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

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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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