International Trade and Its Impact on Us Economy

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International Trade and its Impact on the U.S. Economy


The international trade sector of the U.S. economy continues to draw attention in economic and political circles. It is true that, the international market has become increasingly important as a source of demand for U.S. production and a source of supply for U.S. consumption. Indeed, it is substantially more important than is implied by the usual measures that relate the size of the international sector to the overall economy. This paper explores the role international trade now plays in the U.S. economy and answers the important questions for economic policy: How does international trade affect economic well-being? Who gains and who loses from free trade among countries, and how do gains compare to loses. How international marketplace achieves these gains from trade or how the gains are distributed among various economic participants.

International Trade and its impact on U.S. Economy

U.S. foreign trade and global economic policies have changed direction dramatically during the several years that the United States has been a country. In the early days of the nation's history, government and business mostly concentrated on developing the domestic economy irrespective of what went on abroad. But since the Great Depression of the 1930s and World War II, the country generally has sought to reduce trade barriers and coordinate the world economic system. This commitment to free trade has both economic and political roots; the United States increasingly has come to see international trade as a means not only of advancing its own economic interests but also as a key to building peaceful relations among nations. Since the end of the 20th century, a growing trade deficit has brought some ambivalence in the minds of American people about trade liberalization. The United States had experienced trade surpluses during most of the years following World War II. But oil price shocks in 1973-1974 and 1979-1980 and the global recession that followed the second oil price shock caused international trade to stagnate. At the same time, the United States began to feel shifts in international competitiveness. By the late 1970s, many countries, particularly newly industrializing countries, were growing increasingly competitive in international export markets. South Korea, Hong Kong, Mexico, and Brazil, among others, had become efficient producers of steel, textiles, footwear, auto parts, and many other consumer products. Today, The Nation's international trade deficit in goods and services increased to $497.8 billion in 2010 from $374.9 billion in 2009. (Appendix 1) Today the attention to the impact of the trade sector on the economy continues to intensify. In one form or another, U.S. international trade issues have been and continue to be routinely placed in the public spotlight for review and dissection. In short, international markets are becoming ever more important to the U.S. economy as the nation participates in an increasingly interdependent world economy. While international interdependence is not universally popular, it is one of those facts of life that we ignore at our risk, for as we shall see, the degree of interdependence of the U.S. domestic economy with the international economy is extensive. Indeed, international trade is vital to the health of U.S. industry and to the interests of U.S. consumers. In order to understand the importance of the international sector of the economy, it is critical to choose appropriate questions. For instance, how important are exports of goods relative to the nation's total output of goods, or what proportion of the nation's total output of goods is exported? (Appendix 2) The interpretation of a comparison of goods imported relative to domestic goods output is rather more obscure, for example, than is a comparison of...
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