International trade's impact on U.S. employment and balance of trade

Team Project

International Trade

In evaluating how the ramifications of international trade on jobs in the U.S., and in also assessing its impact on this nations' balance of trade and standard of living, the article Globalization in Retreat, written by former U.S. Deputy Treasury Security Robert Altman illustrates just how quickly and significantly global trade has changed in just three years. Each of these issues, the ramifications of international trade on jobs and employment in the U.S., how international trade is affecting the U.S. balance of trade, and how international trade is significantly redefining the global standard of living are analyzed. Underscoring all of these factors is the realization the free-market capitalism as it has been known for the last 30 years is not the panacea to global economic recession as it has been in the past (Altman, 2009). The severity and depth of the global economic recession is re-ordering international trade, and with it, the economic and social structure of nations to such an extent that free market capitalism vs. government control is being debated in the U.S., France, the United Kingdom and Germany (Altman, 2009).

Ramifications of International Trade on Jobs in the United States

The net effect of the global recession has been to significantly reduce global trade over the last three economic quarters, resulting in significant unemployment throughout the manufacturing centers of the U.S. The downturn has shown, as Altman (2009) illustrates in his article, how tightly interconnected the U.S. economy is with the UK, France and Germany. It has also shown that despite the most manufacturing centric regions of the U.S. having unemployment rates that hover in the 20 -- 25% range, the global rate of growth in international trade has not become significantly negative during this downturn (Altman, 2009). Instead China has been able to withstand the economic downturn by concentrating on re-indexing its currencies including the Yuan and also by investing a significantly higher percentage of its GDP back into manufacturing and retailing, two industries supporting the Chinese economy right now. All of these factors are having a deflationary effect on American employment as a result of the fundamental re-ordering of international trade.

How International Trade Affects the Standard of Living

The contraction in consumer spending as a result of the decrease in international trade has had an immediate impact on the standard of living in the U.S. Altman (2009) notes that international trade has been one of the primary determinants in driving down discretionary spending and driving up savings rates of American consumers (Altman, 2009) which has had a positive effect on stabilizing the economy and holding down inflation. Yet the international trade's affects of magnifying and making more acute the subprime mortgage crisis has acted as an accelerator of foreclosures and drastic re-ordering of the financial services industry across all nations, hitting the American companies particularly hard. Just as the Balance of Trade has had significant effects on the political stabilities of nations, international trade has a direct impact on the standard of living across all nations. The American economy is driven primary by consumer spending, and when international trade shifts rapidly between nations, it has an immediate effect on consumption. The fact that Americans are reluctant to purchase durable goods today is evidence of how quickly international trade can influence the standard of living in this country and many others.