New_House_Readiness

Melissa Herring International Trade Debate Week 8 When it comes to International Trade one of the biggest advantages that I had found in the simulation was the opportunity to be able to negotiate a Free Trade Agreement with another country. This left open the possibility to really help a developing country to prosper and be placed “on the map” so to speak. We would be able to have more resources available to us, the ability to cut our own production costs and they would be afforded the opportunity to produce new jobs and generate needed income to help their economy become stable and healthy. All these opportunities would greatly affect each economy positively. We would be wealthier, have good stable economies, be able to decrease unemployment even more, and be able to have more products available to sell. One disadvantage to International Trade I seen in the simulation was when trade between two countries was open, the exporting country was “dumping” their goods and selling them at a lower cost than in their own country and of that in the importing country. This was hurting the production of the importing country and they were seeing losses in sales and thus a decrease in their economy because so many people were buying the lower cost product. The end result was the ability to choose to put a quota or a tariff on the exporting country to try and ease the burden. A tariff is a tax placed on the goods that are imported and a quota is a restriction that is placed on a country and limits the amount of goods they are able to export at any given time. This could have a negative impact because they are not making money off their products and they end of having a surplus of goods that are just sitting and not being put to use. Absolute advantage is when a country or business has the ability to produce more of a product or provide more of a service then their competitors from other countries or businesses while using the same amount of resources as their rivals. One example would be two countries that produce corn; one has the ability to make more than the other all the while using the same amount of resources. This is good for the country that can produce more, because it can lead to more of their product being sold and earning them a profit. Comparative advantage is when a business or country has the ability to make a good or provide a service at a lower opportunity cost than their competitors. Example would be; a worker in one country can produce both shoes and shirts at 20 per hour, and a worker in a country with less machinery can produce either 2 shoes or 4 shirts in an hour, each country can gain from trade because their internal trade-offs between shoes and shirts are different. The less-efficient country has a comparative advantage in shirts, so it finds it more efficient to produce shirts and trade them to the more-efficient country for shoes. Without trade, its cost per shoe was 2 shirts; by trading, its cost per shoe can reduce to as low as 1 shirt depending on how much trade occurs. The more-efficient country has a comparative advantage in shoes, so it can gain in efficiency by moving some workers from shirt-production to shoe-production and trading some shoes for shirts. Without trade, its cost to make a shirt was 1 shoe; by trading, its cost per shirt can go as low as 1/2 shoe depending on how much trade occurs. There were a few ways that absolute and comparative advantages were used in the simulation. The following is just a short review of some of the things that are available if trade were to be opened with our neighboring countries. Absolute Advantage: Uthania- chocolates and confectionery are their specialty and they are able to produce these goods better than other countries Alfazia-services, there were no specifics listed but it does make up 41% of their GDP Suntize- electronic goods, they are known for their products and are tourist dream for electronics. Comparative Advantage; All countries have an advantage in agriculture, specifically corn and cheese. Even though Suntize does have absolute advantage in electronic goods, there is a comparative advantage in specific goods such as watches and DVD players. These good are comparative advantages because other countries are able to produce them. There are many factors that can and will influence Foreign Exchange Rates; the first being the political stability of a country. When a country is stable they are able to attract those who are willing and able to invest in their economy. Good investors and a healthy economy increases and improves the exchange rate. Interest rates can also affect the exchange rates. Higher interest improves exchange rates, while a lower interest decreases rates. Inflation also has an impact on foreign exchange rates. Countries whose inflation is low will have money that will be worth more, and vice versa a country with higher inflation will have money that will depreciate and not be worth much in the exchange market which can hurt their economy While there are many areas that we must look at when it comes to considering International Trade such as tariffs and quotas and “dumping”, price competition, it would be in my opinion something that is definitely worth looking into, there are so many advantages to trading with other countries, such as healthier economies, more jobs being created for our underdeveloped neighbors, more value of our money, saving money, being able to cut production costs or production times, or even increase resources available to our country and others and more product availability to the people. It is a matter of what will work best for this country and for those around us. There will always be problems that will arise from importing and exporting goods such as the above mentioned tariffs and quotas but it is something that can be handled as long as we plan ahead and stay prepared. I am very confident that opening trade to our neighbors will be most beneficial to us and our country and allow us to prosper even more and allow us to extend our capabilities and possibly form strong bonds with our international counterparts.