Please, respond to the attached classmate discussion posts (250 words each). No citation is required. Thank you
Please, respond to the below classmate discussion posts (250 words each). Please, respond to the below two classmate main posts. (Please, the responses need to be a discussion, not an evaluation. You can agree with them and add information regarding the topic discussed. No citation required) Thank you Classmate discussion posts Discussion 1 Michael Osborn Trade Policy; preferences toward business firms or consumers When discussing trade policy, we ought to consider free trade and its basic implications. Free trade indicates that a “government does not attempt to influence through quotas or duties what its citizens can buy from another country or what they can produce and sell to another country” (Hill & Holt, 2019, p. 160). Hill & Hult (2019) make mention the famous economist, Adam Smith, argued that the mechanism of the market, businesses and industry, and not government policy, should dictate what a nation imports and exports. This is furthered by other famous economists, David Ricardo, Eli Heckscher, and Bertil Ohlin. Smith, Heckscher, and Ohlin reasoned that it is often beneficial in international trade for a country to export products that are domestic specialties, and to import goods that are often produced by a lower cost labor force and have lower transportation costs elsewhere (Hill & Hult, 2019, p. 161). Some instruments of trade policy include tariffs, subsidies, import quotas, voluntary restraints, local content requirements, administrative policies, and antidumping duties (Hill & Hult, 2019, p. 194). According to Hill & Hult (2019), Tariffs are taxes imposed on imports and occasionally on exports, subsidies are government payments to a domestic producer, import quotas are a direct restriction on the quantity of some good that may be imported into a country; and antidumping policies aim to deter goods from being sold in a foreign market at below costs of production or below fair market value. Theses trade instruments often are in support of businesses and less for consumers because of increased costs for imports (Osgood, Tingley, Bernauer, Kim, Milner, & Spilker, 2017, p. 135). A key insight into international trade theory is that restrictions on imports are often beneficial to domestic producers, but not domestic consumers (Hill & Hult, 2019, p. 161). Because of the critical role business firms play in international trade, firms can and do strongly influence trade policy and tactics in the political sphere (Spilker, Bernauer, & Umaña, 2018, p. 519). For consumers to benefit in trade policy it is likely advantageous for them to employ themselves in leading industries and in source countries where their desired goods are produced and where sustainable growth is favorable. Even knowledge-based jobs are transferring outside of the U.S. and going to countries such as India where the labor force is less expensive, often a fraction of the cost compared to U.S. equivalents. Hill & Hult (2019) give the example of a California-based start up firm employs 1,000 inside India yet only 20 people in the U.S. Another aspect is with agricultural trade policy, it is well known that domestically and internationally there are many government subsidies and tariffs for agricultural goods, often more than for manufactured goods and services (Jensen & Shin, 2014, p. 308). It is argued that if government subsidies were removed on agricultural products, highly developed countries could return to the developing nations three times more goods than all the foreign aid currently provided from those same highly industrialized nations Hill & Hult, 2019, p. 212). Another factor in considering consumer preference in trade policy is on consumer prices. For those in developing countries there is often a larger share of income spent on consumption of basic goods, thus a decrease in the price of goods suggests a direct and significant welfare increase (Spilker, Bernauer, & Umaña, 2018, p. 519). Overall, business firms tend to favor more on trade policies, it could be advised for firms to use their major influence for more altruistic purposes, thus allowing consumers greater benefit or rewards. That would be shaped by the notion that business firms are geared to make financially sound decisions that lead to greater profit, better resource allocation, reduce labor and material expenses and sustainable growth in the foreseeable future. References Hill, C.W. & Hult, G.T. (2019). International Business: Competing in the Global Marketplace. 12th Ed. New York, NY. McGraw Hill Education. Jensen, N. M., & Shin, M. J. (2014). Globalization and Domestic Trade Policy Preferences: Foreign Frames and Mass Support for Agriculture Subsidies. International Interactions, 40(3), 305–324. https://doi-org.saintleo.idm.oclc.org/10.1080/03050629.2014.899228 Osgood, I., Tingley, D., Bernauer, T., Kim, I. S., Milner, H. V., & Spilker, G. (2017). The Charmed Life of Superstar Exporters: Survey Evidence on Firms and Trade Policy. Journal of Politics, 79(1), 133–152. https://doi-org.saintleo.idm.oclc.org/10.1086/687207 Spilker, G., Bernauer, T., & Umaña, V. (2018). What Kinds of Trade Liberalization Agreements Do People in Developing Countries Want? International Interactions, 44(3), 510–536. https://doi-org.saintleo.idm.oclc.org/10.1080/03050629.2018.1436316 Discussion 2 Unfortunately, the needs of one person or group of people sometimes conflict with another person or group. What benefits me may be detrimental to you and vice versa. How does one decide who should get the benefit? Can a compromise be reached that benefits both parties? People like lawyers, judges, lawmakers, politicians, and business executives face these kinds of decisions every day. International trade policy is a complicated topic that requires answering these kinds of questions. What is better for one country may be worse for the other. What is better for one business may be worse for the other. What is better for businesses and employees may be worse for consumers. Trade policy can be defined as, “Laws related to the exchange of goods or services involved in international trade including taxes, subsidies, and import/export regulations” (What is trade policy?, 2018). There are two general schools of thought on trade policy. One school of thought believes in free trade, which is essentially free from government interference. It relies on the market to regulate trade. The other school of thought on trade policy involves increased government regulation. Governments can impose tariffs or other limits on imports, or enact “punitive taxes on American companies that move production out of the country” (Hill & Hult, 2019, p. 177). Historically, the United States has had a system on the free trade end of the spectrum. With the election of Donald Trump as President, our country has quickly moved towards more government regulation. Trump and other supporters of regulation believe that production and other business activities need to stay in the United States and not be outsourced to other countries. Furthermore, he believes the United States should be “winning” the trade war by exporting more than we import (Hill & Hult, 2019). In order to help U.S. employees keep their jobs, he advocates imposing penalties on companies that “move production out of the country” (Hill & Hult, 2019, p. 177). In this case, American workers benefit at the expense of the consumer. If companies are not allowed to utilize cheaper labor or they are penalized for doing so, costs will rise and that will reflect in higher prices for the consumer. If companies were to continue to move production to other, cheaper countries, costs could be kept down, resulting in less expensive products for the consumer. However, American production workers may lose their jobs. The same effects come from the decision whether or not to impose trade regulations. Limiting or taxing imports helps keep production jobs in the United States, but may raise prices for consumers. Allowing the market to dictate trade may reduce prices for consumers, but may result in loss of American jobs. In deciding whose interests should take precedence when designing trade policy, I would take several things into account. For one, I would look at the degree of harm that would come from my decisions. Which would be worse, a man losing his job or a man having to pay an extra $1 for a toy? In my mind, losing a job is the worse outcome. That would make me lean towards regulation in order to keep jobs in America. However, the many years of research stating that free trade benefits everyone that participates in it, leading to economic growth for everyone, is compelling as well and should be taken into account. I believe the best policy is one that allows for as little regulation as possible, while doing the least harm for the American worker. References Hill, C.W. & Hult, G.T. (2019) International Business. McGraw-Hill Education What is trade policy? definition and meaning. (2018). Retrieved from http://www.businessdictionary.com/definition/trade-policy.html