Research Paper on "Global Economy and International Trade"

Research Paper 4 pages (1146 words) Sources: 1

[EXCERPT] . . . .

Global Economy and International Trade

The intent of this analysis is to evaluate the importance of international trade to the U.S. economy, specifically focusing on financial linkages, trade patterns and the use of the Gross Domestic product (GDP) as a measure of economic competitiveness and efficiency. Also analyzed are the several factors that continue to be the catalyst of the rapid growth in international trade since the end of World War II. This analysis concludes with an assessment of the several global competitive forces and factors that are most affecting U.S.-based consumers, firms and workers.

The Critical Importance of International Trade to the Global Economy

The global economic systems of nations have grown increasingly integrated due to the continual increases in the complexity and type of trading agreements and alliances, the increased sophistication and speed of trading systems, and the development of common currencies such as the European euro. All of these factors have made international trade for the U.S. economy critical to its stability and growth. Recent studies indicate that these factors have become so pervasive in their integration of the U.S. economy with other nations' that the cyclical nature of economies are now intertwined and highly dependent on each other (Lee, 361). In essence, the global economic system does not differentiate on national or regional boundaries anymore; it differentiates on the valuation of a given currency driven by the many factors that influence its value. For the U.S. economy, the key performance indicators (KPIs) including Gross Domestic product (GDP), Gross National Product (GNP), per capita income, the unemployment rate, interest rate, and Money Supply measures (M1, M2, and M3) all have an impact on currency valuation in the short-term and economic condition of the U.S. In the long-run. All of these factors also affect international trade balances and payments, define the trade patterns, and dictate the speed or velocity of transactions over the financial linkages of global economic networks. They also influence the balance of trade and whether the U.S. runs at a trade surplus or deficit overall and within specific industries. In conclusion, the U.S. economic conditions greatly affect other nations' economies due to the series of integration factors mentioned in this analysis. This level of integration influences the cyclicality of industries as well, which is a recent development from economic research (Lee, 361).

Factors Driving International Trade Growth since WWII

The series of alliances formed for purposes of stabilizing the global economic system following WWII including the Bretton Woods Agreement, General Agreement on Tariffs and Trade (GATT) and formation of the World Trade Organization (WTO) together became the catalyst of for rapid international trade growth and globalization (Gowa, 488, 489). Taken together these alliances and treaties also were instrumental in defining streamlined processes and systems between nations that once automated through information technologies, accelerated international trade growth even more. While global economic systems continued to become more integrated and synchronized over time at the process and transaction level, the corresponding synchronization of economic cycles was further supported by trade agreements (Lee, 361). In effect the combination of agreements set the foundation for much more efficient accomplishment of free trade in post-WWII global economies

A second series of factors related to the promotion of free trade through the reduction of capital controls, elimination of subsidies that had previously been used to protect and are today used to promote local businesses and the definition of intellectual property rights across western nations… READ MORE

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