Liberal economic models are based on Ricardian concept trade, which suggests that trade is benefiting all trading countries, as it is based on the competitive advantage (discarding/contradiction absolute advantage theory. From the study of the contemporary global economic system, we learn that trade is of one the major components of International Business System and regions use trade as an instrument to ensure economic integration. For instance, the size of total merchandise trade, in 2014, was $18,310 billion. Manufacturing goods, of worth $11, 848 billion were traded the same year. It helps us understand the size of the trade. It was presumed that because of trade, by competitive advantage, would benefit all the trading countries; however, because of the mixed results, trade and trade agreements are being criticized, especially after The Great Recession.
Among all the trade agreements North Atlantic Free Trade Agreement, the World Trade Organization Agreement and European Union model of trade are being severely criticized. As per statistics, in the year 2016, was around $63 billion. Similarly, China’s trade surplus is $26.6 billion, which widened from the previous year around 12.2%. There are several advantages and disadvantages of trade (Pettis). For instance, because of intense competition, prices go down, and firms invest in innovation for survival. Lower prices directly impact real income, which increases consumption. However, the drawback is that capital can move quickly and technology has become universal, which causes a flight of capital to labor-intensive economies (deindustrialization), which is why Republican President, Donald J Trump, is severely criticizing these trade agreements. Also, Trump is questioning the very nature and provisions of these trade and trade agreements. It is apparent that trade agreements and trade have improved the global economic system and its structure; however, this is also a fact that these trade agreements can be improved further. These agreements can be made fairer and more dividend yielding, which will have a positive impact on the global economic model. Regional Economic Integration is essential for social, economic and technological evolution. It will further dilute borders and reduce hostilities between nations.
Work Cited
Pettis, Micheal. “Trade Deficit With Mexico Is Good for America.” Bloomberg. Bloomberg LP, 8 February 2017. Web. 22 November 2017. https://www.bloomberg.com/view/articles/2017-02-08/trade-deficit-with-mexico-is-good-for-america.
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