Globalization and Trade in Context 1

This assignment has been previously used in Global Managerial Economics class with Professor

Deborah McCafferty on/around October 20, 2013. The course number was ECON310 section 03

and the term was 1304A.

Colorado Technical University Online

Global Managerial Economics

Globalization and Trade in Context

Phase 3 Individual Project

Professor Rocio Ribero

Ayesha Jackson

June 09, 2014

Table of Contents

Introduction to Topics......................................................................................................................3

The Effect of Trade Policies on Industry.........................................................................................3

How Global Organizations Affect Business owners.......................................................................4

Role of government in trade policies...............................................................................................5

The Automobile Industry & Trade Agreements with Attention on NAFTA..................................6

Reference Page................................................................................................................................8
Globalization and Trade in Context 3

Introduction to Topics

As a business owner, I must approach the issue of globalization and trade in context.

With all the complicated tariff and nontariff trade policies, organizations, and government

involvement, the important question to ask is why the United States maintains certain economic

policies. In this assignment I will try to cover the effects of trade policies on a particular

industry. How international organizations affect business owners, will also be discussed; as well

as the roles the government plays in the trade policies. I will also focus on the automobile

industry and trade agreements with a focus on NAFTA.

The Effect of Trade Policies on Industry

U.S. International Trade Policies and History

U.S. foreign trade and global economic policies have transformed dramatically within the

two centuries that the United States has been a country. In the early periods of the country's

history, government and business generally focused on developing the domestic economy

irrespective of what went on abroad. However, in the meantime the Great Depression and World

War II, the nation in general has sought to decrease trade barriers and organize the world

economic system. The commitment to free trade has both economic and political backgrounds;

the United States increasingly has come to see open trade as a means not only of advancing its

own economic interests but also as a key to building peaceful relations among nations (State,

N.D). As global trade has developed consequently, so did the necessity for international
Globalization and Trade in Context 4

organizations to sustain unchanging, or as a minimum foreseeable, exchange rates. Free trade

raises sales and revenues for U.S. businesses, as a result reinforcing the economy. Free trade also

builds jobs over the long-term in the United States for the middle class jobs. Simply put, it

allows for a chance for the United States to make available financial assistance to many of the

world's deprived countries. The best conclusion to this paragraph is economic assistances from

international trade arise simply because all countries do not have the same items in their

production capabilities. For instance one country may have different levels of education, or

merely because of the differences in natural resources, and/or technical knowledge, and so on.

How Global Organizations Affect Business owners

Do the economic trade policies today help or hurt business owners and laborers?

GDP is a measure of all the goods and services produced domestically. In today's

progressively globalized world, exports and imports are crucial amounts in the exploration of a

country's economic state of affairs. Every time an economy slows down or moves faster, all other

economies are perhaps affected. Globalization is affectedly separating the connection amongst

American business firms and their personnel. There has always been conflict over the shares of

the benefits of worker productivity going to profits and wages. But up until recent times, we

must assume that mutually workers and businesses had a shared concern in manufacturing in

America. For instance, businesses turned out to be multinational, whether they truly

manufactured in America was beside the point when it comes down to their shareholders and

upper leaders. The person in charge may or may not be an American by birth or culture;

nevertheless she/he no longer acknowledged the prospect of the business with the future of

America. They were paid to invest where the cost of labor and environmental regulation was
Globalization and Trade in Context 5

cheapest (Jeff Faux, 2014 ). From the business perspective, one effect of globalization is that of

expanded markets. This basically means a company that has beforehand individual sold its

merchandise nationally can begin to sell their goods to additional countries. A good example of

the expanded markets consists of the auto industry. If Americans may perhaps borrow and spend

to sustain their living ethics, Washington policy creators could favorably disregard the statistics

that every year we are purchasing more from the rest of the world than we are actually selling;

which in turn is causing us to fall deeper in debt. Simply put, we as a country can rebalance our

trade with thoughtful investments and trade strategies that can possibly grow the market for the

United States manufactured products and goods. Otherwise we could just simply wait for the

global market to force us to contend in this world by dropping employees’ salaries and living

standards.

