The Global Economy and International Trade
Introduction
At the same time, it would be paramount to draw attention to the importance of international trade concerning the economy of the United States of America. This is due to the facts that the country reveals as a superpower and because the entire amount of both exports and imports results in an honorable second place worldwide (fn. – America waives the first position to China, of course).
In advance, I feel an inexorable desire to note that since the time the United States of America had become a state and until nowadays, the country has been altering its directivity concerning both the overseas trade and the global economic policy. In its old time subsistence, a special emphasis on the domestic economy was given, no matter what was happening abroad. However, such circumstances had been shifted significantly since the Great Depression that took place in the interim of 1930s and since the cease of the Second World War.
In a word, the aforementioned dogmas are going to be thoroughly discussed within this research paper, as they appear to be on the keys to the soi-disant door of global economy and international trade. Hence, let us get closer to the business.
US Economy and International Trade
“The primary measure of the economy’s performance is its annual total output of goods and services. This output is called gross domestic product (GDP)” (Brue, McConnell, and Flynn 233). Taking this fact into consideration, one should undoubtedly argue that the larger amount of the country’s output persistently engenders the heightened degree of the international trade importance. If the provision of goods and services raises, the United States of America will actually benefit from such conditions, as its products start being in demand nearly throughout the whole globe.
Another noticeable point I would like to draw your attention to is that the American gross domestic product is presumably estimated around eighteen trillion dollars. Just to ponder over, it reveals next to one fourth of the global one. Thusly, it is more than just obvious that the USA has been remaining both a paramount participant of international economic relations and a global player in terms of the sphere of world production and consumption.
Talking about the country’s vulnerability, I must really confess that the United States of America is less dependent on international trade comparing to other countries and union, for instance, the European Union. This may be because America covers the predominant majority of its continent, while a trade within Europe (and elsewhere worldwide) is rather oriented on nearby territories.
Concerning the chief trade patterns preserved within the USA, it seems fairly necessary to single out the following ones:
1) Though the country possesses a trade deficit in toto, it still owns a trade surplus in services;
2) Airline transport provided by local airlines is a compelling US export of services.
Last but not least is when we just fall back upon financial linkages. As for the issue stated by the United States Census Bureau, “The Nation's international trade deficit in goods and services increased to $47.1 billion in February from $45.9 billion in January (revised), as imports increased more than exports.” Here, we have a brand new argument concerning why international trade is so meaningful for the USA. It becomes clear that the state is import-dependent; the main reason seems to be high home prices for both goods and services. In case the American dollar drops against other currencies, this hardly has a tremendous impact on inflation within the United States of America. Foreign traders are not capable of jacking up the price, as their market share is not that high. Consequently, either American producers or import producers from other countries can take their (fn. – foreign traders’) place.
Rapid Growth of International Trade since the Second World War
The end of the Second World War has certainly led to many shifts in international trade. As a great quantity of trade-referring amendments had to be altered in order to reach a rapid growth, the most developed countries of that time (including the United States of America) looked for anchor points that could really help to facilitate the trade flow with the following contributions made to benefit their market activity. Research by Brue, McConnell, & Flynn argues the next, “Following the Second World War, the major nations of the world set upon a general course of liberalizing trade” (416).
Favorable Factors
A rapid growth of world trade cannot actually appear by itself – there should be certain factors that may lead to such consequences. For this reason, it seems important to single out the most outstanding ones along with their explanation.
1) Alterations within political environments;
2) Development of both communication and transport;
3) Technological breakthroughs;
4) Maneuverability of manpower.
Political changes are persistently suggested to be a driving force for all key points of any country’s activity. Since the Second World War, such shifts have certainly led to the world trade expansion. Due to the political stabilization, a free market economy has happened to be. A considerable quantity of brand new trade policies resulted in encouragement of trade amid states worldwide. The movement of goods, services, and labor force from country to country could finally experience the aforementioned facilitation. Moreover, a duly competition between states was introduces thanks to good trade habits.
