Sponsored Ads

Search JC Economics Essays

Custom Search

Globalisation and international trade have opened up new opportunities in the world. While a globalised international, world economy brings great benefits to the US economy by opening up new markets for American exports, it has subjected American companies and their workers to unfair overseas competition, which justifies protectionism for these affected industries. [25]

What is globalisation? Globalisation refers to the increasing integration and interdependence of the world’s economies arising from increased trade and greater international mobility of factors like capital, labour and enterprise. There have been a lot of benefits arising from globalisation. Globalisation has benefited the American economy vastly as it has enabled ordinary Americans to enjoy greater consumption possibilities and the engine of growth of the world's most powerful economy. However, it can be argued in a sense that the opening of new markets has also subjected American firms and workers to unfair foreign anti-competitive practices like dumping of cheap, low cost goods, and loss of jobs in the secondary sector of the American economy. 
Comparative advantage is the main theory for international trade. The law of comparative advantage states that a country is able to enjoy higher consumption levels if it was to specialize goods in which it has comparative advantage in, and trade for other goods in which it has a comparative disadvantage in. 

[Insert diagram on production possibilities of USA and Mexico]
Trade enables the USA to consume at any point along its consumption possibilities curve, which is beyond its own PPC. At the same time, Mexico also benefits from international trade. Therefore, both countries are able to consume more goods and services. Hence, it can be seen that when the opportunity costs of producing different goods differ between 2 countries, specialization and trade according to comparative advantage is beneficial to both countries. As such, increased exports to new markets would enable USA to have higher consumption possibilities as compared to a situation of autarky. 

[Insert diagram on AD and AS increasing]
Increased exports also allow full utilization of resources, which increases both AD and AS. Increased exports to new markets allow USA to overcome their domestic demand constraints by giving them access to larger world markets. With additional demand coming from exports, greater utilization of otherwise unemployed resources, output, income and employment. Since AD = C + I + G + (X – M), AD shifts out and real output increases, but price level remains unchanged. Rising export demand further stimulates investments, causing the AS to shift to the right in the long run, resulting in greater output and a lower price level, hence ensuring long run, sustained economic growth in the economy.
However, on the other hand, the globalized economy has also subjected American companies and workers to unfair foreign anti-competitive practices like dumping, which refers to the situation where foreign imports are sold below cost because foreign firms are trying to drive out domestic firms to gain market power. This is a situation that seems somewhat unfair to developed economies.

Also, labour unions in developed economies continuously argue that imports from developing countries are cheap because they artificially keep costs down by subjecting their workers to ‘sweatshop’ like work environments and by paying them depressed wages.
Thus, to curb this problem of unfair overseas competition, many in the USA lobby for countervailing duties (i.e. import tariffs) to be imposed to raise import prices so that they are more in line with prices of locally produced goods. This is known as protectionism, defined as the act of imposing economic policies aimed at restricting trade between countries, designed primarily to protect domestic producers and workers from foreign competition. Methods of protectionism include import tariffs, import quotas, subsidies, voluntary export restraints (VER), foreign exchange restrictions, physical barriers to entry, and technical barriers to entry.

However, on the other hand, protectionism results in greater allocative inefficiency as domestic firms have less drive to improve operating efficiencies and minimize costs. Also, protectionism results in a ‘beggar thy neighbour’ effect where exports, output and income of its trading partners are reduced, which then curbs exports, output and employment of the former. All these indirectly harm American consumers and the American economy in general. 
On top of the costs of protectionism, there are actually benefits to be reaped from the competition from imports. Firstly, competition from foreign imports forces local producers to innovate, cut costs and improve product quality. Local consumers thus enable enjoy lower prices and higher product quality form both imports and domestically produced goods, thus putting the majority of the Americans at an advantage, whereas protectionism only benefits the producers. Secondly, countries may be unable to produce some goods domestically because of the lack of key resources. Importing such goods will thus widen consumer choice. Product variety is also increased when intra-industry trade occurs as consumers get to enjoy not only domestic versions but also imported version of a given type of good, thus benefiting the majority of the Americans again. 
In conclusion, while one must admit that the globalized economy had brought about great benefits to the US economy by opening up new markets for US exports, the overseas competition faced by the American companies and workers may not be unfair. In view of the cheap labour argument, the fact that in developing countries, labour is in abundant and thus these countries will have a comparative advantage in producing labour intensive goods, which is why imports from these countries are cheaper. Therefore, this renders protectionism unjustified as protecting these industries would be to produce a good that it has a comparative disadvantage in. Therefore, this comprises the consumption levels of the country, and gradually greater allocative inefficiency as domestic firms become even more productively inefficient because they have less need to improve operating efficiencies. Hence, protectionism may not be justified in the USA.

JC Economics Essays - H1, H2, H3 Economics essays - tutor's comments: This economics essay on globalisation, international trade, and the US economy is quite interesting, well written, crafted under timed conditions, and seems to address the economics question posed rather well to a large extent. There are some developed economic theories and the appropriate essay techniques, such as signposting, are used. The answer is rather clear and generally well developed, and could quite possibly gain a rather good mark from the examiners. The question is: how can this economics essay be made better? The overall quality of the essay answer could be much higher, but the question is - how can that be achieved under examination conditions, when time is scarce? What should have been done, and what should have been done better? Also, what other economic theories should have been brought in to make the answer more complete? Think about how you could write this essay better, and sharpen it further, and stretch the grade with models, theories, and examples. Perhaps this economics paper could have used more examples and empirical data to show good Economics knowledge and materials. 

Sponsored Ads

Please do NOT Plagiarise or Copy Economics Essays

It is one thing to learn how to write good economics essays from sample or model economics essays, but another thing if you plagiarise or copy. Do not copy economics essays.

First, if you are handing in an assignment online, there are checkers online which track sources (such as turnitin). Please craft assignments yourself. Second, if you are handing in a handwritten essay, if you copy, you will not learn and will thus not benefit, nor earn good grades when the real economics examination rolls round. Third, you can always write better essays given time and improvement. Fourth, copying is illegal under most conditions. Do not copy economics essays.

This is an economics site for you to learn how to write good economics essays by reading a range of useful articles on writing, study essay responses and contributions and sample/ model economics essays from students, teachers, and editors. We hope you can learn useful and relevant writing skills in the field of economics from our economics site. Thank you for reading and cheers!