Role of government in trade policies

Economically speaking, governments have no role to play in international trade. If governments

abstained from adopting trade policies, the world would have an economic condition called free

trade. This would mean there would be no more barriers to an exchange of goods or services

across national boundaries than there are within such boundaries (Britannica, 2014). In today’s

global economy, government industrial policies can dramatically change a nation’s comparative

advantages. If the determination of international trade is to supply goods and services that we all

demands, then I would have to assume that merely the purpose of government is to ensure that

nothing interferes with the transaction between international producers and consumers. However,

I do not agree with this information. My reasons are simply because some of the products we get

from other countries are not safe. My second point of thinking is, companies that trade with them
Globalization and Trade in Context 6

are often be able to hide details about how dangers or harmful their goods are from us; until the

government forces them to follow regulations. “According to a University of Michigan study, the

average U.S. family of four still stands to gain an estimated $7,800 per year if there was total

elimination of global barriers to trade in goods and services. The World Bank has reported that

the elimination of global trade barriers could lift 300-500 million of the world’s poor out of

poverty over the next 15 years (N,N, 2014). However, I know for a fact that I would like and do

appreciate our government for regulating health and safety issues.

The Automobile Industry & Trade Agreements with Attention on NAFTA

The Economic Trade Policies Today

General Motors stated they will be increasing its affiliation with China-based SAIC

Motor Corp. While it may be good for the American taxpayer, who do you really believed bailed

them out? Are there truly many jobs that the American workforce could be losing? Are there any

real benefits of the Trade Adjustment Assistance Program? I learned that the Trade Adjustment

Assistance program aids employees in getting back to work and on their feet by given the

required training to assist them in competing in today’s global economy. Broadly, free trade

agreements have not had a beneficial impact on US jobs. The year after NAFTA passed, the US

saw its trade deficit with Canada explode and their trade surpluses with Mexico turn into a trade

deficit. The NAFTA model provides a strong incentive for all producers to move out of the US

and export back home. International trade can raise efficiency is through the enhancement of

competition. By opening borders to trade, countries force industries to compete with goods and

services produced abroad; and hence to struggle to become competitive and pass on cost

reductions to consumers in the form of lower prices. In industries which tend to be monopolistic
Globalization and Trade in Context 7

or oligopolistic because of the nature of the production process, this is for the most part very

important. A great example would be the car and telecommunication industries. From the early

’90s onwards, a wave of multinational firms entered both markets. In both countries, these

entrants were required to achieve a high level of domestic content within a specified period

(typically, 70 percent within 3 years). For at least some of the new entrants, this was seen as an

unreasonable target, as domestic suppliers could not meet the price and quality requirements of

the car makers. Achieving the 70 percent target required the car makers to switch rapidly from a

reliance on imported components to sourcing from local vendors; and this in turn gave the car

makers a strong incentive to work closely with (first-tier) suppliers, to ensure that quality

standards were met, within an acceptable price. Trades could very well be a very good way to

bring competition and raise efficiency in these industries. Jobs continue to be lost to NAFTA

today. In the years 2007-2010, the U.S. economy has lost 116,400 as a result of the trade deficit

created by NAFTA (Strachan, 2011).

Reference Page

Works Cited

Britannica. (2014). Iinternational Trade. Retrieved from Kids Encyclopædia Britannica:

http://kids.britannica.com/comptons/article-202824/international-trade

Jeff Faux, A. O. (2014 ). Trade policy and the American worker. Retrieved from Trade and

Globalization: http://www.epi.org/publication/trade_policy_and_the_american_worker/

N,N. (2014). Government's role in trade. Retrieved from eNotes:

http://www.enotes.com/homework-help/it-404938

State, U. D. (N.D). Foreign Trade and Global Economic Policies. Retrieved from U.S.

Department of State: http://usa.usembassy.de/etexts/oecon/chap10.htm

Strachan, M. (2011). U.S. Economy Lost Nearly 700,000 Jobs Because Of NAFTA. Retrieved

from The Huffington Post: http://www.huffingtonpost.com/2011/05/12/nafta-job-loss-

trade-deficit-epi_n_859983.html