According to the emergence of new means of transport and communication, delivery of information among people was improved sufficiently. As there appears to be a free flow of information, it becomes easier to develop business structures. The transport advancement assisted in creating favorable conditions of both labor and goods movement.
If we just manage to explore the nature of technology importance, it seems worthwhile noting that technology was a uniting factor that has absolutely improved transport systems as well as communication-referring ones. It has also positively influenced the differentiation of distinct goods. Last but not least issue here is the subsistence of outsourcing. It is deservedly assumed to be a major achievement, as both better quantity and quality of products were introduced.
Talking about labor mobility, I feel the desire to mention that it became more mobile since the end of the Second World War. Migration of either skilled or non-skilled employees has been a proof of enhanced alterations considering trade policies provided by the majority of post-war countries.
Frankly, the USA has benefited from the war that was processing in Europe. According to Branson, “With industrial capacity largely destroyed in Europe and Japan, the U.S. produced more than 60 percent of the world's output of manufactures in the late 1940s” (2). The other noticeable point is that the USA has always been a net importer of goods; still, some years later, a net export surplus occurred. Hence, the country became an exporter of various manufactured articles.
How Global Competition Influences the Subjects of U.S. Economy
Research by Cuñat and Guadalupe supports the following idea, “There is much research that shows that product market competition can directly affect the amount of incentives programs utilized by a firm because of the positive effects on overall profit and individual productivity.” Higher competition along with higher productivity surely leads to a larger degree of a staff performance. This heightened activity appears to be the key point that results in stability of any firm; consequently, companies will be more flexible for the existing demand presented in the global market. The chief effect of increased global competition on American firms is development of new strategies.
Well, the main target of each company is maximizing profit that can be reached by the condition, when a firm meets consumers’ expectations. Due to the globalization of economy, the process of grasping profits has become more vital than ever before. Moreover, U.S. firms faces international rivalry in an extent greater than at both national and regional levels. Concerning employees, they will be capable of being paid more bonuses, if performance of their company reveals positive shifts (growth).
As the United States of America is a country that bears trade balance deficit, it is clear that Americans tend to utilize and purchase overseas goods. As for Innovation (America’s Journal of Technology Commercialization), “Emerging markets are financing U.S. deficits so that American consumers will continue to buy their exports.” Concluding this point of international trade, it comes important noting that the development of foreign states’ competition has influenced the demand of an average American consumer significantly.
Conclusion
Works Cited
Brue, S.L., McConnell, C.R., & Flynn S.M. Essential of Economics (3rd edition). Gross Domestic Product. (pp. 233, 465). Web. 2014.
<file:///C:/Users/home/Downloads/Essentials%20of%20Economics%20%252C%203r d%20edition%20(The%20Mcgraw-Hill%20Serie%20(1).pdf>
United States Census Bureau. U.S. International Trade Data. Latest U.S. International Trade in Goods and Services Report. Web. April 5, 2016.
<https://www.census.gov/foreign-trade/data/index.html>
Brue, S.L., McConnell, C.R., & Flynn S.M. Essential of Economics (3rd edition). General Agreement on Tariffs and Trade. (pp. 416, 465). Web. 2014.
<file:///C:/Users/home/Downloads/Essentials%20of%20Economics%20%252C%203r d%20edition%20(The%20Mcgraw-Hill%20Serie%20(1).pdf>
Branson, W.H. NBER Working Paper Series. Trends in U.S. International Trade and Investment since World War II. Web. April 1980. <http://www.nber.org/papers/w0469.pdf>
Cuñat, V., & Guadalupe, M. The World of Labour. The Effect of Foreign Competition: US Firms. Web. May 4, 2011.
<https://laboureconomics.wordpress.com/2011/05/04/the-effect-of-foreign- competition-us-firms/>
Innovation – America’s Journal of Technology Commercialization. How Competitive Are We? U.S. Performance – How Is America Doing? Web. December 2006 – January 2007.
<http://www.innovation-america.org/how-competitive-are-we>
