Rodima

Rodamia International Trade page 1 . . . . . . . . . . . . . . . . . . International Trade Simulation By Tyleen Wilson June 6, 2011 University of Phoenix Axia XECO 212 Hamsa Wilson In Through international trade, every country worldwide can benefit by either Importation or exportation of goods and services. The balance that can be achieved through this shared use of resources fosters a healthy global economy. The foundation of our economy today is one which is defined by both Disadvantages and advantages. Trade from foreign countries is a controversial Issue among all economists and many politicians. The first goal in trade is to allow each country’s economy remain fruitful and productive through the provision of goods and services to each country that are not readily available in the other. This is true for all countries and all goods and services. If international trade did not take place, then some products could not be produced. The potential for economic growth would be smothered and the demand supply cycle would be entirely different than it is today. A country that makes the trade beyond its own borders has a significant advantage if not the ability to be competitive in such market is weak. Each country has a product or service of some type that is readily available to various countries and true in all levels of manufacturing, production, and labor supply. The ‘Absolute and comparative advantage’ is a specific indication that by any situation each type of gain arises from variable types of circumstances. An example Of absolute advantage that occurs would be a producer who manufactures a chain of products at a higher rate than the contending company and use only the same amount of resources as his contender. This too occurs, except for one country has land that is richer, and generates a higher tonnage per acre. Comparative advantage strategically obtains the advantage in one service or product that also takes place in another country. The advantage gained is through use of lower costs that is available in that particular country. However, the availability in the competing country is acquired as well. A specific example was the Corn Producers of Rodamia. The producers made the necessary investment in the demand of technology for cultivation and in high quality seeds which permitted them to obtain the comparative advantage in the production of corn. To secure their decision they asked their President to place a tariff on cheap imported corn. So they could launch themselves effectively while they recouped their investment costs. Tariffs employ the charging of a fee for specified services and goods. In this way they limit imports. Tariffs are very controversial tools. The simulation revealed that the tariff was used to limit cheaper, imported corn to help the domestic producer gain a foothold in the market. Two limits were seen in the application of this tariff. The first limit indicates that the country’s consumers will pay a higher price for their corn and less corn will be made available to them. The second limit is that those countries that neighbor them will retaliate for the imposition of the tariff by placing tariffs at their own borders for Rodamia goods. This apparently negates the original reason for imposing the tariff and removes the comparative advantage. Ultimately, the tariffs may be removed and free trade may reign again. It takes great skill and consideration for manufacturers to determine which countries they wish to export their goods to at any given time. Their own economy can suffer greatly as a result of their decisions. As with most things in life, a balance must be struck. This takes considered thoughtful planning. The economist always sees free trade as the best, most powerful route to healthy economies. The consumer is offered the best price for goods and services and the economy can thrive from the bottom up. In some cases, the use of tariffs and quotas may be necessary so domestic productions in desired industries are protected. Retaliation must be taken into account in making these decisions. This is the infinite line together we tread. One side convenes prosperity, and the other side convenes economic self destruction. Foreign exchange rates are another critical factor in economic health. Foreign countries determine what value they will place on another country’s currency. This determines the conversion rate. These rates are established on the basis of a number of factors that include the country’s economic status, interest rates and inflation. Higher rates of inflation will devalue the countries currency. Minimal rates of inflation will increase its value. These determinations are made on a country by country basis and are of the fiscal policy role that plays out through application of exchange rates. Government spending, borrowing and taxation policies can affect these values. Government spending increases funds available to consumers that cause’s inflation if left uncontrolled. Decreasing government spending in concern with raising taxes can slow the rate of economic growth. In 1995, the World Trade Organization (WTO) was established as a heavy weight in international monetary management and trade control. They are intended to foster trade through negotiation and agreement. They are intended to reduce economic barriers for developing nations and set standards for all economic players worldwide. Much study has to go into the elements of international trade prior to reaching any decisions that will affect a country’s people. The world depends on international trade for the global economy to thrive. The business cycle reigns supreme affecting the overall balance among countries over time. This requires that a constant assessment and adaptation should be taking place so that some balance can be achieved during downturns and times of prosperity. A country cannot exist in its own right without trading with its neighbors. It is a learned skill to make use of the ability to exert absolute or comparative advantage. This simulation has demonstrated both the advantages and disadvantages of trade limits. The use of tariffs and quotas to control trade can severely limit a country’s success in the international market. Reference Page . .. . Mankiw, N. Gregory (2007). Principles of Economics (4th ed.). Florence, KY: South-Western Cengage Learning. . . . World Trade Organization. (1995 - 2009). World Trade Organization. Retrieved June 5 2011, from http://www.wto.org/ . . .