The bilateral agreement has enabled China and South Korea and increases in trade and an increase in the trade deficit for the United States; what are the advantages and disadvantages for the United States to continue these relationships with the bilateral agreements?
Trade supports the economies of many nations. Many people in every corner of the world consume services and products from foreign countries. New bilateral trade agreements have emerged in order to support different economies. Such agreements do away with trade barriers. Such agreements also result in new opportunities and markets. This practice increases the level of specialization and competition. This development also boosts economic growth. Different economists have analyzed the benefits and disadvantages of different bilateral agreements. To begin with, bilateral agreements have made it easier for countries such as South Korea and China to increase their exports. These nations have also increased their trade volumes.
According to statistics, the United States recorded “a trade deficit of 46 billion USD in 2014” (Nanto & Donnelly, 2011, p. 17). The country’s exports have decreased significantly over the past ten years. In 2014, the country’s imports increased significantly to over 241 billion USD. It is appropriate to consider the advantages and disadvantages associated with these bilateral trade agreements. To begin with, many Americans are able to acquire a wide variety of services and goods. The increased level of competition will support the needs of many customers (Nanto & Donnelly, 2011). The United States has also been getting a foreign exchange from its exports. This foreign exchange is used to purchase different materials and products from every trading partner. The country will also create more jobs and opportunities. International trade activities can support the economies of many countries. More companies will emerge in order to increase efficiency and productivity.
However, the United States will continue to encounter several challenges. For instance, the country might eventually become economically unstable due to dependence on global producers. The decision to import different materials might result in unemployment. New investors might find it impossible to invest in the country. The removal of different barriers can eventually result in unemployment. Many international markets will emerge thus “creating an unleveled playing ground” (Kliesen & Taton, 2013, p. 32). Bilateral trade results in different environmental challenges such as pollution. This scenario occurs when many companies fail to use effective laws and policies. This situation also explains why “the US might record more trade deficits in the future” (Kliesen & Taton, 2013, p. 32).
What are the advantages/implications for trade within the trading group for the United States?
The United States trades with different countries and blocs. Many countries and territories across the globe have established unique treaties. Such countries have benefited a lot from international trade. Such treaties have produced different trade agreements. The United States is also “negotiating a Free Trade Agreement with different nations such as Chile, Mexico, Canada, Malaysia, Peru, New Zealand, Brunei Darussalam, Australia, Vietnam, and Singapore” (Kliesen & Taton, 2013, p. 41). The US has established new FTAs with countries such as Colombia, Korea, China, Panama, Morocco, and Israel.
The US has a GDP of 17 trillion USD. South Korea’s GDP is 1.3 trillion USD (Daniels, Radebaugh, & Sullivan, 2015). The GDP of China is 9 trillion USD. The GDP of Mexico is 1.3 trillion USD. The United States also trades with different associations such as the World Trade Organization (WTO), the North American Free Trade Agreement (NAFTA), and the Asia-Pacific Economic Cooperation (APEC).
In 2013, the US launched new negotiations with the European Union. These two parties want to create the Transatlantic Trade and Investment Partnership (TTIP). The completion of this negotiation process will have numerous implications for the United States (Daniels et al., 2015). Cameroon and Ivory Coast have also applied for FTAs with the EU. Negotiations are also underway for Russia, MERCOSUR, Japan, ASEAN nations, and India.
The above countries should become full members of different FTAs. Such FTAs have the potential to support the economies of different nations. Free Trade Agreements are relevant because they reduce trade barriers. The approach will ensure more countries such as Japan, India, and Cameroon export their products to the European Union. The EU will also acquire new imports from these trade partners. Such countries will also acquire cheaper products and services (Daniels et al., 2015). The GDP of these countries will also increase significantly. For instance, the US has over 20 FTA partners. These agreements have increased the country’s imports and exports. These countries will “enjoy trade surpluses” (Kliesen & Taton, 2013, p. 36).
Statistics show clearly that NAFTA has improved the level of trade in the region. Many American firms have maximized their opportunities. The U.S. has also become globally competitive. This practice has increased the level of sales (Kliesen & Taton, 2013). The above nations should become full members of such FTAs in order to achieve their potentials. Such FTAs have the potential to support the needs of many firms and citizens. It is agreeable that international trade can increase the level of trade deficit. It also supports many entrepreneurs, marketers, and importers. Without these Free Trade Agreements (FTAs), many nations and firms will not be competitive in the global market. For instance, NAFTA has made many firms competitive. Nations should become members of different FTAs in order to increase their trade volumes (Nanto & Donnelly, 2011). This approach will eventually result in economic growth.
Daniels, J., Radebaugh, L., & Sullivan, D. (2015). International Business: Environments Operations. Upper Saddle River, NJ: Pearson Education.
Kliesen, K., & Taton, J. (2013). U.S. Manufacturing and the Importance of International Trade: It’s Not What You Think. Federal Reserve Bank of St. Louis Review, 1(1), 27-50.
Nanto, D., & Donnelly, M. (2011). U.S. International Trade: Trends and Forecasts. Congressional Research Service, 1(1), 1-38.