Imports and Exports Term Paper

Pages: 8 (2584 words)  ·  Style: MLA  ·  Bibliography Sources: 3  ·  File: .docx  ·  Topic: Economics

International Financial Accounting: Imports and Exports

The objective of this work is to first, relate the history of importing and exporting in the United States and to introduce how the move from the 'gold standard' to the 'floating dollar' has affected importing and exporting for the United States. This work will further examination the devaluation of the dollar against the Euro and as well will examine how the United States will need to learn new ways to deal with emerging nations, such as India and China. Finally, this work will examine how globalization has changed the manner in which the United States conducts business both at home and abroad.Download full Download Microsoft Word File
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TOPIC: Term Paper on Imports and Exports Assignment

The Smoot-Hawley Tariff Act of June 1930 raised the U.S. tariff rates to levels higher than any time in history to this point and had the intention in increasing the protection to domestic farmers against agricultural imports from foreign nations. European producers recovered post WWI due to a massive expansion in the agricultural production sector outside of Europe during the First World War resulting in massive overproduction of agriculture during the decade of the 1920s ultimately resulting in a decline in farm prices. Herbert Hoover, 1928 presidential election candidate promised to assist the farmer through raising tariff levels on agricultural products. This resulted in calls for protection from those in the industrial sectors and then among other economy sectors resulting in an agreement from Congress in raising tariff levels even higher that the rates that the 1922 Fordney-McCumber Act. It is not believed that the Smoot-Hawley Tariff caused the depression but however that it did contribute to the depression. A drastic decline in international trade occurred during this time-period. U.S. important from Europe experienced a decline from a 1929 high of $1,334 million to the 1932 figure of only $309 million. U.S. exports to Europe declined from $2,341 million in 1929 to $784 million in 1932. (U.S. Department of State, nd) the world trade declined approximately 66% during the period from 1929 to 1934. The U.S. Department of State report relates: "The Smoot-Hawley tariff represents the high-water mark of U.S. protectionism in the twentieth century. Thereafter, beginning with the 1934 Reciprocal Trade Agreement Act, American commercial policy generally emphasized trade liberalization over protectionism." (nd) it is related that it is the United States, which has served as the leader toward trade liberalization.

I.U.S. STEADILY GROWING TRADE DEFICIT

The United States has experienced "steadily growing trade deficits for nearly three decades and these deficits accelerated rapidly after NAFTA took effect on January 1, 1994." (Scott and Ratner, 2005) Scott and Ratner (2005) in an Economic Policy Institute document entitled: "NAFTA's Cautionary Tale: Recent History Suggests CAFTA Could Lead to Further U.S. Job Displacement" relates that "The rise in the U.S. trade deficit with Canada and Mexico through 2004 has caused the displacement of production that supported 1,015,291 U.S. jobs since the North American Free Trade Agreement (NAFTA) was signed in 1993." (2005) Displacement is said to be "in every state and major industry in the United States" with approximately 2/3 of lost jobs in manufacturing industries. The Economic Policy Institute report states that NAFTA "is a free trade and investment agreement that provided investors with a unique set of guarantees designed to stimulate foreign direct investment and the movement of factories within the hemisphere, especially from the United States to Canada and Mexico." (Scott and Ratner, 2005) Because there were no provisions of protection relating to labor or environmental standards, "NAFTA tilted the economic playing field in favor or investors and against workers and the environment causing a hemispheric 'race to the bottom' in wages and environmental quality." (Scott and Ratner, 2005) Secondly, NAFTA has failed in delivering the promised benefits "to the poorest citizens of the hemisphere, many of them living in Mexico." (Scott and Ratner, 2005)

