Question

One of your relatives suggests to you that importing goods from other countries reduces employment in the U.S. and thus lowers our "national well being" and that increasing U.S. exports(while reducing imports) ought to be the goal of the government trade policy. Is this the right way to look at international trade and its effects on the country? If not, (and it isn't!) how would you respond to your relative's assertions?

Answer 1

The relatives assertion is quite contrary to what actually happens in the real world. It is very important to maintain a healthy balance between import and export for a country.

Answer:

International trade is the exchange of goods and services among various countries. globalisation gave this impact that consumers and producers are now exposed to a variety of different choices which were not available previously, for example a person sitting in the united states can now order goods from the United Kingdom. Likewise producers are now exposed to international competition, they are not only competing with domestic producers but international producers as well.

The statement says that importing is not good for national well being but in fact this statement is inaccurate at best. Importing and exporting both are of equal importance. importing gives the consumers an exposure to the global market, thereby allowing customers to experience products they would never would have before. Countries which have an comparative advantage on a good will be looking to export goods, for example rice is cheaper in the United kingdom than in the United States of America, buyers of rice in the United States of America will be looking to import rice, due to its cheaper price and the fact that it might be of better quality. Secondly no single nation is self sufficient, no one nation can produce all that they need to consume, which means that they do not need to import. Therefore it is unlikely that if a country can produce good A at a high quality and low cost it will ever need to import good A, thereby not impacting unemployment to a certain degree.