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Impact of International Trade and Globalization: Benefits and Concerns, Exams of Accounting

The expansion of international trade and the creation of trading blocs since the end of world war ii. It explores the benefits and concerns, including economic, environmental, labor, and political issues. The document also touches upon the recent plunge in oil prices and its impact on the us economy.

What you will learn

  • What are the benefits and concerns associated with free trade agreements?
  • How does the plunge in oil prices affect the U.S. economy?
  • What is the potential impact of a Trump presidency on globalization?

Typology: Exams

2018/2019

Uploaded on 02/01/2019

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Alex Gilliam
Midterm
1. Since the end of World War II there has been significant support, especially from the United
States, to eliminate artificial trade barriers and to support a greater liberalization of international
trade.
The expansion of free trade and the creation of trading blocs cause concern for some people.
As reported by the Congressional Budget Office, the pursuit of free trade could "divert the world
from multilateral negotiations and lead to the development of rival trading blocs." Other concerns
include: the exploitation of developing countries by industrialized countries; environmental
concerns as the production of goods overseas is not consistently regulated from country to
country; and labor concerns over fair wages and the loss of jobs from industrialized countries to
the developing countries, as well as political concerns that may influence the negotiations
between trading partners.
Multilateral and free trade agreements create benefits by increasing imports and exports of
goods. Countries are not the same in their production capabilities. Access to raw materials,
necessary levels of technological development, and education of the workforce all have an
impact on developing a product or service.
Yes, NAFTA is a trading bloc. The expansion of current trade agreements is also taking place—
as with the expansion of NAFTA into the Free Trade Agreement for the Americas (FTAA). The
U.S. market is extremely desirable and lucrative for smaller countries' exports, while also
providing access to a wider variety of goods and services from the U.S. and other potential
trading partners.
2. The recent plunge in oil prices should be — mostly — good for the U.S. economy.
Cheaper fuel brings big savings for consumers and businesses — several hundred billion
dollars since prices crashed from more than $100 a barrel to less than $30. Gasoline, diesel and
heating oil make up about two-thirds of the roughly 20 million barrels of oil consumed in the U.S.
every day. The oil price recovered from below $30 in early 2016 to over $50 by the end of the
year, there was rising confidence in the industry that crude could rise to $60 a barrel or even
higher later this year.
First and foremost, oil companies, their employees and shareholders are winners as oil and
gasoline prices rise. Producing states like Alaska, Louisiana, North Dakota, Oklahoma and
Texas also benefit because employment and tax revenues rise.
Higher prices also mean more activity in the oil fields, which helps local businesses such as
mom-and-pop services companies, construction firms that build housing, and truck dealerships.
And, of course, producing countries benefit, like Nigeria, Russia,Saudi Arabia and Venezuela –
all of which have been pressed financially in recent years. For the Saudis, there is an additional
advantage: Higher oil prices make its state oil company, Saudi Aramco, more valuable for the
initial public offering it has planned for later this year.
There is also a potential benefit for the environment. Higher oil and gasoline prices encourage
consumers to buy smaller vehicles and limit driving.
Consumers of gasoline, diesel fuel and heating oil are losers, and those with lower incomes in
the United States and abroad are affected disproportionately because fuel costs eat up a larger
share of their earnings. Restaurants, hotels and retail outlets can be hurt when consumers have
less to spend. But current oil and gasoline prices are roughly in balance, representing good
economic news over all. They are high enough to help struggling states and countries, but not
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Alex Gilliam Midterm

