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Why is international trade important to the American and world economy?

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kristenmarieb... | Student, Grade 10 | Valedictorian

Posted August 12, 2013 at 4:57 AM via web

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Why is international trade important to the American and world economy?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted August 12, 2013 at 5:15 AM (Answer #1)

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The first reason why international trade is important to the American economy and to the economy of the world as whole is because neither the United States nor any other country in the world has everything that its people need and want.  This fact alone makes trade necessary.

If every country in the world had resources sufficient to meet its people’s needs and wants, there would be less of a need for trade.  But countries do not have such resources.  Japan, for instance, does not have oil.  The United States does not have diamonds.    The United Kingdom does not have the land or the climate needed to grow all the food its people want.  Because of this, trade is necessary.

In addition, different countries have different comparative advantages.  This makes trade important.  For example, the US could, if it wanted to, trade much less.  For instance, it could require that all of its clothing be made within the country.  The problem is that this would be a waste.  American workers are generally more skilled and more educated and would be wasted on low value-added work like making clothes.  Therefore, it is better for the US to devote its resources to more valuable goods and services and let people in other countries make things like clothes.

Trade is important to the world economy, then, both because it allows us to get things we can’t produce at home and because it allows each country to make what it is best at.  This allows more people to have more goods and services than would otherwise be possible.

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pranav2008 | College Teacher | eNoter

Posted August 13, 2013 at 7:17 AM (Answer #2)

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The international trade surely brings benefits to the American Economy and for the world Economy. Out of the total manufactured goods in US only 24 percent are consumed in the nation and remaining 74 percent are marketed in teh international markets. For example maximum revenues for companies like Fedex, Wal-Mart and Microsoft and Oracle is gained from foriegn or international markets then in the US market. 

Current interest and international marketing can be explained by changing cometitive structures coupled with shifts in demand and characteristics in markets throughout the world. With the increasing globalization of markets, comapnies findthey are unavoidably enmeshed with foriegn customers, competitors and suppliers, even within their own borders. Many of US companies are now foriegn controlled or headed in that direction. Foriegn companies that entered through exporting thier products into the United States realized sufficient market share to justify building and buying manufacturing plants in the United States.

Selected US Companies and their International Sales

Company

Global Revenues

(billions)

Percent Revenue from Outside the US

Wal-Mart

$285.2

19.7

Ford Motor

$172

49.2

General Electric

$152.4

46.8

CitiGroup

$86.2

58.1

Hewlett-Packard

$73.1

60.3

Boeing

$52.5

28.7

Intel

$34.2

76.8

Disney

$39

29

Coca-Cola

$22

73

(Source: Pg. 9, Cateora et.al (2011), International Marketing, 13th edition, McGraw Hill Publishing, US).

The above table consists gloabl revenue details and the percent of revunes of global revuenes of comapanies outside the US. The data belong to the year 2003. Since the world economy is growing it can be anticipated that the revunes and percentages of gloabl revenues of US coampanies have been doubled in the present year i.e 2013.

Colclusion

The international trade is important for US based companies because they are getting lot of revunes from the international markets than in the home country. The world economy also grows because of international trade and it leads to effective relationships between the countires. 

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