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Microeconomics paper

By DaDaDa13 Feb 26, 2014 1009 Words

Economics 103, Economics in the Information Age
International Trade and the Role of Information Technology in Microeconomics 02/09/2014
Professor Asif

International Trade2
Microeconomics is a field of study that relies on the market decisions made by people and businesses regarding which goods, services and resources they chose to use (Mayer,2010, p.2). These decisions are quite complex and the results can have catastrophic effects on those around them. The article regarding international trade and the role of information technology leaves a lot of room for debate. It started with the auto industry and the cascading effects on the economy when affordable Japan exports increased, which quickly turned into a steel industry issue. Then it detailed the arrival of the North American Free Trade Agreement and the impact it had on the United States and it's neighbors. It was fascinating hearing expert opinions and listening to each side's very valid points. I can see where it would be hard to be objective, especially if personally involved.

The auto industry in the 1970's was a prime example of international trade being changed by technology. I was born in 1977 and I remember hearing stories when I was a little boy about gas shortages and the crisis surounding it. People were forced to find alternate means of transportation or pay the sky high price to drive. One way to allievate the burden was to buy a more fuel efficient car, such as a Toyota, made by the Japanese. This wasn't an easy decision for an American to make, especially for someone like my uncle who fought against the Japanese in the war and was still very bitter. My father bought a Toyota and took a lot of grief about betraying our country from all of our family and friends. He felt it worth the hassle because it was a cheaper car to drive and statisically more reliable than an American model. Due to the influx of consumers buying the foregin car, many Americans lost their jobs working in the automotive industry. People cried out for the government to save their jobs, but at what cost to other citizens. In an effort to discourage people from buying imported cars an additonal dealer mark up cost was added to foregin cars (Economics U$A). Also, the government made an arrangement with Japan to decrease the number of cars it brought over called voluntary restraint (Economics U$A). The problem with both of the efforts was the demand from Americans was high, with a low supply. People were willing to pay more for the Japanese cars.In fact, because people were willing to pay more for Japanese cars, American automakers raised their prices as well (Economics U$A). This just proved that the market would prevail over government regulation and consumers would end up paying for it, literally. The cost of saving jobs ended up costing car buyers a whole lot more in the long run.

International Trade3
Another element to the article involved a major component of automobiles, steel. In the mid 1900's the United States steel industry was untouchable. There was no competetion and the steel makers were virtually unregulated. In the 1970s's countries overseas, mainly Germany and Great Britain decided to change that monopoly, using subsidized steel to undercut the American industry (Economics U$A). The Treasury Department stepped in with the creation of trigger price mechanisms (U.S GAO). These mechanisms were designed to prevent other countries from stepping in with much lower prices by automatically triggering an investiagation when a price was lower than the standards set by the Japanese, who were viewed as having the lowest cost production in the World at the time (Economics U$A).

The third major component of the vidoe article involved the organization of the North American Free Trade Agreement. Commonly refferred to as NAFTA, this trade agreement began on January 1st, 1994 and included the US, Mexico and Canada (NAFTA). This formalized the trade industry between the three countries and created the World's largest free trade area (NAFTA). Although all three countries benefited from this formal agreement, I believe it benefited the poorest country, Mexico ,the most. One Mexican company that took advantage was Bimbo bakeries. It instantly seized the opportunity to expand it's goods to the United States, mainly via rail (Economics U$A). Opponents of the agreement argued that many Americans lost their jobs to lower paid employees in Mexico. Proponents argue that the cost of those jobs will benefit far more Americans by having goods and services at a lower price as well as the benefit others will reap from Bimbo bakeries using American goods to make their products (Economics U$A).

In conclusion, I believe only time will tell if an industry or market will be able to balance itself without governement intervention. I know that both sides of the trade arguments have valid arguments. People want to keep their jobs and ensure their way of living, while others want prices as inexpensive as possible. Life is about checks and balances and economies are no different. I think the government is doing a good job regulating those who which to take advantage and the population needs to adjust to inevitable change. Humans have learned to evolve in order to survive and the field of microeconomics is no exception. We must learn from mistakes and frequently change tactics in order for the World to keep functioning at it's best and stay ahead of the game. International Trade4

Economics U$A. (n.d.). Retrieved from Mayer, D. A. (2010). The everything economics book: From theory to practice, your complete guide to understanding economics today. Avon, Mass: Adams Media. North American Free Trade Agreement (NAFTA) | Office of the United States Trade Representative. (n.d.). Retrieved from U.S. GAO - International Affairs: Administration of the Steel Trigger Price Mechanism. (n.d.). Retrieved from

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