1. How important is international trade to the U.S. economy? If the European euro were to increase in value (appreciate) in the foreign exchange market, would it be easier or harder for the French to sell their wine in the United States? Suppose you were planning a trip to Paris. How would appreciation of the euro change the dollar cost of your trip? .
International trade is important to United States’ economy. This is because just like any other country in the world, United States is deeply enmeshed in a global web of economic relationships that involves trading of goods and services. This trade takes place between countries and multi-national corporations, world firms and among other ventures in the world. America takes a major role in the world’s economies. This implies that U.S economy depends on the stability of various states in the world. For instance, if the European euro were to increase in value in the foreign exchange market, it will be harder for the French to sell their wine in United States (McConnell & Flynn, 2006). This is simply because of the fact that when the value of euro appreciates in comparison to dollar, the French products would become more demanding and marketable throughout the world. However, when such happens, Americas will not be willing to provide the extra cost involve in importing such brand of wines. They will go for alternatives. When the euro becomes superior to that of dollar, Americans will be required to incur high cost in relation to the imported products from France. Domestic markets will opt for alternatives in order to make profit which is the main aim of any business (McConnell & Flynn, 2006). After all, the GDP of United States must grow and this is only possible if dollar becomes more stable in comparison with other world currencies. In short, the French products will become more expensive to United States’ buyers. Therefore, few products will be bought.
2. What factors account for the rapid growth of world trade since the Second World War?
There are various factors that account for the rapid growth of world trade since the Second World War. Such factors include the following; removal of restrictions on movement. Before the end of World War II, people were not free to move and trade with other countries. This is simply because there were restricted movements as a result of war. Another factor that favored trade between countries is the establishment of free trade agreements. This was aimed at promoting international trade. Generally, no state would support its economy at the time the second war was ending. This is because the war had caused instability in various countries in the world. The newly established states that had gained independence just after the end of Second World War, they had to rely on developed countries such as United States and China. Moreover, there was a popular conviction that the wealth of nations would only be improved through international trade (McConnell & Flynn, 2006). American took the leading role from 1940’s to 1980’s. Unlike in the current state of globalization, world economy at that time was dominated by few states. Therefore, these states were responsible for regulating international trade even in foreign markets. International trade was also favored by technological advancement. There was an immense integration between various states due to the need of technological imperative (McConnell & Flynn, 2006). In fact, the major factor that favored international trade is the removal of protectionist measures that had previously restricted world markets since the First World War.
3. What measures do governments take to promote exports and restrict imports? Explain.
There are two major measures taken by the government to promote exports and restrict imports. These include; prices and non-prices measures. Prices measures are geared towards enhancing the competitiveness. On the other hand, prices measures such as devaluation of currency, direct and indirect tax benefits, quality of products, after sale services among others are also meant for promoting exports. Price factors are meant to protect the exports in the short run because the competitors can easily emulate them leading to the loss on both sides. When devaluation of currency is done to promote exports, it makes exports more expensive at the international markets (McConnell & Flynn, 2006). However, exports must be import-intensive. As a result, international sales are increased in the case where the price is elastic demand and also there is sufficient supply of the product. Non-price factors are meant to provide long term solution in promoting exports. Some of these factors include; faster delivery of consignments, improvement of the export consignments among others. Tariffs and non-tariff barriers are also used for promoting exports to promote regional trade.
4. What forms do trade adjustment assistants take in the United States? How does such Assistance promotes support for free trade agreements?
Trade adjustments assistants in United States take various forms which include; Alternative Trade Adjustments Assistance (ATAA) that assists workers who have become unemployed due to increased imports from foreign countries. Secondly, Reemployment trade Adjustment Assistance (RTAA). The goal of these two forms of TAA is to help trade affected by workers return t the suitable level of employment. There are TAA certified workers who access services which include relocation allowances, income support, health coverage as well as job-search allowances. These types of assistance plays an important role in promoting free trade agreements because it contains trade acts and programs that aims at promoting domestic trade or production in order to promote exports (McConnell & Flynn, 2006). When the supply for exports is increased even in terms of human personnel, trade s favored. In this case, it creates a favorable condition where international trade can take place effectively.
McConnell, B. & Flynn's (2006). Economies: Principles, Problems and Policies, 18th Edition. McGraw: McGrawHill