Introduction to Management BU106
The Role of International Trade
The United States has been constant in keeping an open market for quite a while and that has helped the production of goods extraordinarily. The Open market was not always the norm, and for most of American history, the United States imposed sanctions on outside imports in an effort to protect those individuals that aim to produce their goods within the shores of the United States from foreign competition. International trade has a rich history starting with barter system being replaced by Mercantilism in the 16th and 17th Centuries. The 18th Century saw the shift towards liberalism. It was in this period that Adam Smith, the father of Economics wrote the famous book ‘The Wealth of Nations’ in 1776 where in he defined the importance of specialization in production and brought International trade under the said scope. David Ricardo developed the Comparative advantage principle, which stands true even today. (Management study guide, 2008) International trade or world trade affects the entire American economy. The early industrial years of American the economy was based entirely on the exporting goods to other countries, and these exports created the revenue need to sustain the country. America would export more products than it needed this created a surplus in the GDP. This began to change in the 1930's when the trade began to change and the country began to import more products. This downward trend led the GDP its lowest point in history. In today's world trade market America's import percentage is somewhere in the mid-60%. The balance of trade in America today is running in a deficit. The U.S. government has created trade agreements the various countries that allow free trade between these countries. This means there are no tariffs, fees or taxes applied toward the good being imported or exported between the countries in the agreement. These...
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