International Trade ECO 372 University of Phoenix There are many contributing factors to the stabilization and prosperity of our global market. We, the United States, are living in a time of severe trade deficit, meaning that we are importing many more goods than we are exporting. While it is nice to be able to buy foreign products at a lower price, there is risk in doing so. When we purchase foreign goods over domestic at lower prices it forces our domestic companies to sell their goods at lower prices to remain competitive. These lower prices may lend to making enough profit to sustain the current workforce.
The fact that Wal-Mart is a company not even a country; and is China’s eighth largest trading partner; just makes us realize how much economic growth depends on businesses to produce more goods and services faster and more efficiently. According to many economists, continuous economic growth leads to greater prosperity for everyone, but because so many countries are trying to achieve the same exact thing, competition is harsh. These are some positive and negative perspectives that are caused by international trade. As you can see, the relationship between the three sources is that they are all based on trade. All around the world, different countries import and export goods to each other so they can benefit themselves with economic growth.
This shifting of the labor market has other effects too, outside of the labor market. Chapter 15 brings up externalities and there are negative externalities associated with the globalization of trade. The exporting of jobs for cheaper wages creates cheaper products. These products may be sold at a cheap price. The higher transportation costs are involved with outsourcing, shipping products across the world is subsidized by cheap oil, and the business is not responsible for the cost of their increase in
4. The case of Starbucks: ethics and marketing Starbucks changed its main supplier in terms of coffee, and now its major coffee producer is the global organization Fairtrade (“commerce equitable”.) Starbucks has always presented itself as a fair-trade company: it presents itself as an ethical corporation, claiming that it pays higher than market price for its coffee, thus distancing itself from other coffee houses. By doing so, by adhering to fair-trade movement, Starbucks partakes in the helping of 100,000 coffee farmers and communities. Not only is this changing its economic strategy, as coffee gets more expensive to buy for the company, but it more importantly improves the image of the brand on the social stage.
Outsourcing brings proven benefits in the form of economic leveraging, increase in the quality of products and it provides a number of opportunities to less developed countries. For example in recent times, Americans are overwhelmingly supporting the major retail stores like Wal-Mart, Target and K-Mart. The reason behind this consumer loyalty is that it has become much easier to shop at these locations rather than the local mom and pop stores located on the corner of most neighborhoods. The benefit is that you can purchase everything on your shopping list from one location, saving you time, money and gasoline. In a highly competitive business world, on a firm’s priority list is the subject of increasing profit and reducing cost.
This will mean the population will have more money which will go into the economy, this will mean more income for improving infrastructure and services. Also as TNCs move to other countries, job opportunities increase which means that the quality of life will generally improve too. Another benefit would be that the status of an area would be raised; this may encourage investment by other big name Multi-Nationals and most importantly will improve the countries economy drastically as valuable export revenues will be earned. Most important, they will benefit from cultural exchange creating a cultural integration. LEDC countries do not benefit as much as MEDC countries do, for example, sometimes much of the employment is low paid, low skill, long hours, meaning that the countries do not develop economically or give the opportunity to develop their skills.
The importing industry can increase its output only by attracting more resources from the export industry. 3. Equalization of Costs Argument "We need to neutralize any advantage the foreign producers may have over the domestic producers, in lower taxes, or cheap labor." "We need to equalize the costs of production between foreign and domestic producers." In this way, we level the playing field.
But some of the population has gained also due to the creation of higher paid jobs in some factories, for example some of Nike's factories provide safe working conditions for higher pay than they were previously used to. However the rapid inflation that China has been experiencing has caused a large increase in the prices of products and this could ultimately lead to poorer consumers being unable to purchase the goods that they need to survive as they no longer earn enough from jobs such as farming. Stakeholders that have been impacted by the rapid growth of the Chinese market are the companies that choose to outsource their work to China. Due to the growth that China has experienced in the recent years, roughly 10% over the last 20 years, many companies now choose to outsource some of their labour-intensive work to China as wage rates, although they are increasing, are still much lower than developed countries like the UK or the USA. This has allowed companies to move to China and lower their costs substantially.
This will allow different parts of the world to enjoy merchandise that is specific to one country. Throughout the past it has been proven that by introducing industries’ and the use of globalization has strengthened a country’s economy. I am a pro economic globalization because I feel that we need to change the way of the past if nothing seems raise the economic standards. Hopefully we will be able to realize that economic globalization is working so we can help countries quickly and efficiently. Economic globalization has attracted much debate throughout society today.
It is true that corporations and consumers receive the benefits of cheap labor, but to facilitate stability, taxpayers must cover the infrastructural cost. Notwithstanding all the negative ramifications, illegal aliens do raise the general effectiveness of the U.S. economy by adding profitable contributions via taxes and hence diminishes marginal cost for total product production. Though this topic is important, there are more significant topics (i.e. automation in manufacturing or the growth in global trade) that will have more impact on the U.S.