Application of International Trade Concepts Simulation
Identified advantages of International Trade
In the simulation, there are quite a number of advantages that have been identified. To begin with, it is evident that international trade enables different countries involved in it to fully concentrate their resources to the production of goods and provision of services in the areas in which they indeed have comparative advantage. Rather than each country struggling to produce all the services and goods that its citizens need, international trade offer the unique opportunity for each country to specialize in the production of the given goods and services and then import the rest. International trade leads to the reduction of opportunity costs of producing certain goods and services. The country concerned could also chose to import the goods and services from countries that enjoy the lowest opportunity costs.
Limitations of International Trade
From the simulation of the international trade, the fact that international trade would produce an opportunity for different countries to produce goods and services at lower cost posses great threats to other countries. Some countries which participate in the international trade exploit other members in the business through unfair low setting of the prices of the goods and services produced. Goods which are naturally assumed to be produced at lower costs by some countries could end up being sold at unreasonably high costs. Moreover, McKenzie (1994, pp. 12-192), argues that it is very evident that that lower marginal costs do not necessary translate to lower and competitive prices. Lower costs from other international markets also cause a lot of threats to the local business market. Local companies, according to the international trade concept simulation, normally face a lot of threats from unfair competition among diverse countries. Joshi (2009) believes that most local companies are at times forced to shut down due to the extremely lower-priced goods and services which floods to most local markets.
In addition to the above mentioned limitations of international trade, the fact that international trade raises a number of risks can never be ignored. Based on the studied international trade concepts simulation, companies in various companies which engage in international trade faces the risks of buyer insolvency, none acceptance challenge, credit risks, regulatory risks among different countries, and different methodologies and levels of government interventions in the trade.
Effects of International Trade On the U.S. Economy
The economy of the United States of America has in a number of ways been affected by the international trade. Even though the primary benefit of the trade to the country is the overall improvement of the United States of Americas economy, other effects do exist. Based on the argument of Jones (1981, pp. 78-174.), international trade has opened up new markets for the United States of Americas products and services to the international market all over the world. For instance, because of the international trade, the whole world normally uses Microsoft Windows, Intel microprocessors, the Warner Brothers movies, the Boeing 747s, and the Pfizer drugs (Samuelson2001, pp. 349-1214). This is however not a surprising issue due to the superiority of the United States of America in a number of fields which include aviation, technology, biotechnology, and entertainment. This is in direct contrast to what would have been if the United States of America would not have been involved in international trade.
Samuelson (2001, pp. 349-1214), in his analysis of international trade, concurs with the fact that constant fluctuation in the growth of the United States of Americas economy is partly controlled by the influence of the international trade. A boom in one business partners economy normally leads to a boom in the United States of Americas economy. Poor performance of the international markets also results in the subsequent decline in the performance of the United States of Americas economy. Exchange rates and trade control measures which are implemented at the international business forums always need to be adhered to by the U.S thus forcing its business market and the entire economy to be influenced by the same. However, some concepts are very dynamic in the international market. A shift in business partnership at the international market has, in most cases, left the United States of America on the losing end. The U.S has in the recent past been the greatest loser of international trade due to the negative ripple effects from other poor performing markets and the ever shifting of business alliances among countries in the business arena.
Effect of the Fiscal and the Monetary Policies on Exchange Rates
The changes in fiscal and the monetary policies have had serious effects to the exchange rates both within and outside the United States of America. The continued changes in the various fiscal and monetary policies have to a greater extent, from a U.S. point of view, negatively impacted the exchange rates (Jones 1981, pp. 78-174). Changes in the monetary policies such as the lending and borrowing rates, in relation to the performance of the international trade, has continued to lower the exchange rates. Fiscal and monetary policies changes lead to either an appreciation or a decline of the exchange rates. As a result, this normally causes imports and exports hence compelling a country to change its pricing. Changes in the monetary policies also influence the import control which normally include imports and charged quotas on goods. Exchange rates thus shifts based on the level of comparative advantage involved.
Points Emphasized In the Simulation and My Application of the Lessons to My Work Place
The key points from the reading assignment which were emphasized in the simulation include the vital role which a government should play in safeguarding the local market, the importance of international trade, the various dangers of the international trade which are normally ignored and, the fact that even though fiscal and monetary policies are crucial in the international trade, they should not be used to harm other parties in the business association. The four emphasized points basically imply that even though international trade is very fundamental to the growth of countries and the world economy, proper mechanisms should be put in place to safeguard vulnerable countries and to ensure fairness in the world market. Emphasis has been done through depiction of the dangers which the U.S faces within the world market.
To apply the many vital lessons learned from the simulation to my work place, Wells Fargo, I would work towards ensuring that this mortgage company understands the importance of specialization in the business market. I shall also reinforce to the top-level management the importance of broadening our business scope and ensuring that the challenges faced at the Wells Fargo are viewed and solved from an international perspective. From the assessment, the core lesson learnt is that international trade has a number of diverse challenges which ought to be addressed through collaboration of the dynamic stakeholders involved in the trade.
Conclusion
From the analysis of the international trade concepts simulation done, it is very evident that multinational corporations, business outsourcing, globalization through the usage of information technology, transportation, and industrialization all have great effects on the modern international trade practices.