Although economists have been largely successful in synthesizing empirical evidence demonstrating that international trade plays an important role in contemporary economies, including the U.S. economy, the issue sill remains a hotly debated one, with proponents and critics rallying behind their presumed reasons for and against the adoption of international trade and open markets (Policy Debate, 2006).
The conflict of interests is not new, if congressional debates for the adoption or elimination of trade barriers are anything to go by. This paper argues that the U.S. economy benefits immensely from international trade, especially in core areas of enhancing specialization, achieving comparative advantages, enhancing the leverage for firms to engage in innovation, and improving the living standards of American consumers.
Extant literature defines international trade as the exchange of capital, goods, and services between countries, with the view to expanding markets as well as allowing for greater competition and more competitive pricing in the market. The exchange of capital, goods, and services across international borders have been shown to enhance specialization and division of labor, which in turn improves the economic outlook of a country by triggering efficient utilization of resources and lowering prices (Policy Debate, 2006).
In such a context, the U.S. economy benefits from international trade in terms of lower prices and economic growth as the country continues to specialize in what it is able to do best while acquiring the things that it has difficulty in producing from its trading partners.
The specialization benefit triggers yet another critical benefit of international trade for the U.S. economy, namely the possession of comparative advantages. Available literature demonstrates that “a comparative advantage exists when the opportunity cost of producing a good is lower in the domestic economy than in foreign economies” (Policy Debate, 2006 para. 2).
Using this definition, it therefore becomes clear the U.S. economy gains from international trade by having the capacity to import goods and services at a lower opportunity cost than it would face if the products were produced in domestic markets.
It is also argued that the U.S. economy benefits immensely from international trade by enhancing the leverage for domestic firms to engage in innovation.
This argument is firmly grounded on the premise that international trade provides the avenue for these firms to source for products from global partners and produce output more efficiently due to extensive foreign competition (Policy Debate, 2006), leading to innovation and creativity.
Lastly, the U.S. economy benefits as international trade enables American consumers to not only have the diversity of selection, hence improving their living standards, but also to pay less for groceries and other consumer products from international markets.
Some critics still believe that the U.S. should not participate in international trade or should in fact increase economic isolationism for varied reasons, including the urge to protect infant industries, protecting industries that are fundamental for national security reasons, preventing environmental degradation and labor abuse, and preventing job losses in domestic markets (Policy Debate, 2006).
Although some of these reasons are valid, they cannot in anyway match the economic benefits associated with international trade as clearly demonstrated in this paper.
Overall, therefore, the task should be for the government and other interested parties to come up with structures, policies, and strategies that will facilitate the U.S. to continue reaping the benefits of international trade while ensuring that it does not harm domestic markets. Entering into trade agreements with international partners, rather than engaging in protectionist and isolationist practices, is the way to go for the U.S. economy to gain optimal benefits from international trade.
Reference
Policy debate: Does the U.S. economy benefit from foreign trade? (2006). Web.