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International Trade - Essay Example

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International Trade International trade has expanded rapidly in last few decades. A growing international trade benefits to the consumers as they get the goods at the lowest possible prices but at the same time it affects domestic markets, students and GDP of the country in a varying way…
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International Trade
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Most of the countries participate in such trades. The US exports high tech goods such as aircrafts, chemicals and ammunitions and at the same time it imports consumer goods, which are traded internationally at much lower prices. Usually, Gross Domestic Product (GDP) and employment has a direct correlation; that is to say, employment or new jobs in the country rises in tandem with the growth in GDP. Gross Domestic Product, in the economic parlance, is the measure of goods and services that are produced in the country.

GDP is the sum of the incomes of all the residents within the country. It is also measured by adding all kinds of spending such as government spending, investment spending and consumer spending. All exports generate incomes at home and they are part of GDP. Imports do not form a part of the GDP as they generate incomes abroad. For many years in US, imports exceed exports. That means domestic markets suffer in the goods that are imported. For example, steel import disrupts domestic steel industry resulting into a closure of many units and the loss of jobs.

The government often imposes tariffs on certain products to make imports costlier safeguarding domestic industries. At times, the government resorts to quota system and restricts imports within predetermined quota for a given country. This is usually found in textiles and garments business where quotas are allotted to the countries beyond, which they cannot send material into US. Tariffs restrict international trade as they are one kind of tax on imported good and make imports costlier. The university students in US are not benefitted as consumers of other industrial goods because education industry in US is a big exporter.

A huge number of students from other countries enroll in US universities for study and research by paying huge tuition fees in US dollars and spend in US for their essential needs during their learning. Since 1930s, many countries have supported free trade among nations by reducing tariffs. That is how the process of globalization has progressed at the rapid pace and world trade touched to the tune of almost $12,400 billion by 2009 (International Trade Statistics, 2010 p.12). World Trade Organization (WTO) works toward reduction of tariffs and smooth flow of goods and services among the nations.

The WTO also works to discourage retaliatory taxes among nations. When two countries trade their currencies form a relationship for transaction to place. It is true that exchange rates between two currencies are governed by the demand-supply dynamics of the currencies that arise due to trade between two countries. When US imports more Chinese goods and exports less to China, a trade gap also called balance of payments is created causing more demand for Yuan against dollar. When this continues for a long, dollar tends to depreciate against Yuan.

In 2011, the US exported goods worth $103.93 billion to China while imported goods worth 399.36 billion creating trade gap of $295.5 billion. The trade gap was $273 billion and $226.8 billion in the year 2010 and 2009 respectively. The figures reveal that the trade gap is constantly on the rise and the reason for this is that the China produces hosts of goods at much lower the cost compared to the producers in US. The US consumers have benefitted a lot due to these

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