How Trade Affect the Economy

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Destiney Clay Mr. Gillispie Economics 8th block September 14, 2010 How the International trade impacts the US economy? Foreign trade has become more important to our economy in recent years. Only five percent of the world consumers live in the U. S. Therefore, if the U. S. only trade domestically, it will only have small share of potential customers in the world. International trade help diversify U. S. domestic economy. It helps the overall economy of the U. S. grow stronger. International trading also help small companies grow and become more competitive in the world market. The study shows that international trade help the small business’s growth. Over two-thirds of exporters firms have over twenty employees. The majority of small and medium-sized international trading firms  only sell to one foreign market. If they can easily boost up their sales by increasing the number of countries they sell to. They are important because, the small and medium sized international trading firms made up almost ninety seven percent of U. S. exporters. But they only represent thirty percent of export value of U. S. products. They have strong potential in expanding. The statistics show that the United State exports has increased from 224 billion to $1. 1 trillion in the past twenty five years. Small and medium size international trading firms create new jobs in the United State. An important policy tool that can assist Congress in assessing the value and the impact of trade agreements is represented by sophisticated models of the economy that are capable of simulating changes in economic conditions. These models are particularly helpful in estimating the effects of trade, in such sectors as agriculture and manufacturing where the barriers to trade are identifiable and subject to some quantifiable estimation. Barriers to trade in services, however, are proving to be more difficult to identify and, therefore, to quantify in an economic model. In addition, the models are highly sensitive to the assumptions that are used to establish the parameters of the model and they are hampered by a serious lack of comprehensive data in the services sector. Nevertheless, the models do provide insight into the magnitude of the economic effects that may occur across economic sectors as a result of trade liberalization. These insights are especially helpful in identifying sectors expected to experience the greatest adjustment costs and, therefore, where opposition to trade agreements is likely to occur. This report examines the major features of economic models being used to estimate the effects of trade agreements. It assesses the strengths and weaknesses of the models as an aid in helping Congress evaluate the economic impact of trade agreements on the U. S. economy. In addition, this report identifies and assesses some of the assumptions used in the economic models and how these assumptions affect the data generated by the models. Finally, this report evaluates the implications for Congress of various options it may consider as it assesses trade agreements. This report will be updated as events warrant. Although, the trade had become more important to our economy we’ve had a deficit, in which imports exceed exports, but in recent quarters a decline in that deficit has contributed to G. D. P. growth. On September 11, 2001 our economy was greatly affected due to our terrorist attack, a lot of our industries were slowed down such as the airlines,hotels, travel agencies, upscale restaurants, the entertainment sector, and suppliers of goods and services to those industries and people were afraid of recession. Auto company profits have also been hurt The attacks themselves caused approximately $40 billion in insurance losses, making it one of the largest insured events ever. In New York City, there were approximately 430,000 lost job for months and $2. billion in lost wages, which occurred in the three months following the 9/11 attacks. The economic effects were mainly focused on the city’s export economy sectors. Before the attack on the trade center our economic environment was not under this condition compared to the other economies such as Canada and Switzerland on a scare 1 to 10 the scores ate 1 or 2, while Israel and Sri Lanka receive scores of 9 or 10. The wealth effects of the terrorist attacks, which have clearly been negative in the short run, may also have ecular negative effects. In recent years, many workers nearing retirement have viewed rapid increases in their often stock portfolios as a substitute for more traditional savings. If such trends continue if and as terrorism events recur periodically their impact on our standards of living will also be negative. As the economic impacts of the World Trade Center and Pentagon attacks unfold, it has become increasingly clear that very few industries and significant companies have been unaffected by this event. Business economists have a strong comparative advantage in analyzing how such events are likely to affect their employers. They should therefore be taking the initiative in developing plans for dealing with both the short and long term impacts of such events on their corporations. Since then our trade economy has increased. Now the trade deficit negatively impacts the US economy. Since we have a large trade deficit it means we are not exporting any where near as much as we are importing, and thus contributing more to other countries economies than we are our own. Americans agree that foreign trade is good for the U. S. economy, but they do not believe free trade should come at the expense of domestic industries. While 67% of Americans think the overall economic effect of foreign trade is good, almost as many think trade restrictions are necessary to protect American industries. Americans are progressively less enthusiastic the lower their incomes, education levels, and pinions of the economic condition of the country. Nearly seven in ten Americans believe that, on balance, trade with other countries is good for the U. S. economy. Roughly the same percentage of Americans felt this way ten years ago. Some groups are more positive about the benefits of foreign trade on the national economy than others. Americans are more likely to see trade as beneficial as their incomes and education levels increase. Republicans are more likely to describe foreign trade as good for the economy than are Democrats and Independents, and while large majority of whites say that trade is good for the economy, only 44% of blacks agree.

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