The Political Economy of International Trade - Essay Example

Topic: Globalization Economics is the social science that deals with money, markets, individuals, investments, economy etc. Economics has two main branches “Micro economics and macro economics” Micro economics deal with individuals and how they earn their livelihood where as macroeconomics deals with aggregate issues or economy as whole. Macro economics consists of concepts that can be applied to the entire world. Globalization is a procedure of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world. For thousands of years, people and corporations have been buying from and selling to each other in lands at great distances hence globalization is not the new concept, but there have been vast changes in form of technology, advancement and policies over decades. Globalization can be explained as Covering a wide range of distinct political, economic, and cultural trends and discouraging barriers. Globalization became commonplace in the last two decades, and In today’s world barriers and distance don’t matter anymore especially because of the advancement in technology, media and internal and most of all the mode of travelling. By the help of all the advancement and progress in the technology now anyone can travel a thousand miles in matter of hours and days. However Globalization is a very controversial topic, many economist don’t support the idea of globalization as it has many diverse affects on the economy. As many economist believe that Advances in communication and transportation technology, combined with free-market ideology, have given goods, services, and capital unprecedented mobility. And this can affect the local market of the country. Because of globalization “international trade” takes place. International trade is the exchange of goods and services among different countries, no country is self sufficient and can’t produce all that it needs to survive, and hence the countries need to Export and import to meet their needs. With the help of modern techniques, up to date procedures, contemporary practices, globalization and highly advanced transportation system, the International trade system is spreading really fast. in today’s world International trade is important for meeting the needs of the country, not every country can produce all that it wants so in order to meet their needs and demands the trade takes place. International trade can benefit the economy of the country by expanding the local market and increasing the variety of the goods and services available. International trade is the basic source of bringing “FOREX” in the country. Trade often increases competition and it helps in reducing monopolistic pricing and the cons that generate from that. It encourages local investors and manufactures to perform better and keep stable pricing in the market. International trade is one of the major sources of revenue for the country. By doing more exports and fewer imports the country can actually achieve economic stability. international trade can help reduce local dependence on the existing companies and international trade can even help stabilize seasonal market fluctuations. No matter the level of the development of the country there will always be some specific products that other countries must be producing at a cheaper rate, in order to make maximum use of minimum resources the country import those certain goods, The are produced at lower marginal costs, this help countries save and stay in their budget, this concept is known as the “Comparative Advantage”. International trade is one of the best examples of Globalization. In spite of all these benefits international trade has certain diverse affects on the economy as well, which are often argued by the economists for example, In certain cases this discourages the local manufactures and proves to be unjust for them. For example, a local manufacturer produced 500 shirts and they are available in market for $ 40 each, where as someone imported 500 shirts and the marginal cost of each shirt was lesser than the local manufacturer because of Comparative Advantage and hence the imported shirts are available for $ 30 each in the market. Because of this the local manufacturer will face great loss and might get discouraged. Many economist argues that International Trade can sometimes increase your expenses for Example, in certain cases you will have to hire additional staff for the procedure of import and export and it Can result In trade deficit(negative balance in balance of trade) this takes place when there are more imports and comparatively less exports, international trade Create unemployment in the country, if you start importing more then there will be less industries, mills, and factories in the country this might result in unemployment and most of all increase dependency on other countries. According to economist Globalization have many diverse affects on the economy for instance, Increased flow of skilled and non-skilled jobs from developed to developing and under- developing nations as corporations seek out the cheapest labor and in developing and under- developing nations labor are usually cheap. And this lessens up the chances of employment for the citizens of their own country. Globalization can even result in Increased likelihood of economic disruptions in one nation effecting all nations, Threat that control the world of media by a handful of corporations will limit cultural expression, Greater risk of diseases being transported unintentionally between nations and this can have a very vast affect on the economy as the treatment for these diseases and government social programs are often very expensive and bothersome, Increase in the chances of civil war within developing countries and open war between developing countries as they vie for resources and Decrease in environmental integrity as polluting corporations take advantage of weak regulatory rules in developing countries. Although the U.S. economy continued to grow in the 1970s and 1980s, its rate of growth began to fall behind that of western Europe and Japan, even as