The five government polices of the U.S that affect trade are; International Organic Trade Policy which is concerned with facilitating the exchange of organic products with other countries; United Stations Agricultural Trade which is concerned with looking oversees in order to boost domestic income through improving market access; Antidumping and Countervailing Duty Laws which is designed to protect the country from material injury as a result of dumping; The General Agreement on Tariffs and Trade (GATT) Act of 1947 which is designed to reduce trade barriers such as quotas and tariffs; and the Generalized System of Preferences (GSP) which is concerned with promoting trade of some specific products by providing preferential duty-free entry for the products. The major aim of these policies is to protect the U.S while it is trading with other countries (Cooper, 2014).
The three factors of production are capital, labor, and natural resources. The mobility of these factors of production is understood as the movement of the factors of production from one country to another for example when a worker moves to another country. The mobility of labor is good because it helps countries obtain expertise they did not have. The mobility of capital is good because it will attract foreign investment and at the same time it will increase investment opportunities in foreign countries. Capital mobility can be bad because it could lead to sudden capital outflow during the periods of uncertainty. Finally, the mobility of natural resources is beneficial because not all countries are the same in terms of resource availability. The mobility of natural resources with help countries to obtain resources necessary for their survival.
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Difference between absolute advantage and comparative advantage trade theories
Absolute advantage theory is understood as the ability of a nation to produce goods in a more efficient manner than other countries. In simple terms, a country will be considered to have an absolute advantage if its products are produced with lower marginal cost, that is, cheaper materials, fewer materials, with fewer workers, in less time, and with cheaper workers. The country that has an absolute advantage will be able to sell its products at lower prices than other countries (Levchenko & Zhang, 2016). For example, we can assume the United States and Japan both manufacture aircraft. In a particular month, the U.S produced 45 planes while Japan produced 14 planes of comparable quality. In this case, it takes the U.S 0.67 days to manufacture a plane while it takes Japan 2.14 days. Therefore, the U.S has an absolute advantage over Japan because of its ability to produce quality goods at a quicker rate than Japan.
On the other hand, comparative advantage is understood as the ability of a nation to produce products and services at a lower opportunity and marginal cost over another. Two countries can still benefit by trading with each other even if one of them is more efficient than the other one in terms of production of goods. Countries can also import goods and services if the opportunity cost associated with importing is much lower than the cost associated with local production. For example, assume that China and Thailand are both producing cellphones, but China also produces computers. In a day China can produce 30 computers and 45 cellphones. The opportunity cost of producing a cellphone is 0.67 of a computer for China. If the opportunity cost associated with the production of cellphones by Thailand is lower than 0.67, then it will be considered to be having a comparative advantage.
TPP free trade agreement
The Trans-Pacific Partnership (TPP) is understood as a free trade agreement between Brunei, Chile, Japan, Malaysia, Vietnam, Australia, New Zealand, Peru, Singapore, Mexico, Canada, and the United States. The major aim of the free trade agreement is to promote trade between the countries by reducing barriers to trade such as tariffs on goods. The U.S Senate should ratify the agreement because the agreement will lead to increased incomes. This is because the free trade will reduce the costs of goods, thus leading to increased income for workers. In addition, the job creation will also be increased as TPP will create more job opportunities. Finally, the passage of TPP will lead to more capital benefits and this is because the trade benefits and tariffs will reduce the cost of labor, thus benefiting industries and capital (Lim & Low, 2012). In Japan, the agricultural market acts as an example of how tariff incentives can be powerful.
Regional trading has many effects on businesses. First, it helps companies to reduce their operational cost through economies of scale. This is because demand will increase leading to increased production. Second, there is the relocation of operations. Regional trading provides businesses with an opportunity to move to areas where costs are low without incurring duties and tariffs. Third, regional trading helps business to increase their sales and this is because they will expand into new markets (Cooper, 2014). Small businesses will grow and become big business as they will be open to new markets.
References
Cooper, W. H. (2014). Free trade agreements: Impact on US trade and implications for US trade policy . Current Politics and Economics of the United States, Canada and Mexico, 16(3) , 425.
Levchenko, A. A., & Zhang, J. (2016). The evolution of comparative advantage: Measurement and welfare implications . Journal of Monetary Economics, 78 , 96-111.
Lim, C. L., & Low, P. (2012). The trans-pacific partnership: a quest for a twenty-first century trade agreement. New York: Cambridge University Press.
