Importing of goods and services has been the norm in international business due to the fact that various regions cannot produce various goods or lack the required resources. Importation requires establishment of agreements with international producers in accordance with national and international regulations and trade covenants. Similarly, losses on low consumption and high cost production could lead to greater transfer on income within the society from consumers to producers (Bouët and Laborde, 2012). In the importation of automobile industry, there are various factors that should be considered. These factors range from the organization of inputs such as labor and supplier of components and materials plus the configuration of distribution channels. Similarly, there are other external factors that play a huge role as to what leads to industries shaping their structures and industries. These include: trade flows, regional and international movement of capital, regional and global policies on trade, environmental regulation as well as intellectual property (Korinek and Kim, 2011). These factors are coupled with infusion of information technology throughout the production and distribution systems. The automotive industry portrays sectors for economic growth opportunities especially due to the fact that they offer vast links to other sectors in the economy. Many countries however have engaged in importing automobile activities due to various causes (Beukering, 2001). This paper will focus on discussing the causes that occur due to importing automobile material from foreign countries. It will be followed by the analysis of the effects that emanate from importing automotive material from foreign nations.
The major reason as to why the United States imports automobile goods and services from other countries is that they feel motivated for selling exports or rather make profits from goods that are not consumed by the domestic market. The United States is not self-sufficient and therefore needs goods and services from other countries due to various reasons (Bouët and Laborde, 2012). These reasons include: automobile materials are essential to economic welfare and are highly attractive to consumers but not available in the domestic market. Similarly, the United States imports automobile materials in order to satisfy the domestic needs or wants that can be produced more inexpensively or efficiently by other countries and thus are sold at lower prices. The oil produced in the United States cannot serve the huge population and thus they have to import from other nations (Bouët and Laborde, 2012).
Another major cause of importing automobile materials is the market rivalry where two strategic variables are applied. Product variety and quality as well as transactions price have built concerns over short term profitability and a company’s desire for long term viability leads to automobiles attracting solid customer bases (Beukering, 2001). This results to automakers building allegiance in order to brand their names in order to maximize earnings in the long term. Therefore, the United States will attract automobile materials with certain brands in order to innovate the products and meet the customer needs. This leads to customers importing automobile materials in order to keep their businesses running between two or more states, where business people earn profits. Similarly, there are various controls on automobile importation to uphold certain standards for the good of the importing economy. The over reliance of imported oil is caused or rather has been brought by economic vulnerability and major constraints on the foreign defense policy (Beukering, 2001).
The importation of automobile materials such as oil brings about various effects where the economy has been boosted while others forms have brought about increased pollution cases. As well all know, every coin has two sides and the effects of importations have positive effects and negatives effects. To start with, the positive effects of importing automobile materials and parts have brought about improvements in the trading interactions between the countries that import and those that export (Korinek and Kim, 2011). Alliances have been formulated that expand cultural and economic exchange traits. Similarly, friendly terms have been formed where even other sectors of production have benefited. Another effect that emerges as a result of importing automobile materials and part s is that it allows the exporting economies to benefit from their competitive advantage. This allows them to access cheap raw materials to increase production of final products (Korinek and Kim, 2011).
In addition to this, importation of automobiles enables reduction of the costs of purchasing vehicles as the imported parts will enhance the present supply and creation of value added automotive (Korinek and Kim, 2011). This is accompanied by the United States trade deficit that leads to manufacturing job losses. Most jobs have emerged in the foreign markets thus denying the local manufacturers the opportunity. The dependency of foreign oil and other manufacturing parts has led to trade deficits. This may lead to foreign countries ensuring their currency is much higher than that of the importing country. Inflation may also be another effect that arises due to importation of these automobile parts. Additionally, the negative effects of importing automobile materials may occur when nations import more than what is required or the estimated capacity of car parts, which may lead to trade deficits. This occurs when a country imports more products than it is exporting (Korinek and Kim, 2011).
Incidentally, importation of automotive parts lead to emergence of stiff competition especially in economies similar parts which are being imported are produced by the local producer. This may bring about uncontrolled importation that may put the local producers out of the market, which significantly affect national production as well as the employment levels (Beukering, 2001).Another effect is that the importing countries may impose high taxation on the materials they have imported with the aim of making some profits on them. Customs have been formulated in order to regulate and examine portions of the imported goods. This has brought about perforation of state economies through foreign investment and interference in the market trends. On the other hand the long term effects of importation of automobile materials bring about pollution where vehicles exhale carbon monoxide which affects the environment. The materials used in green houses also emit hazardous chemicals that affect the environment (Beukering, 2001).
Importation of automobile materials directly supports the processes by which the products they were brought to the country. It in turn affects the local industries and contributes to high rates of unemployment. Customer preference has led to many to import automobiles from foreign countries as they have combinations of qualities or features that satisfy their tastes unlike the local automakers. This brings competition in the foreign efficiency as the exporters produce them at much faster rates and cheaper with better quality. The importation has also brought rise to trade agreements and merges between countries to produce goods locally at some prices. Other sectors have also expanded in the effect and other strategies to reduce the over reliance. There have been developments of other sources of energy that have helped reduce the use of automobile materials (Bouët and Laborde, 2012).
In conclusion, the United States should formulate ways to reduce the over reliance of foreign products and focus on the local industries. This would ensure increased rates of employment and increased output. Most of the automobiles imported are cheaper and user friendly to the ones manufactured locally. This over reliance would result to countries being vulnerable to skepticism as well as other forms of foreign manipulation.
References
Beukering, P. J. (2001). Recycling, international trade and the environment: An empirical analysis. Dordrecht [u.a.: Kluwer Academic Publ.
Bouët, Antoine; Laborde Debucquet, David (2012). Food crisis and export taxation: the cost of non-cooperative trade policies. Review of World Economics, 148(1), 209-233.
Korinek, Jane; Kim, Jeonghoi (2011). Export Restrictions on Strategic Raw Materials and Their Impact on Trade and Global Supply. Journal of World Trade, 45(2), 255-281.
