Question

In: Economics

In your well-informed opinion, should the US pursue a free trade approach, or should the US...

In your well-informed opinion, should the US pursue a free trade approach, or should the US regulate trade? Why?

Solutions

Expert Solution

International trade refers to the involvement of the purchase and selling of goods and services overseas or cross nation boundaries. The trade can bring numerous variety consequences to an economy that could be evil and good. As a result there is always an ongoing cold war between the supporters of free trade and supporters of trade protectionism. In my opinion U.S. must regulate it's trade because of the following reasons

--Regulations will act as a kind of buffer to protect fledgling domestic industries in America. . The foreign firms have taken benefits of economies of scale and thus achieved relatively low levels of cost of production. New firms in America facing low levels of output and higher average costs will find it harder to compete. Therefore to protect certain industries from foreign competition tariffs and quotas must be imposed.

-- Such restrictions can help protect employment since it can become hard to compete against the cheap foreign labor. The model of international trade suggests that the nations countries specialize in activities in which they have a comparative advantage, sectors in which they do not have this benefit will shrink. Maintaining such sectors through trade barriers deprive countries from enjoying the gains possible from free trade. Cost cutting leads to layoffs, and layoffs lead to demands for protection; and protectionism also temporarily creates employment for domestic workers.

--Furthermore, the United States security would be threatened if the nation excessively depended on foreign powers as the primary source of strategic materials. In time of war, America may be required to cut off from sources of foreign supply and lose few of the materials upon which U.S. industry depends. Moreover, national security would also be beneficial to help keeping United Nations safe from terrorists and guarding industries from selling technology that could fall into enemy hands.


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