American corporations began to feel the pinch of intense competition from foreign corporations. Between the early 1970s and the late 1980s, the U.S. share of world manufacturing declined. The United States lost ground in steel, autos, machine tools, electronics, computer chips, and finance. The relative decline in Americas manufacturing position had a devastating effect on the wages of blue-collar workers, raised protectionist sentiments, and spurred proposals to shield American industry from foreign competition. The intensity of the fight over the 1994 North American Free Trade Agreement (NAFTA) shows how Americas changing economic position in the world generated a set of important issues in American politics. NAFTA stands for “North American Free Trade Agreement” NAFTA first began in 1994 on January 1st; the purpose behind NAFTA was to make trade and investment easier and more accessible between United States, Canada and Mexico. Under NAFTA all duties and Trade restriction barriers were removed between United States, Canada and Mexico, NAFTA got famous for encouraging free trade. United states trade representatives suggests that “NAFTA created the worlds largest free trade area, which now links 450 million people producing $17 trillion worth of goods and services.” There were many diverse affects on the economy of US because of NAFTA. United states faced the issue of unemployment, since labor in Mexico is cheaper than US many manufacturing companies in US started hiring labor from Mexico and certain companies moved to Mexico because of cheaper labor another adverse effect was Not all companies from US moved to Mexico some of them just decreased the wages of the labor in US by following the foot step of those who moved to Mexico like most countries have suffered from the idea of Globalization, united states is one of the greatest victim of Globalization. American companies have migrated most of their manufacturing jobs to foreign countries where it is cheaper to do business. Furthermore, service and technical jobs are currently undergoing a large exodus to foreign labor too. Globalization has a negative impact because it exploits the developing world, denigrates the worlds environments, and results in U.S. jobs being transferred to other countries. Globalization in U.S also created other issues like over population in few states, less facilities for the original citizens, culture diversification and most of all increased opportunities for the original citizens in all sectors. Because of Globalization U.S. have also fallen behind developed nations on strategically important issues like education, health care and basic infrastructure. production technologies and Transportation, which were once confined to developed nations, are now ubiquitous around the world. The U.S. no longer enjoys a technology gap with everyone else. In many cases the cutting edge research and development work isn’t being done in America. American consumers and companies are now more focused on getting the most for their money, It is all about paying less for products regardless of their quality or where they are made. The U.S nation is becoming a price-driven consumer society that produces less and less everyday. The real problem in US society is that with globalization is that as the middle and lower class get poorer, they are looking for the cheapest goods to keep up with their lifestyle. So they think that the globalization that took their jobs is helping them make ends meet. But the rich, the ones pushing globalization, are now making more money than ever. Measures should be taken to prevent diverse affects of Globalization, the U.S government should stop issuing visa to under-developing countries, also they should create more complex procedure for attaining nationality so that not everyone can benefit for the advantages given to the local citizens. They should keep “close economy” for certain years. Close economy is one that doesn’t allow you to import or export anything. This step will encourage the local investors and more manufacturing activities will be performed in the country. This might also create employment as local mills, industries and factories will start producing more and will need labor. Government should set some beneficial policies for the local investors to encourage them and they should discourage imports. US should also immediately seek for its competitors and seeks ways to produce better than them in technology and education sector. The United States of America is increasingly falling behind when competing economically in the global market. Something needs to be done before more Americans leave for better opportunities in foreign lands and before the American economy permanently stagnates. Look to Europes bleak economy where very little made, designed, or invented to see America’s future is. References: 1. Graz, J.-C. (January 01, 1999). The political economy of international trade: The relevance of the International Trade Organization Project. Journal of International Relations and Development, 2, 3, 288-306. 2. Antrobus, P. (January 01, 2002). Women, globalization and international trade. Canadian Woman Studies, 21. 3. Arbitral Awards (ICSID) Bayview Irrigation District et al. v. Mexico (NAFTA), 19 June 2007. (January 01, 2007). World Trade and Arbitration Materials, 19, 5, 5-30. 4. Grugel, J., & Piper, N. (January 01, 2011). Global governance, economic migration and the difficulties of social activism. International Sociology, 26, 4, 435-454. 5. G. Thomas Sims, "Northern Europe, U.S., East Asia Remain Tops in Competitiveness, Wall Street Journal (September 28, 2005), p. 1. 6. Richard Florida, The Rise of the Creative Class (New York: Basic Books, 2002). 7. For entertaining yet highly informative critiques of extreme pro-globalization advocates and extreme anti-globalization advocates see Michael Veseth, Selling Globalization: The Myth of the Global Economy (Boulder, CO: Rienner, 1998); and Michael Veseth, Globaloney: Unraveling the Myths of Globalization (Lanham, MD: Rowman & Littlefield Publishers, 2005). 8. Florida, The Rise of the Creative Class. Read More