The policy of free trade

A free trade policy

A free trade policy is one in which the government does not impose tariffs on imports or export subsidies in order to discriminate against imports or exports (McConnell, Brue, & Flynn, 2013). This paper explains the logic for free trade. The papers also examine the benefits and drawbacks of free trade, as well as the domestic and international commodities used in the United States.

The significance of free trade

There are times when people urge for free trade (Ricardo, Sraffa, & Dobb, 2004,). The following case study demonstrates the reasoning for trade restrictions. From the theories of international trade, we know that the basis for free trade is comparative advantage (Ricardo, Sraffa, & Dobb, 2004,). According to the theory of comparative advantage by David Ricardo, trade is beneficial to both importers and exporters (Ricardo, Sraffa, & Dobb, 2004,). In this theory, production is based on the ability of one party to produce more efficiently than the other. What this means is that a country specializes on production of goods and service of which it can produce at the lowest cost possible (Ricardo, Sraffa, & Dobb, 2004). The other goods and services which are comparatively expensive to produce are imported (McConnell, Brue, & Flynn, 2013) In this regard, free trade makes it easier for importation and exportation to take place.

Why trade restrictions should be placed

Trade restrictions should be placed if and only if the interaction with the other party is harmful to the internal economic structure of a country (Devereaux, Lawrence, & Watkins, 2006). That is, if opening the boarders for foreign industries can lead to closure of domestic industries then trade restrictions ca be placed for protection purposes.

Trade restrictions can also be place to avoid dumping (Devereaux, Lawrence, & Watkins, 2006). This is a situation foreign countries export their products in other countries selling the at lower price in the other country than what is charged in their mother country (McConnell, Brue, & Flynn, 2013). The aim of dumping is to drive out competitors (Devereaux, Lawrence, & Watkins, 2006). Trade restrictions aid to avoid such instances to take place.

Food stuffs imported in American

The existence of free trade has benefited Americans in a significant way (McConnell, Brue, & Flynn, 2013). For instance, many food stuffs are imported and sold at cheaper and affordable price in America than if they were domestically produced (McConnell, Brue, & Flynn, 2013). A good of these food stuffs is the seafood such as shellfish imported from China, fruits and nuts imported from costa Rica and Mexico, vegetables imported from Mexico, Red meat from Canada among others.

Clothes consumed by Americans

Americans do not only consume imports. They consume domestically produces products such as clothing’s. From my locality, there are a few examples of the domestically produced clothing’s manufactured in USA. They include men’s Khaki pants, Carolina shoes, women dresses and tops from North style manufactures, jewelry, sweaters and women pants also from North style manufactures. Other examples are the red black flannel shirt. These products are manufactured by companies such as Nike, Navy company, Levi-Strauss and company Co. Jeans among others. There are some foreign companies that operate in my locality. They include Airbus (a French company), Toyota motor (Japan), Honda Motor (Japan), Daimler AG (Germany), Nestle company (Switzerland), Unilever (Netherlands), among others.

Friends and relatives working in foreign firms in my locality

I have several friends and relatives working in this Unilever and Nestle company. My mum works at Unilever. My dad works at Nestle and four friends of mine work with Nestle company.

The type of a car I drive

The type of car I drive is GMC Acadia which is an American made car. There is a heated debate on the circumstances that a product such as a car can be referred to as an American product. Some people argue that Japanese-branded cars should not be considered as American cars. However, it is worth noting that these vehicles vary widely in the percentage of components belonging to America and are used to make them. The amount of money spent on the American assembly-line workers, American plant construction, equipment procurement among others bolsters American economy (Schott, 2004). In this regard, a vehicle can be considered as American if and only if the benefits to the US economy exceeds the benefits from the other economies where the vehicle originates from.

Why a car is considered as American

The conclusion is that an American vehicle is the one whose highest percentage of components used to make it are American (“Pierce fastening technology drives vehicle assembly into the fast lane,” 2005). That is, the highest percentage of its components must be attributable to American manufactures.

References

Devereaux, C., Lawrence, R. Z., & Watkins, M. (2006). Case studies in US trade negotiation: Vol. 1. Washington, DC: Institute for International Economics.

Pierce fastening technology drives vehicle assembly into the fast lane. (2005). Assembly Automation, 25(2). doi: 10.1108/aa.2005.03325bab.003

Ricardo, D., Sraffa, P., & Dobb, M. (2004). The works and correspondence of David Ricardo: Volume VI. Indianapolis: Liberty Fund.

Schott, J. J. (2004). Free trade agreements: US strategies and priorities. Washington, DC: Institute for International Economics.

McConnell, C. R., Brue, S. L., & Flynn, S. M. (2013). Microeconomics: Brief edition. New York: McGraw-Hill/Irwin.