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creativeprojpaper[1] - International Trade Protectionism...

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International Trade Protectionism vs. Trade Liberalization RET 471 Creative Project November 7, 2007 Elizabeth Dalton Colby Eklund Sara Stachowiak Jessica Wisniewski Jessica Zuby
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The American trade deficit, which has been a topic of political and economic concern for many years, is becoming increasingly urgent. The American dollar has fallen 35% within the past six years, causing concern among Americans about the weakening economy (Sluis & Popely). Stephen Roach, from the New York Times, describes the relationship between our trade deficit and the weakening dollar by stating, “As long as the United States fails to address its saving problem, its large balance of payments deficit will persist and the dollar will keep dropping (September 25, 2007)”. Before the economy can improve, Americans need to decide what action to take regarding the deficit. The issue is highly debated and finding the correct action to take becomes difficult because Americans are divided among protectionist ideals and trade liberalization. Protectionists and free trade advocates have valid cases regarding the effects of trade on the economy; therefore, an analysis of each side can provide insight to the best approach the United States should take regarding international trade. Protectionism If the United States continues to ignore its growing trade deficit with China and other countries, the gap will continue to widen. Eventually, an event would occur that would make it difficult for America to sustain a large deficit and continue to maintain the confidence of foreign investors. According to the American Chronicle, “In such a scenario, the sell-off of U.S. dollars and the withdraw of foreign investments from our markets would force us into an inflationary period with the rise of interest rates and import prices” (Fry). The result of a rise in interest rates and import prices will cause an economic slowdown that would only result in a cycle of increased imports. Advocates of trade liberalization often forget the victims of free trade. Every year 2
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Americans lose their jobs because of foreign imports and outsourcing of labor. Although free trade provides countries with cheaper products and more efficient economic systems, it does so at the expense of hardworking American citizens. According to an article by Thomas Palley, “Increased imports have shifted spending away from domestic manufacturers…some firms have closed permanently, while others have grown less than they would have otherwise.” The effects of an increased trade deficit have multiplied through out the economy, with lost manufacturing jobs and reduced investments causing lost incomes that have further weakened job creation. Free trade and the theory of competitive advantage allow for cheaper products, but these
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creativeprojpaper[1] - International Trade Protectionism...

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