Globalization entails the internal integration that arises due to exchange of ideas, products, worldviews, and other aspects of culture in a nation. The United States government has shown tremendous strengths, aiming at increasing the output and the productivity of the nation. The concern of the U.S government is on improving the free-trade environment between the United States and other countries (Bertho et al 76). Improving the free-trade environment will enhance the draining of jobs from the economy of the U.S, to other countries in which the workers command low remuneration. Globalization includes the flow of economic activity in two directions. Although the American workers lose their jobs to foreign workers, others gain jobs that boost the economic activity of America. Globalization has harmed the low-skilled U.S workers because other countries have low-skilled workers, though they are paid fewer salaries than those of the low-skilled U.S workers (Bertho et al 79).
Current account refers to the sum of the factor income, cash transfers, and the balance of trade. Balance of trade is the net revenue on the exported goods, after the deduction of imports, whereas the factor income refers to the foreign investment earnings minus the foreign investors’ payments (Stohl et al 42). However, balance of trade entails the difference between the export of goods and services, the imports of a nation, provided all investments, components, and financial transfers are ignored. Balance of payments entails the monetary transactions carried between a nation, and the world. Balance of payment accounts is used in summarizing the transactions of a country in a year.
Profits from the international trade act as incentives for entrepreneurs, which gives them the morale to invest. During the international trade, the government charge tax from companies based on the profits made by the company. Profits are used during risks and the provision of insurance during the unexpected downturn. High profits from trade motivate and attract new firms and investors into the firm (Stohl et al 46). High profits from international trade lead to high dividends among the shareholders and encourage people to buy shares. High profits remunerate shareholders, who are a source of finance for firms. Profits enhance the investment in research and development programs, which enhance the technology and efficiency of businesses. Profits complement the regulatory function of pricing. This is because profits from international trade lower the costs of production of the developing nations.
If a nation imports fewer products than she exports, that trade is said to be a favorable and balanced. The countries who have a record of negative balance of trade lead to a negative balance of payment. However, the balance of payment and the balance of trade of a country need to be negative. This is because; a country may at times have a negative balance of payments and a favorable balance of trade (Haugen et al 22). Balance of payment depict that the entire account surplus is balanced by capital account deficit of an equal size, or a capital account surplus that is corresponding to the capital (Stohl et al 51). The government can overcome unfavorable balance of trade through decrease of imports and increase of exports in a country. Unfavorable balance of trade can be caused by the infusions of loans and capital aids. This is because whenever the expenditure of a country exceeds the income of the country, the living standards fall. Research explains that the products produced outside United States are expensive to the U.S buyers, making the demand for the imported goods to reduce.
Bertho, Michelle, Beverly Crawford, and Edward A. Fogarty. The impact of globalization on the United States. Westport, Conn.: Praeger, 2008. Print.
Haugen, David M., and Rachael Mach.Globalization. Detroit: Greenhaven Press, 2010. Print.
Stohl, Rachel J., and Suzette Grillot. The international arms trade. Cambridge: Polity, 2009. Print.