5 trillion dollars and this added to 12% to the gross domestic product of the country. At the same time international trade has created 12 million job opportunities for the American citizens (“4 Reasons Why International Trade Is Slowing”). Products which get exported from this country are technological goods like computer, mobile phones and consumer goods. Almost all the countries of the world are associated with the American economic through trading.
This write up will tell the readers about international trading policies of United States, it will also tell about the way US trades with European countries and less developed countries. Finally there is an analysis done on the US international trade.
2.0. Literature review
The barter system existed since human being started living on this planet; it is a kind of age old practice. International trade refers to exchange of goods and services among different countries (Rodrik, 73-90). As days are going by countries are trying to make their international policies easier so that all countries can participate in it and at the same time common people can also enjoy foreign goods. Previously international exporting and importing goods were difficult but now with online shopping websites purchasing goods are becoming easier (Keck et al 16-23). Most of the citizens of developing countries like to purchase goods produced by the Americans just because of their good quality, unique design and style and American business owners are trying to take an advantage of this matter, so they try to export their best products all over the world.
The utility achieved from international trade will increase number of potential clients who would like to do business with the US. Each country US starts dealing with will open a new venture for increases in revenue for both the countries and growth in all business units. US based business owners like to get themselves engaged in international trade because this will help their business units to grow and they can generate more job opportunities for the common people, this way there will be a development on the society also.
The business owners who gets involved with international trade also benefits from currency fluctuations. For example if the US dollar goes down then business owner should export more products to the foreign customers and this way there business will not be harmed. Suppose an American business owner is involved in trading with a Japanese business owner and if the Japanese Yen goes stronger than US dollars then he will earn through Japanese currency and this way he will not face any kind of loss.
According to the authors (Picciotto, 177-198) there are several advantages of international trade in USA i.e. exports have created more job opportunity in this country and it has also boosted the economic growth. This has given opportunities to domestic companies more chances to produce better commodities for the foreign markets. Through this the companies have gained a competitive advantage in the global trade. International Trade also makes the companies better and efficient. Business owners who deal with export business in America are more productive than other owners who only focus on the domestic market, this is because they think of their good name and reputation and they do not want to spoil it. The American government should reduce the tariff rates to boost up the export rates so that the trade is easy all over the world. As argued by the authors (Dellink et al 200-214) there are some disadvantages of International Trade of USA i.e. International trade reduces job opportunity in the domestic industries and that cannot compete on the global scale, eventually this will lead to job outsourcing. This is the reason USA companies’ relocate their technology office, customer care call centres, manufacturing centres in the developing countries like India. The business owners choose countries which have low cost of living and maximum population who are unemployed. On the other hand these way developing countries are losing their local farming base. Through this policy US is gaining because they have to pay less to the employees of developing countries.
As per the views of the authors (Foley, 119-146) international trade always have helped USA to make best use of all its natural resources. Hence USA can produce more of those commodities for which they can use their free resources or raw materials therefore the wastage will not happen. As counter argued by the authors (Michalopoulos 1-7) too much export will exhaust the natural resources of USA and within a shorter span of time and this can cause an economic downfall in the long run. Sometimes this country exports those commodities which are needed by the common citizens; this will result in shortage of those commodities within the country causing inflation.
For the US trade the Free Trade Agreements (FTAs) plays an important role. With twenty countries US has free trade agreement and this represents 6% of the world’s population (Anderson, 279-298). For this country the trade exceeds is in all the manufactured goods. This is relevant to the medium sized American business organizations also, which represent one-third of the merchandise exports of US.
United States and United Kingdom’s international trade
According to the authors (Goldberg, 161-206) trade promotes peace and co-operations between the countries also. The more countries trade with USA the more they benefit from USA and also USA can help them to grow at the same time. In fact countries which trade with each other they try to avoid war with the trading countries.
Common values, social structure and shared heritage have helped UK and USA to be trading partners for a long time. In the year 2016 US had earned 55.29 billion dollars in exporting commodities to UK but it was more in the previous year. In spite of the slight decline, the U.S. Department of Commerce had seen growth in the retail industry, travel and tourism sector, e-commerce industry in terms of international trade. The commodities which are exported to UK are vehicles, machineries, precious stones, pharmaceuticals, electrical equipment, metals and minerals. For U.K. the seventh largest source of imports is the U.S which adds to 54.27 billion dollars in the year 2016. The goods which are imported by U.S. in the year 2015 were packaged medicaments, nucleic acids, cars and refined petroleum. In 2015 U.S had imported 68.99 billion dollars in products and services from the U.K (“International Trade Between U.S. And U.K. | American Express FX International Payments”). Hence the international trade has benefited both the countries.
International trade of USA with other developing countries
The top three countries for US when it comes to cross border shopping destinations are UK, China and India The problems which arises during trade between USA and other developing countries is that the developing countries have agricultural based economies and are mostly located in the tropical regions so they generally exports agricultural products like coffee, sugar and so on. Markets for these agricultural commodities are highly competitive and the price range also fluctuates according to the demand and supply (Stewart, 139-148). On the contrary the prices of all the manufactured goods are more stable, hence if the prices of all export commodities fluctuate, the developing countries will experience fluctuations in the “terms of trade”. Since India exports sugar to US the price of sugar is rising within the country and this is being difficult to the common citizens.
