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The Fruits of Free Trade - Essay Example

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The paper "The Fruits of Free Trade" highlights that the counties with the freest economies adopted a capitalist model of economic development.  The free trade policies can encourage development and raise the level of economic freedom.  When economic growth occurs the poor people can benefit…
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The Fruits of Free Trade
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Summary of Article "The Fruits of Free Trade" The Free trade agreements are generally made between two countries. Through the free trade agreement,US exporters are open to the world market. This expands the opportunity of American workers and business to enter into the different market places in the world. This is a real tool for promoting competition and transparent market to the consumers. The free trade policies enhanced competition, quality products in low cost, better job opportunities and investments. The American economy as well as world economy benefited with free trade specialisation. The per capita consumption in U.S tripled by introduction of free trade practice. Americans are depending on different countries in the world for different needs. Americans importing cameras and car from Japan, shirts from Bangladesh, videocassette recorders from South Korea, paper products from Canada, fresh flowers from Ecuador, Oil from Kuwait, steel from China and Computer Programmes from India. In 2001, U.S imports of goods and services totalled $1.6 trillion. Not only in importing goods, Americans are number one in world exporters. They sell computers, bulldozers, financial services, movies and thousands of other products to entire world. They are selling $1.3 trillion worth goods to different parts of the world. In the past three decades, the U.S imports and exports increased from 11 percent to 30 percent. And also financial investment is gown from less than 1percent to 3percent. One of major concern of the Americans was the large import from different countries may destroy the jobs and nation becoming dependent on others. But the trade is the great generator of economic well-being. It improves the competition, through the productivity and quality will improve. It will avail cheaper and better good for the consumers. By spurring economic activity and reducing cots, trade helps create jobs. By enhancing productivity and quality, the U.S companies makes vibrant in world market. Imports are the real fruits of trade because the end goal of economy activity is consumption. Americans view the free trade as an unfair trade. The cheap imports hurts the higher cost US suppliers, but consumers will gain from this. The U.S traders become more dependent on other countries. The domestic industries will fell down. It will destroy the jobs of factory workers, farmers and reduce the wages. On wrong heading into a trade, will sap the US economy and sour its relationship with other countries. The American live and work in a highly dependent Society. People buys good from thousands of sources, including different part of the world. U. S accepted specialisation and trade and as it rewards the standard of living is higher than any other country in the world. English economist David Ricardo explained the benefits of specialisation and trade. In his theory he explains, an average American worker produces 100bushels of soybeans or five pairs of shoes and a Chinese worker produces 8 bushels of soybean and 4 pair of shoes. U.S is more productive than China in both industries, but specialization and trade both the counties can gain more. By shifting American worker from shoe factory to soybean farm produces a gain of 100 bushels of soybeans at the cost of five pairs of shoes. Shifting two Chinese workers from farm to factory raises show out put by eight pairs but cuts soybean production by 16 bushels. The net effect is an increase of 84 bushel of soybean and three pairs of shoes. In this example both the countries should specialised on their own products and this will maximise the production. Both countries can divide the production between themselves and it will offer better than they were by their own. The specialization of trade arises out of the profit motive. Each country can expertise their own advantage and support to the countries for their needs as expertise on their product. By the country can offer better living standards to the people. If we consume only what we produce, we build our own house and grown food enough to survive. The wealth of the nation is reflected on the trade not what the work they do. In U.S nearly 61 percent of oil comes from foreign countries. The U.S is importing from nations that produce oil at lower cost and paying it by selling their good and services to the oil supplier and other countries. The import enriches the market place by adding variety of goods. The imported good are may be more cheaper and good quality than the local goods. If American consumer denies using foreign goods, they don't have eight of the ten high rated cars, best diamonds from Africa, Swiss chocolate German cutlery. Imports added variety and quality goods and also keep lid on the prices of the goods. They made cheaper and also encourage the local producers to reduce the prices. Over the past five years, U.S price have actually fallen down by 10 percent for the wide range of traded goods like, cloths, computer, toys, etc. U.S and other capitalist nations rank high in both per capita consumption and economic freedom. The poorest consumers lives in the countries which are most closed to the outside world. Competition makes the nations stronger. Countries, which are sitting in the rock bottom of the free trade barriers, is not performing as the free trading countries doing. Consumers buy form thousands of markets. The protection of consumer is an upper hand. The consumers are fighting for open market where they can avail different products and competition make cheaper price and good quality. The producers in other hand sell in one market earn more incentive and focus on their own industry. Under the American leader ship, in 1995 created the World Trade Organization, a 144 national form for foreign markets. Between 1980 to 2001, world trade more than triples to $12.5 trillion and at the same time U. S economy doubled. U.S added 35 million jobs in the past two decades. Americans have a large stake in a free trade future. American consumer will get better goods and services and lower prices. With the global competition the U.S companies will flourish and innovative (Arnold S.Miller, 2004). If the people start staying own constructed houses, wearing own sewed clothes or grow food for their own needs, it would cost more time and money. Since these items are available in the open market, which is more cheaper than producing themselves. This principle of practicality and cost is applied to these conditions. This makes sense of buying products from who is specialised in such production and who can make it more easily and less cost. Through the free trade with Canada and Mexico, has risen the U.S trade to 86 percent. The growth in US economy also benefits the countries that are entered in to the US market selling their products. They received with good remuneration for the goods and services, which is much higher than from their home country. The trade at this level enables their business to earn more capital gains and enhance their business and develop their industry. By this opportunity the people earn better wage, acquired more goods and improved their living standards. Foreign investments allow the domestic industries to develop and improve the employment opportunities and facilities. Through Free trade, the direct investment from the developed countries like U.S increased in the developing countries. This helps the developing countries to improve economics conditions, better job conditions and health and development programmes, which lead to better living condition. (qtd. in David Dollar, Aart Karvy, 2000). The counties with the freest economies adopted a capitalist model of economic development. The free trade policies can encourage the development and raise the level of economic freedom. When the economic growth occurs the poor people can benefit. The sound and strong economic freedom assure property rights, independent judiciary and free flow of capital and fair system of taxation. Works Cited: Federal Reserve Bank of Dallas, Annual Report-2002. 'Fruits of Free Trade". http://www.dallasfed.org/fed/annual/2002/ar02.pdf Retrieved 2009. Arnold S. Miller. Free Trade - Currents issues and prospects. Nova Publishers, 2004. David Dollar, Aart Krayy, 'Growth is Good for the Poor" World Bank Research Group. 2000. Read More
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