  1. Since the end of World War II there has been significant support, especially from the United States, to eliminate artificial trade barriers and to support a greater liberalization of international trade. The expansion of free trade and the creation of trading blocs cause concern for some people. As reported by the Congressional Budget Office, the pursuit of free trade could "divert the world from multilateral negotiations and lead to the development of rival trading blocs." Other concerns include: the exploitation of developing countries by industrialized countries; environmental concerns as the production of goods overseas is not consistently regulated from country to country; and labor concerns over fair wages and the loss of jobs from industrialized countries to the developing countries, as well as political concerns that may influence the negotiations between trading partners. Multilateral and free trade agreements create benefits by increasing imports and exports of goods. Countries are not the same in their production capabilities. Access to raw materials, necessary levels of technological development, and education of the workforce all have an impact on developing a product or service. Yes, NAFTA is a trading bloc. The expansion of current trade agreements is also taking place— as with the expansion of NAFTA into the Free Trade Agreement for the Americas (FTAA). The U.S. market is extremely desirable and lucrative for smaller countries' exports, while also providing access to a wider variety of goods and services from the U.S. and other potential trading partners.
  2. The recent plunge in oil prices should be — mostly — good for the U.S. economy. Cheaper fuel brings big savings for consumers and businesses — several hundred billion dollars since prices crashed from more than $100 a barrel to less than $30. Gasoline, diesel and heating oil make up about two-thirds of the roughly 20 million barrels of oil consumed in the U.S. every day. The oil price recovered from below $30 in early 2016 to over $50 by the end of the year, there was rising confidence in the industry that crude could rise to $60 a barrel or even higher later this year. First and foremost, oil companies, their employees and shareholders are winners as oil and gasoline prices rise. Producing states like Alaska, Louisiana, North Dakota, Oklahoma and Texas also benefit because employment and tax revenues rise. Higher prices also mean more activity in the oil fields, which helps local businesses such as mom-and-pop services companies, construction firms that build housing, and truck dealerships. And, of course, producing countries benefit, like Nigeria, Russia,Saudi Arabia and Venezuela – all of which have been pressed financially in recent years. For the Saudis, there is an additional advantage: Higher oil prices make its state oil company, Saudi Aramco, more valuable for the initial public offering it has planned for later this year. There is also a potential benefit for the environment. Higher oil and gasoline prices encourage consumers to buy smaller vehicles and limit driving. Consumers of gasoline, diesel fuel and heating oil are losers, and those with lower incomes in the United States and abroad are affected disproportionately because fuel costs eat up a larger share of their earnings. Restaurants, hotels and retail outlets can be hurt when consumers have less to spend. But current oil and gasoline prices are roughly in balance, representing good economic news over all. They are high enough to help struggling states and countries, but not

so high as to cause inordinate pain to consumers. Oil prices remain half what they were in the middle of 2014. Nevertheless, a price shock – either up or down – could come at any time.

  1. So US President Barack Obama has been spotted indulging with a local wheat beer as part of his breakfast ahead of the G7 summit in Germany. Is this really the behavior we expect from the leader of the world’s most powerful nation? I say it was well cordoned as he, the U.S. president, had just flown across the Atlantic, where Angela Merkel met him and treated him to the Bavarian tradition. Firstly, Obama was adhering to the traveller's rule that you can get away with morning drinking if it’s dressed up as a bit of foreign culture. Second, a local farmer informed reporters from the UK Telegraph that the beer he had drunk was non alcoholic. It is important to understand Germany’s culture and a look at Hofstede’s Cultural Dimensions helps to shed some light on the topic. Germany has an high score of 68 on the masculinity dimension of its culture. It also scored low on the power distance dimension showing that control is disliked. The country also scores highly in individualism with a score of 72. This shows Germans have self actualization and loyalty ingrained within their culture. Another note to take on German culture is the fact that they like to keep business matters formal and that a personal relationship is not necessary when business is being conducted between two parties.
  2. It is worth emphasizing that a resistance to globalization was arguably the foremost policy theme in Trump’s election campaign. In the speech announcing his presidential bid, Trump railed against the United States’ existing trade agreements, threatened to slap taxes on U.S. companies investing overseas, and pledged to build a wall to keep out migrants, whom he accused of being rapists. Trump’s plan for his first 100 days in office reaffirms the centrality of this theme, with a commitment to renegotiate or withdraw from NAFTA, abandon support for the Trans-Pacific Partnership (TPP), label China a currency manipulator, establish tariffs to discourage companies from off-shoring production and jobs, expel more than two million migrants, suspend immigration from terror-prone regions, and build the wall. Let’s assume President-elect Trump succeeds in implementing this agenda. Americans will see its effects on globalization playing out at three levels.The first is the direct effect of the U.S. turning inward. The U.S. is the world’s largest economy, measured in market dollars, and its third most populated. A partial withdrawal from the global economy by the U.S. is therefore likely to register in measures of globalized stocks and flows, simply by virtue of the country’s size.Indeed, America holds the largest share of global trade, foreign capital stocks, and migrants. Yet, relative to its size, America is not as globally integrated as many other countries. It is those areas where the U.S. is most globally intertwined that the direct impact of a Trump presidency on globalization could theoretically be greatest.
  3. It's important to remember that the value of a currency — whether it's the U.S. dollar, euro, or yen — doesn't exist in a vacuum. The dollar moves up or down in relationship to another currency. A strengthening dollar against the euro means that you'll need more euros to buy a dollar's worth of goods and services. This means a strong buck can have a major impact on trade and foreign sales. A strong dollar helps U.S. consumers buy foreign products — from German cars to Chinese shirts — more cheaply, as the cost of imported goods are held down. This can actually help the U.S. economy by keeping inflation at bay. U.S. tourists can also get more bang for their buck. The greenback, for instance, has gained about 13% against the British pound over the past year, according to Bloomberg data, thanks in large part to Britain's decision to leave the European Union. A falling dollar, by contrast, would have the opposite effect it