India ranks 18th when it comes to export market for US products. In 2016 there was 20 billion dollars export of merchandised goods. The export categories are the gold, diamonds, and spare parts of aircraft, electric machineries, and medical instruments. Us exports 18 billion dollar services to the tourism industry and educational sector (“International Trade | U.S.- India Relations | American Express FX International Payments”). This amount has risen over 10% against Indian rupee in the past few years. The digital e-commerce websites is also a good opportunity for international trade and it has been found that 462 million Indians are internet users who prefer to shop from online shopping websites. Most of the Indian citizens spent 8.7 billion dollars on shopping as per online monetary apps and online shopping websites. Last year the Indians had purchased 5% digital merchant products from US. On the other hand few authors (Limão, 279-367) have argued to this statement and have said that this a huge disadvantage towards the local economy because most of the Indians previously used to depend on the local market for shopping and now with the help of the internet they are purchasing products from the US, this way local market is becoming stagnant and also is losing its existing customers.
US trade and policies
International organic trade: US have its trade arrangements with all the countries they export their organic products. This kind of arrangement provides extra market facilities to all the organic product producers (Cottier, 3-20). The National Organic Program works with the Office of the United States Trade Representative and the Foreign Agricultural Service to establish better international trade arrangements.
US Agricultural Trade: the agriculture of US looks to all the oversea countries to boost up their domestic income just by expanding in the existing market areas or by entering new markets. US are also the largest exporter of agricultural products and are also highly competitive producer for agricultural products.
Trade polices: this country tries to purse liberalization through trade negotiations and policies which boosts the prospects of agricultural market in the less develop countries and it stimulates economic development and economic growth. By entering new markets American business owners will have more opportunities to develop their business units.
The free trade area policy is the ‘North American Free Trade Agreement’ and this policy is between Mexico, Canada and the US. This policy eliminates all tariffs from these three countries. According to the author (Limão, 1-42) NAFTA has many advantages and very less disadvantage. Last year the leaders of Canada, Mexico and US had signed the ‘United States-Mexico-Canada Agreement’, this new policy deals with six more new areas.
The Trans-Pacific Partnership had happened with the USA and eleven other countries of the world, the eleven countries where Brunei, Australia, Chile, Canada, Malaysia, Japan, Mexico, Peru, Vietnam, Singapore and New Zealand. This policy enhanced the trade and investment of other countries (Woolcock, 73-89). The TPP had included some trade requirements addressing the compatibility to support small business organizations and also making the rules and regulations easier. The present president of US Mr. Donald Trump had signed this policy on 23rd January 2017.
Since a long time in America there is instability in income just because of international trade and this has been faced by native people (Zajac, 233-255). The living standards of these people are going down and the lower middle class people are struggling to improve their life style at least to fulfill their basic demands. Many American blames the income inequality due to the growing importance of trade.
Though international trade does not reduce the job opportunities but it always affects the wage rates. The traders should check the issue whether the wage earned by an American worker is more or less (Rodrik, 1-22). Employees who can give more towards the production will earn better position in the organisation eventually this will give rise to labour rights and increase in wages in the labour market. Barriers to international trade will eventually reduce the average level of wages in the American economy. On the other hand if the trade gets better the overall wage level will increase but still some employees will get less amount of salary than what they expect.
Globalization will benefit the high skilled laborers, high wage laborers of the United States; it also imposes low cost on low wage and low skilled workers. All the high skilled workers of USA mostly benefit from sale of advanced products like machineries, computers, and pharmaceuticals in which this country has comparative advantage. According to the authors (Felbermayr et al 913-1025) low skilled workers of USA should compete against low-wage workers throughout the world for producing simple products like cloths or toys. Hence this reduces the wage rate of all low-skilled workers of US. Though globalization has helped some of the industries of USA but the salary increment has not been done on the low skilled workers. Most of the US workers working in automobile industry have high wage rate because of their skill.
America’s population is less than 5% when compared with the world but still it earns more than 20% from the total income of the world. America is one of the important global traders and it has the largest national economy. The process of trading with the world markets and expanding its business trade was started in the year 1934 and since then international trade has played a crucial role in financial development of this country.
By expanding the production of export products, this country has raised the income of common people a lot. By focusing on the production in the competitive areas of the economy it has helped to raise the efficiency of a normal American worker. US have the ability to serve the global market hence investment is encouraged a lot specially in the export sector. In addition imports helps to increase customer’s needs and choices, and this helps in keeping the prices low just by raising the purchasing capacity of the customers. Not only Americans export their products they do import products like crude oil, precious gems and so on.
These products are the best in terms of quality and this has helped the American business organisations and owners to maintain their standards and also to remain competitive in the foreign markets and domestic markets. The imports of commodities have helped common people to purchase the commodities at low price without sacrificing on their needs.
To conclude America’s huge economy has a noteworthy impact on the global trade and economy. If this country’s economy gets better it will help other nations to grow as well, on the other hand if the country’s economic condition declines it will begin to bring about downfall for other countries economy also. International trade is the driving point of this country’s economy and this give support to the customers and business units on a whole in the globalised world. As more opportunities develop for international trade for USA, this country can continue to expand its trading policies and also provide all its citizens easy access to all the desired products and services that they want. All the business owners of USA follow the rules and regulations diligently of all the countries with whom it gets involves in international trade.
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