US trade policies on different levels->unilateral, regional, multi-lateral. Who is the US Government conducts our trade policy, and how do those different bodies interact? Why are we constantly torn between trade liberalization and protectionism? What do you make of President Trump’s arguments against trade agreements with other nations as “bad deals” which the United States should get off?
US trade Policies
The only aspect of the economy, which is semi-independent of government control, is money supply; controlled by Central Banks. However, in case of the United States, the Federal Reserve controls money and determines interest rates. Policies, regarding trade and use of the Fiscal instrument, are devised by governments; however, in developed countries, institutions play an important part in devising of these policies. In some cases relevant/related, the institution’s footprint is too apparent on policy.
In the United States, different state institutions/bodies interact to devise a trade policy. Eventually, three types of institutions play a critical role in devising trade policy; these institutions are 1) US Congress, 2) President /Executive Branch and Independent Agencies. For instance, North Atlantic Free Trade Agreement was though signed by President Bill Clinton during his first tenure; however, on this Republican agreement President, Bush Senior, has also invested considerable political and economic capital. Therefore, trade-related policies are devised by the system, rather than a single political party, in the United States.
In the United States, political-economic division is also because of the difference in views of different political parties. For instance, Democrats believe in large government and regulation of the economy, whereas Republicans believe in small government and tax breaks. Similarly, view on trade is also quite different; however, it does not differ drastically. Almost both Democrats and Republicans are in favor trade; however, there are some differences on the modalities. Also, because of trade deficit with Mexico and China, some politicians, like President Trump, fear that trade deficit may cause deindustrialization.
President Trump is of the view that these bad deals are hurting economic interests of the United States as because of these deals American markets have been with inexpensive products. Also, some of the trade partners, such as China is accused of undervaluing its currency to facilitate its exports. I agree with President Trump on this account that trade agreements are not balanced, as because of these trade agreements, most of the industry has shifted its operations to China or Mexico, from the United States, while continuing to sell its products in the US; causing unemployment. However, there are two apparent benefits, which are 1) intense competition (innovation-low prices) and increase in real income (because of low prices).
This seventh forum is for discussion of regional trade agreements, such as NAFTA or EU, and their (often contradictory) effects. Add in the context also how Donald Trump has impacted this question.
Regional Economic Integration
The concept of Regional Economic Integration is based on the principles of Competitive Advantage. As per this Ricardian concept, when trade between countries is based on competitive advantage, trading countries benefit. However, this Ricardian concept is inherently flawed, as it ignored mobility of capital and universality of technology.
When we study a regional trade, we learn that because of economic integration, stability comes to the region and intense economic activity benefits almost all partners. However, in some cases, some of the partners are benefited more ac compared to others. For instance, because of North Atlantic Free Trade Agreement and membership in the World Trade Organization, China has benefited a lot and is now one of the top exporters of the world. The labor-intensive economy of China, its undervalued currency and its system of incentives have allowed it to perform better than most. Also, because of the loopholes, in trade agreements, much of the Industry, of developed countries, has shifted its operations to labor-intensive countries and shipping their manufactured products to developed countries at a low price. The United States is also being affected by this reality yielded by contradictions in trade agreements. Donald Trump had asked a very sensitive question, which does not have a very simple answer; therefore, in the near future, it will remain an issue, but this issue would only be addressed in the long run.
Many developed countries are addressing trade agreements and channelizing political efforts to improve these agreements.
+447462439809