Economic Openness
Does greater economic openness between nations
lead towards economic growth and
convergence? Greater economic openness
between nations does lead towards
economic growth and convergence. All of the
first world countries demonstrate
greater economic openness then third world
countries demonstrate. Although
economic openness may be a solution to gain
economic growth and convergence,
free trade may not be the answer. There are
two different views on free trade;
the conservative view and the liberal
view. In an economic age in which speedy
transactions of imports and exports
are essential, free trade is a necessity for
aiding worldwide economic
development. Even today, the United States continues
to support free trade,
an example being NAFTA (North America Free Trade
Agreement). The problem
is that America's generosity has caused the foreign
industry to take over the
U.S. marketplace. This unfortunately has resulted in
high unemployment rates
because consumers and firms can purchase foreign goods
for a little less than
domestic products. From a conservative viewpoint, the
only remedy to decrease
unemployment and stimulate our own economic growth is to
abandon the free
trade policy and raise tariffs. Free trade has only crippled
the American
work force, increased poverty, and added to our national debt. If
other
nations begin to support free trade, the same situation may be likely
to
occur. Today there are about 10 million unemployed citizens and 35
million
Americans are living in poverty because of free trade. Foreign
industry is
taking advantage of us. Market-opening measures in Asia along
with other
countries across the world have been promoted by exporting
opportunities. In any
clothing store and you'll find that most of the apparel
comes from South Korea,
China, Hong Kong, Sri Lanka, and the Philippines.
It's simply not feasible for
the U.S. apparel industry to compete with the
extremely low production costs in
Third World countries. Also, another
example of an industry hurt by free trade
is the lumber industry. Even though
our country possesses the largest supply of
timber resources, the United
States is the largest importer of wood products in
the world. The reason:
imported wood is less expensive, especially from Canada.
Other examples
of industries that have responded negatively to free trade are
the U.S.
textile petrochemical, fishing, and auto industries. The temptation
for
consumers to buy cheaper foreign goods has only slowed production in
U.S.
industries and has caused unemployment levels to skyrocket. America
needs to
become less generous, more independent, and definitely more
self-sufficient.
Free trade policies need to be discontinued if that it
is to be accomplished.
The liberal viewpoint, however, is somewhat
different. In a world of
ever-increasing global economic interdependence, the
United States should accept
the responsibility of leadership towards the
approaching 21st Century by
promoting free trade. We need to do so in such a
way that builds and matures the
economies of other countries. As technology
continues to advance in areas such
as computers, medicine, and communication,
we need to prioritize the spreading
of these advancements across the world in
hopes for reaching worldwide economic
stability and unity. Free trade is the
best way to allow for the sharing of
valuable resources and technology, which
in turn makes the world a better,
safer, and more united place for all.
Inhibiting free trade is a step backwards
in politics that only made sense
back in the days when communication was slow
and were being fought. Allowing
for the existence of free trade is a step
forward in the right direction
towards the necessary global interdependent ways
of the nearing 21st Century.
Having clarified the different perspectives of the
two main political parties
on the free trade issue, it is hard to determine
which action would be the
most advantageous. Actually, both parties have come to
conclusions on this
issue which would allow for positive and negative results.
The only
problem is deciding which one would have the best overall effects.
Should
we put the immediate focus on our own economy and allow it to prosper,
while
other poorer countries suffer from the tariffs? Or, should we do away
with
all taxes on imports in hope that others will follow our bold lead? Only
the
near future can show which was the best decision. For certain, however,
the
results will be global. 4.) Who has benefited and who has lost from
greater
international trade? The financial crisis that erupted in Asia in
mid-1997 has
led to sharp declines in the currencies,stock markets, and other
asset prices
of a number of Asian countries. It was hard to understand what
these declines
would actually do to the world market. This decline was
expected to halve the
rate of world growth in 1998 from the four percent that
was projected pre-crisis
to an estimated outcome of about 2 percent. The
countries that are included in
the East Asian crisis, known as "Tiger"
economies, are Hong Kong,
Indonesia, South Korea, Malaysia, the
Philippines, Singapore, Taiwan and
Thailand. For these countries to
participate effectively in the exchange of
goods, services, and assets, an
international monetary system is needed to
facilitate economic transactions.
To be effective in facilitating movement in
goods, services, and assets, a
monetary system most importantly requires an
efficient balance of payments
adjustment mechanism so that deficits and
surpluses are not prolonged but are
eliminated with relative ease in a
reasonably short time period. The Asian
crisis of recent falls into this
category of inefficient balance of payments
facilitated by, its overcapacity and
its lack of growth to the West,
particularly depreciation of its currency. By
competitively depreciating its
currencies, Asia is exporting its deflation to
the US. History The past ten
or fifteen years have seen an unprecedented
expansion in the extent to which
the countries of the world are tied together,
both by instant communication
and by international trade, institutions, and
markets, including financial
markets. On the whole, this process of
globalization has been an enormously
positive development. It has opened new
markets, enhanced competition,
spurred innovation, and provided new
opportunities for workers, farmers, and
businesses around the world. For example
more than 40 percent of US exports
today are absorbed by developing countries,
an extraordinary increase over
past export patterns, and the jobs associated
with these exports are
high-paying, good jobs. The increasing productivity of
our trading partners
has helped keep inflation down and improve standards of
living in the United
States. And outside the US, probably hundreds of millions
of people have been
lifted out of poverty around the world by the economic
growth and trade over
the past twenty or thirty years. (This view is definitely
a liberal one
unlike the conservative viewpoint given in question 1). Effects of
the Global
Economy In this new global economy, countries are more tightly linked
than
ever before to each other's fates. A decade ago, a collapse in the
currency
of a small, distant country like Thailand would barely have rated a
mention in
the typical American newspaper. A few years ago, however, that
currency crash
triggered a crisis in other East Asian countries that had
dominated news
coverage in a way that no other foreign financial crisis has
ever done before in
this country. The reason for the change is that we now
have more at stake than
ever before in the economic performance of these
countries. Not only are they
major customers for our products; the rich
countries and developing countries
are also increasingly linked by financial
ties. In 1996, the developed countries
including the US invested more than
250 billion in emerging markets, and this is
compared to roughly 20 billion
ten years earlier. Much of this money was from
banks (especially in Japan and
Europe), although US mutual funds, pension funds,
and individual investors
also participated. But whatever its source, the extent
of this investment
means that economic turmoil in East Asia has a direct
financial impact on the
developed world's capital markets, including our own.
Indeed, a brief
plunge in US stocks was widely attributed to turmoil in the Hong
Kong
stock market that was linked to the crisis set off by Thailand's
currency
crash. What were the causes? Throughout the East Asian crisis many
different
ideas have been proposed to what the cause or causes were. Attempts
to identify
the fundamental causes of a financial crisis always suffer from
the problem of
distinguishing insight from hindsight. Many financial
journalists today have
said the crisis was the inevitable consequence of:
"overvalued exchange
rates, large current account deficits, short-term
capital inflows, opaque
financial systems, or one of several other supposedly
fatal flaws in East Asian
capitalism." It seems fair to say that a few years
back, nobody suspected
that a calamity like what we have seen was possible,
although all of the
characteristics that are now described as the fatal flaws
of the East Asian
economies were reasonably widely understood even then, at
least by experts.