International trade and regulations

International trade and Regulations

1 . Trade theory could help the US trade and the World Trade Organization find more common ground and greater efficiency in the global market by being able to explain why and how countries as rich as United States and as challenged as third world countries engage in international trade Trade theory could foster harmony and global efficiency as it brings the implications of trade to an understandable light

Deardorff 's Glossary of International Economics (2001 ) defines trade theory as the body of economic thought that seeks to explain

why and how countries engage in international trade and the welfare implication of that trade , encompassing especially the Ricardian Model , the Heckscher-Ohlin Model , and the New Trade Theory . As such , in achieving harmony that may result to greater efficiency in the global economy , it is important to understand the structures and implications of the different trade theories

The United States and the World Trade Organization have different opinions regarding what particular trading structure is best . The WTO ascertains common benefits among countries through its Most Favored Nation clause . On the other hand , United States promote and adopt a system in which it promotes multilateral trading when multilateralism suits its interest and resort to threats of bilateral pressure and sanctions when multilateral rules do not help . It is to be understood however , that different trading structures have different results and implications

Free trade allows countries to specialize in the goods or services in which they have a comparative advantage . As a result , countries trade the goods in which it is best at producing and thus specialization occurs . This however has its negative implication to developing countries that trade with affluent countries like the United States Developing countries rely heavily on export and thus they cannot compete well with wealthier countries . Resorting to protectionism on the other hand may result reciprocated actions to the United States and another clash with the World Trade Organization

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This situation illustrates an important denominator of all trading structures : there are risks for every trading structure adopted . Both the United States and the World Trade Organization should understand that in most trading relationships and transactions , there always emerge a winner and a loser . WTO for this part should acknowledge that not all countries under its clout can benefit from globalization and fair trade . Smaller countries with smaller economies oftentimes emerge as losers because of the difficulty in keeping pace with the advancements and innovations of highly developed countries such as the United States United States should also acknowledge that it will be liable for all its independence and protectionist policies . While it still remains to be one of the leaders and top earners in the world economy , such other giants as China and Japan may prove to be worthy competitors in the game of international trade . As such , the US may receive reciprocated actions for all its protectionist actions

Trade theory helps in the understanding of the different trading...