II. DEVALUATION of the DOLLAR

This affect on U.S. workers is also noted in the work of Mankiw (2003) in the work entitled: "China's Trade and U.S. Manufacturing Jobs" in which is it stated 'Trade with the world and with China in particular, provides substantial benefits to the U.S. economy." The emergence of China as a major participant in world trade is said to be "fairly recent" and the volume of China's trade with the world was modest throughout the 1980s and early 1990s...with...Chinese imports and exports growing rapidly in the mid-1990s however, having increased even more dramatically since 2000. Over the past five years, the level of imports and exports to and from China has "roughly doubled." (Mankiw, 2002; paraphrased) Because imports into China have experienced an increase faster than outgoing Chinese imports, the Chinese economy has experienced a reduction in its overall trade surplus in recent years. A growth in trade that is imbalanced in nature between the United States and China has resulted from the growth of Chinese imports into the United States. While the U.S. deficit with China has increased the "overall U.S. trade deficit with all countries other than China also rose sharply. Our trade deficit with the world excluding China is almost four times greater than our deficit with China. In a 2007, Economic Policy Institute Report entitled: "The Wal-Mart Effect: Its Chinese Imports Have Displaced Nearly 200,000 U.S. Jobs" it is stated that the entry of China into the World Trade Organization "...was supposed to improve the U.S. trade deficit with China and create good jobs in the United States. But these promises have gone unfulfilled: the total U.S. trade deficit with China reached $235 billion in 2006."(Scott, 2007) the rapidly growing trade surpluses of China has been achieved through the purchase of over $1 trillion in U.S. Treasury bills and other government securities "...in order to artificially and illegally reduce the value of its currency and thereby lower the cost of its exports to the United States and other countries." (Scott, 2007) the work of Humpage entitled: "Do Imports Hinder or Help Economic Growth?" states that: "Since 1992, exports have fallen short of imports by a widening margin. In 1999, the trade deficit amounted to $256 billion. When this happens, we must finance the trade shortfall either by reducing previously acquired claims on foreign output or by offering foreigner claims on our future output. This is accomplished largely through the exchange of various types of financial securities and bank accounts. On balance, this exchange of financial instruments creates an inflow of foreign capital that exactly offsets the trade deficit." (Humpage, 2000)

The work of Gunkzik (2005) entitled: "Soaring "Commodity Prices Point Toward Dollar Devaluation" states that "Although large by itself, the dollar bubble that is driving the value of the dollar lower vs. commodities is dwarfed by the dollar bubble that is parked in the U.S. debt securities." It is reported that the dollar bubble kept long-term interest rates in the U.S. low. As U.S. bond yields have risen, the value of the dollar against both the yen and the Euro has declined, signaling that foreign capital flight from the U.S. may have already begun. The dollar has depreciated by about eight percent against the euro and about five percent against the yen between January 1, and May 22, 2006. " (Gunkzik, 2007)

According to the work of Alhajji (2004) devaluation of the dollar "creates several problems for the world oil industry. The U.S. dollar is the currency of choice in global crude oil trade while consumers use local currencies to buy petroleum products. Oil producing countries receive their oil revenues in U.S. dollars but use other currencies to buy goods and services from different nations." According to Alhajji: "...consumers in countries "...with non-dollar appreciating currencies enjoy cheap oil while people in dollar-pegged countries pay a higher price for the same barrel of oil. Therefore, dollar devaluation affects both world oil supply and demand." (2004) Alhajji states that: "Dollar devaluation increases inflation in the oil producing countries." (2004) Dollar devaluation also increases inflation in the oil producing countries.

III. FACTORS for CONSIDERATION in U.S. TRADE RELATIONS WITH CHINA

Scott (2007) relates: "China has purchased more than $1 trillion in U.S. Treasury bills and other government securities in recent years in order to artificially and illegally hold down the value of its currency, and thereby lower the cost of its exports to the United States and other countries. It has repressed the labor rights and wages of its workers, making its exports artificially cheap, further subsidizing its exports. Wal-Mart has aided China's abuse of labor rights and its violations of internationally recognized norms of fair trade behavior by providing a vast and growing conduit for the distribution of artificially cheap and subsidized Chinese exports to the United States. The U.S. relationship with China needs fundamental change: addressing the exchange rate policies and labor standards issues in the Chinese economy are important national priorities. Wal-Mart's huge reliance on Chinese imports illustrates that many powerful economic actors in the United States benefit from China's unfair trading system. Wal-Mart's gain, however, is not the country's gain, as their imports have… [END OF PREVIEW] . . . READ MORE

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