International trade's impact on U.S. economic performance and competitiveness

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).

Assessment of Global Competitive Factors Influencing American Consumers Firms, and Workers

Our text makes an excellent point with regard to the global competitive factors that are forcing outsourcing of American jobs and the long-run impacts of these economic decisions companies make. That point is that dollars chase knowledge, and if a process or task, from constructing a new PC to writing a new software program, can be more efficiently done in another part of the world,. That cost reduction is passed on to the end consumer. Companies, contrary to popular opinion, do not chase the lowest labor hour when they outsource jobs; they seek knowledge and insight on how to make the process of producing more efficient. This, in the short-term, is painful for American workers, yet in the long-term it forces a focus on the most valuable skill sets the market needs and in many cases the U.S. government is working to help workers gain greater skills. Outsourcing is demonized but it in reality it is the re-shifting of production to find the most knowledgeable workers overall. Additional factors influencing the American consumer and firms is the greater breadth of purchasing and spending options, the greater variety of services, and the need to see culture as a relative aspect of one's country, not an absolute. In other words, the rapid pace of competitive factors is forcing both consumers and firms to not be as ethnocentric and focused only on what they see the world like; it is requiring a reset of expectations and values. Finally, global competition means that any firm is now global, not just dictated by the geographic boundaries of their city or state. Given the rapid advances in Internet technologies, it is common for small businesses to compete for opportunities globally, as customer seek out expertise to solve their problems without regard to international boundaries. The new currency really is knowledge and that is one of the primary catalysts of global competition.