There are two questions related to international trade and exchange rate. If you

Question

There are two questions related to international trade and exchange rate. If you provide some numbers to support your opinion, cite the source of reference.   

1. The U.S. has been a trade-deficit country for a long time. Do you agree with that “American enjoy a better life from buying more inexpensive products from foreign countries”? Please explain your answer briefly.

2. In your opinion, what currently imported products or services should be made or provided in USA to enhance employment? Please provide at least 3 goods or services and explain your answer briefly.

Explanation / Answer

1.       An over view of U S economy shows that the trade deficit of the country has been increasing for the last several years. Now it the largest country in trade deficit.

The trade deficit of the country was $700 billion in 2007, but it steady declined to $400 billion in 2009. It registered an increase to $500 billion in 2010. The trade deficit ranges between $500 billion and $600 billion during the period from 2010 to 2017. The trade deficit of the economy is account for $566 billion in 2017. Now U S is the biggest country with highest trade deficit.

The reasons for ever-growing trade deficit are many. The first reason is that the trade deficit in foreign countries that compel the governments in these countries to restrict the sale of U S products in these countries. It lowered the sale of U S made products in foreign countries. This reduced U S exports to foreign countries. As a method of export promotion many of the foreign governments subsidized their export. This increased import of U S from foreign countries which cause the deterioration in the trade balance and the living standards of the citizens.

The overwhelming spending habit of the households and business is another reason of increasing trade deficit. The increased spending, no doubt increase the demand for foreign goods and services which apparently cause a trade deficit. Opening market for U S product in foreign countries or blocking the market for foreign product in U S is a furtive effort unless the spending habit is controlled effectively.

Another underlying cause of the increased trade deficit is the rise in the value of dollar. The increased value of U S dollar caused the country’s good costly in the foreign market compared to other countries. This made U S goods less attractive to the foreigners.

The economic recovery of U S caused an increase in the import of consumption goods while the financial crisis in Latin America reduced U S exports. The U S products are less competitive in foreign market.

If the U S citizens continue to buy the cheap foreign products they will not enjoy a better life.

When U S persistently experiencing the trade deficit, it will negatively affect its economic growth and stability. If imports are greater than export there will be consider decrease in domestic job opportunities.

The ever increasing demand for foreign currency reduce the value of dollar. As trade deficit persist due to increased demand for export thus the U S dollar depreciated in foreign market. This in fact will lead to balance of payment deficit.

The increased import and ever-increasing spending on consumption goods cause serious inflationary pressure in the economy. This provides U S citizens a lower standard of living

A trade deficit country usually experience high degree of foreign direct investment and foreign ownership of productive sectors. When a large proportion of country’s productive assets are under foreign domain, the country will deteriorate politically and economically.

In short continue to allow the trade deficit in the history of U S is not at all good for the prosperity of the nation. The recent movement of protectionism by U S is a warm welcoming factor for the crisis in the country’s trade deficit and balance of payment. But this may cause retaliation methods of trade restrictions to be followed by other countries

In this context there are certain easy ways open to U. S rather than trade restrictions. A lower U. S budget deficit will help to reduce the rate of interest. The must maintain lower value to the dollar and allow other countries their currency value to rise. The effort on opening foreign market and remove trade barriers in inappropriate areas of trade regions. The U S industries must ensure productivity and product quality to improve the foreign competitiveness.

2.       The overall review on the import of U S shows that large amount of country’s job opportunities are supported by clothes, toys and manufactured electronics items which are primarily imported from China. This sector creates employment on a large scale. More than half a million job opportunities are created in the import sector of clothes and toys and electronic items. This sector provides employment opportunities connected with transportation, wholesale, retail, construction and finance. Roughly 2.6 million jobs in U S over a wide range of industries were created by the Chinese companies. U S imported solar panel from china on a large scale. This industry has a key role in providing greater employment to U S citizens.

          The import of clothes and toys and other electronics items should be encouraged by the U S government. There is a strong recommendation that all tariff and trade restrictions should be removed from the import of these items as they provide huge employment opportunities to U S citizens.

          In short the import of clothes, toys and solar items should be encouraged by U S in order to provide better   opportunities and living standards to its citizens.

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