Week 1–Part Two Geog 2000
QUESTION 11 (2 PAGES)
What is the current U.S. trade balance? You have just read arguments for and against sustaining a trade deficit—which do you find more persuasive and why? Does your answer change depending on the country you think about
The trade balance refers to the difference between the total values of a country’s exports and imports in a particular year. If the total annual exports go beyond total annual imports, a country is said to have a trade surplus. If the total annual imports exceed the total annual exports, a country is said to have a trade deficit. The United States is the biggest trading country globally. Although the exports of the United States increased between 1995 and 2000, the following period experienced an increase in imports leading to a trade deficit in that decade. By May 2011, the United States recorded a trade deficit of USD 50.2 billion.
I find the first argument against trade deficit as more persuasive. This states that trade deficits are interpreted as a sign of economic weakness of a country. I find this argument convincing because, when a nation seems to have an excessive reliance on products manufactured boy other nations, it shows that the nation has an issue with the economic status. It is true that more imports than exports put domestic production as well as jobs at risk. When a nation has low domestic production and limited jobs, then it definitely has an economic weakness.
On arguments for sustaining a trade deficit, the argument that trade deficit can be a sign of economic strength is more persuasive. Statistics show that imports increase more in times of economic growth. This period is characterized by the ability of consumers as well as firms to spend on both domestic and foreign goods. When consumers have more money to spend, then it is a sign of economic strength. In the 1990s, the U.S recorded higher import levels and trade deficits, yet the economy was booming with a higher employment. I, however, think that this answer is for the case of countries with larges economies, for nations that are still growing, trade deficits would not be a sign of economic strength. It would be a sign of economic weakness for relying largely on foreign products than on domestic production.
There is a relationship between trade deficits and the potential for financial crises. A nation that has a trade deficit indicates that most likely it purchases more than it produces. This means that what will be useful in future investment is being used for present consumption. Therefore such a country will definitely have financial crises in future. For instance, if foreign investors in the United States worry about the trade deficit and decide to sell their assets they have invested in at the same time, then the U.S dollar would definitely lose the value putting the nation at an increased risk of financial crises.
Trade deficits can have a positive economic effect in a country. When a nation has a trade deficit, foreign sellers of products and services accumulate a large amount of money in form of the currencies of that particular country. Such currencies such as dollars and Euros cannot be used in some foreign countries meaning that the investors will have to invest in that particular country. Such investments would be in form of bonds, stocks, companies, and other assets. These investments play a significant role in boosting economic growth. The ability to sustain trade deficits depend on a country’s economic strength. A nation that is economically strong, is able to have control over trade deficits. A weak economy will be unable to control sustain trade deficits putting a nation’s economy at the potential risk of collapsing.
QUESTION 12 (1.5 PAGES)
How has the American economy changed over the past 20 years? Who benefits and who loses from this transition? What role has the U.S. government played in trying to smooth this transition for American workers?
The American economy has changed over the past 20 years especially when it comes to trade. In the 1990s, the U.S exports experienced increase, however, after that imports have increased leading to a substantial trade deficit at the end of the decade. Since 2000, America, the US in particular, has experienced an increased trade deficit associated with more imports exceeding exports. Although the trade deficit reduced in 2011, it is still high indicating that the U.S has more imports than exports.
The foreign producers who export their goods to America have gained more income from massive sales. After selling their goods and services, these foreigners selling their products in America invest in American assets which serve as a source of extra income for them. The American people also benefit from the increased importation which avails a variety of products. However, this transition has contributed to a gradual shrinkage of the number of US employees holding jobs that are well paying. Since a majority of Americans with lower skills tend to work in the manufacturing sector, they have been hit hardest by the increased importation of goods and services.
The U.S government has played a major role in trying to smoothen the transition for American workers by creating more jobs in the higher-tech manufacturing industries as well as in the service sector. This is in response to the declining job opportunities and wages in the manufacturing sector. The U.S government has also tried to ensure that the transition is smooth by trying to manage trade flows through encouraging exports and putting some restrictions on imports.
As an additional effort, the U.S government should ensure that there is no discrimination when it comes to occupation and employment to ensure that the Americans secure job opportunities that would enable them to earn a living. Ensuring that there is a balance between imports and exports will also ensure that the manufacturing jobs in America are not taken away by importing all goods and services. Maintain and support the manufacturing sector will ensure that Americans secure the well-paying jobs.
The U.S federal and state governments are focusing on funding programs that will help employees to acquire new skills necessary in the higher-tech manufacturing and service sector. At the local level, the government should ensure that a majority of citizens are encouraged to take part in these programs that will equip them with skills that will enable them to secure jobs in the era of high technology and service sectors.
Looking at the school trend, the subjects have shifted from focusing on agricultural production to manufacturing, and currently, the focus is on higher-tech manufacturing. Classes that focus on high technology are being offered in almost all schools, something that would not have been possible a decade ago. Today, students are being hired by companies that focus on high technology a trend that is different from before.