Free Trade

Topics: International trade, Export, Mercantilism Pages: 1 (393 words) Published: May 9, 2013
2.Why is trade important? Why will trade and the deficit cause trouble in the future? Analyze the use of imports and exports.

Free trade is important and allows developing countries to reach their best possible economic scales for their citizens. Built on the principles of comparative advantage, free trade allows for unrestricted trade between agreeing parties. Trade allows nations to develop better job opportunities, maximize its resources, and increase the quality of life for its citizens. In the U.S. trade balance is a struggle; exporting is more of a problem which causes a trade deficit. Big companies are looking to cut costs and maximize profits so when other countries offer lower production costs domestic jobs are relocated which can benefit the host country, but in return the loss of those possible jobs in the home country hurt U.S. citizens. The trade deficit will have a huge impact on the future U.S. economy and the nations role as a power country in world trade. There is no quick or easy answer about the trade deficit and the various problems associated with the topic. The U.S. trade deficit is caused by changes in national savings and/or investments. As a country, savings has been on the decline for many decades; most analysts blame the ever-growing budget for the widening of the trade deficit. Another major impact is the trade balance, or difference between a countries imports and exports. The trade balance then impacts the country’s Gross Domestic Product (GDP). With the growth of the trade deficit, the amount of outsourced jobs increases. Companies are competing with the bottom line, market entrances, and global market competition. This is driving wages and benefits down and encourages the imports of good and services. In January 2013 the trade deficit widened from $38.1 billion to $44.5 billion due to an increase in imports and decline in exports. While the rise in imports indicates a rise for consumer demands, the decrease in...
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