International Business: Estimating the Gains From Trade for America Essay

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Research produced by the Institute for International Economics attempted to evaluate the benefits of free trade to the American economy. The advantages amounted to almost $1 trillion per year or $9,000 more money for each American household (Hill 205). However, the trade also disrupts multiple domestic jobs, which must be compensated by more robust economic growth as a result of trade agreements, which creates many new job opportunities and boosts family incomes. As a result, an additional $450 billion to $1.3 trillion in capital profits to the economy each year are generated (Hill 205). In other terms, the projected yearly economic benefits are significantly more than the expected annual expenses involved with employment disruption, and a change to a global free trade system benefits more people than it hurts.

The Institute for International Economics suggests several benefits guaranteed by free trade. Firstly, it supposes that the growth of national GDP via increased overseas business opportunities, greater export rate, and more purchases within the country would lead to the rise in income of a general American citizen. In research from Horowitz and others, the relationship between the median income and a peak moment in the economy is confirmed to work. A second benefit lies in the opportunities that are open for the Americans, who can enter new markets and increase their profit (Hill). Thus, the liberation of trade can significantly widen the reach of the national goods into the other economies and guarantee a more excellent economic state for the citizens of the US.

Although the research highlights that disruption in employment is projected to happen because of global trade, the Institute for International Economics believes that the free market is still worthy of pursuit. As such, according to the study, this issue is to be counterbalanced by more vigorous economic development as a result of trade liberalization, which generates many new jobs and increases average incomes (Hill). This view is shared and complemented by United Nations Conference on Trade and Development (UNCTAD). Namely, trade and work opportunities are linked to growth in a variety of ways, but before all, trade generates employment. Exports can boost revenue by increasing demand, earning larger profits, and bringing output closer to full potential, influencing employment levels. Imports have the ability to enhance inflows of expertise and other resources, thus improving the labor market. Trade boosts jobs through influencing worker skill levels, improving efficiency through economy of scale, a diverse customer base, and information transfer, all of which can be related to favorable salary bonuses and skill strengthening (UNCTAD). Thus, global trade upgrades the opportunities of the workers by creating a larger international labor market.

Despite the benefits that have been mentioned earlier, free trade will impact the labor market and leave some people jobless, at least in the short term. This happens due to the fact that international companies might be more successful in an industry than domestic marketers. These drawbacks can be counterbalanced, as described in Duflo and Banerjee, by financial incentives. As such, one of the most prominent policies is the Trade Adjustment Assistance program, which provides monetary resources for individuals who lost their job. Since the incentive proved to be helping people in need, it could be implemented on a larger scale. In turn, this could be done by slightly increasing the taxes, which might be less problematic due to the increasing income levels under free trade.

Works Cited

Duflo, Esther, and Abhijit Banerjee.The New York Times, 2019.

Hill, Charles. Global Business Today. 12th ed., McGraw Hill, 2021.

Horowitz, Juliana Menasce, et al. Pew Research Center’s Social & Demographic Trends Project, Pew Research Center, 2020.

UNCTAD. UNCTAD, 2020.

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