International trade and comparative advantage

Organizational Leadership

International trade has had both a positive and a negative effect on the U.S. economy. The ability to get cheaply manufactured goods from countries like China has allowed the U.S. To maintain its standard of living. U.S. has been a firm believer in free trade. Free Trade is theoretically defined as: "open trade between countries with no government regulation or restraint." By this definition, trade between nations is not restricted by quotas, licenses, taxes, safety concerns, inspections, or limits of any kind. The high trade between different countries and the U.S. has tripled the variety of international goods that are available to the U.S. public. (Broda and Weinstein, 2005) the U.S. consumer feels that the ability to obtain a wide selection of goods is significant to their standard of living.

The number of countries and the range of products that the U.S. imports has allowed the country to maintain trading relationships with many different regions of the world. In addition to getting a wide variety of products, the U.S. citizen also gets it at the most competitive rates. This competition to provide low cost, superior products to this market has encouraged many companies to constantly improve their operations in an effort to become more competitive. Manufacturers and service providers can no longer rest on the laurels of the past when they compete in the modern market. The variety of goods offered in the U.S. As a result of international trade has also allowed the consumers to have a higher degree of substitution of products and uses.

Having an open and capitalistic-based market structure for the U.S. has allowed companies that operate in the region sufficient flexibility to obtain the best economic advantages for the country. Due to the ability of American companies to seek out and utilize the best competitive resources, American companies have been able to set up operations in collaboration with foreign companies in different countries to manufacture and produce goods that can be sold in the local markets as well as imported to the U.S. For example, anticipating the need for consumer goods in China, many U.S. manufacturers are setting up operations in China with the aim of supplying the local population with this consumer good. Buyers want to obtain goods at cheaper prices. Sellers want to get the maximum price for their goods. The market however, eventually will determine the price and the value that is conferred on any product. This ensures that the resource- optimization and resource-utilization in any organization is important.

Comparative advantage on international trade is seen as an advantage due to the fact that goods and services can be produced in regions that support and have the necessary raw materials and the labor for the task. Numerous studies by economists and researchers have indicated that nations relatively open to free trade grow faster and achieve higher incomes levels for their citizens than those nations that follow a relatively closed trade policy. There are however, significant drawbacks. Many countries, as a result of the open markets, come under intense pressure as a result of the talent, technology, capital, and institutions brought into a regional or small market by large-scale multi-national enterprises from developed nations. Trade between nations, which are not at the same level of expertise can introduce an imbalance in the economic field of the less developed nations.