Explain two misconceptions created by some people about trade
Including trade is a zero sum game and trade is also responsible for increased US unemployment, two myths some people are making regarding trade. Trade includes trade between two or more countries in goods and services. One country exports to the other what it can effectively make, and the other exports to the other. The USA imports electronics from China to efficiently assemble them and China also profits from the United States’ knowledge services (Irwin,2). Therefore, both countries are set to benefit in the given trade deal. This bashes the assumption of trade being a zero sum game where there is clearly only one winner and a loser. Trade presents a win-win situation as one country gets to contract certain goods or services cheaply which are efficiently produced by another partner, while they also get to sell their goods and services to the other partners.
Trade is not the cause for increased unemployment is the US. Some people, especially politicians, blame the major trade deals signed by the US as the cause for the unemployment rate in the US. The employment rate is determined by the country_x0092_s ability to absorb the youth into their manpower. However, this rate has reduced over the years, but is largely affected by technology and not trade. Trade has contributed a substantial amount of jobs lost compared to the automation of industrial processes which has costed many blue collar jobs.
Explain 2 important facts about trade. Give at least one example in international business
Two important facts about trade include: trade deals give the trade partners competitive advantage over normal trading countries and also trade can be used advance the social, political and economic interests of a country. The trade deals between countries give them preferential access to their markets for their goods and services. This would mean that a country exporting a certain product to a trading partner would face less hurdles in terms of tariffs and taxes. The trade deal between Australia, China and Japan has given the Australian beef exports preferential access to these markets, debunking exports from traditional exporters like the US (Irwin,6). Also, with these trade deals, some companies utilize the trade networks to their advantage. Audi built a new plant in 2012 in Mexico as it had several free-trade agreements, including the EU. This made Mexico a preferential facility location over its neighbors.
Trade can be used advance the social, political and economic interests of a country. Trade can be used to introduce economic independence in a poorer country. Mexico is a typical example in the NAFTA trade deal. The NAFTA trade deal has led to the rise of middle class in Mexico (Irwin,7). This has had a ripple effect on the Mexican economy which has been on the rise in the recent past. Such effects have been possible as trade opens up other forms of employment while also improving the investment portfolio of the country. Investors may seek to relocate to countries having such trade deals to take advantage of them. Also, the trade deals can be utilized to advance the political and diplomatic ideologies. Trade deals deepen the relations between the trading partners, which would tend to adopt a common political or diplomatic ideology. The NAFTA trade deal made Mexico adopt multi-party system which is more democratic, like its trading partner the US.
Irwin, Douglas A. “Truth About Trade.” What Critics Get Wrong About Global Economy (2016). pdf.