ECON 101 Economics

Write about the trade barriers and firm strategy and international trade agreements such as TPP, suggest a strategy for trade in the US that includes your strategy about trade barriers, foreign direct investment, immigration and exchange rates.

The key highlights of the overall trade strategy are highlighted below.

• Trade barriers should be minimized and rather than focus on local production, the government should encourage the firms to leverage the global supply chain to ensure that each aspect is performed in the location which offers maximum efficiency. Gradually, low value added jobs should be shifted elsewhere with a clause that certain percentage of inputs have to be from US companies. But to enable the same the US companies must set shop abroad and embark on relative factor efficiencies. Protection may be offered for strategic industries and those which currently offer high employment with an endeavor to gradually shift these to efficient locations elsewhere (Dombusch, Fischer& Startz, 2012).
• FDI must be selectively encouraged. The businesses that lead to creation of jobs for high skilled labor needs to be welcomed so that US becomes a hub of high value added services globally while outsourcing the low value added jobs elsewhere.
• Immigration – On one held, it tends to increase the burden on the existing social and physical infrastructure but on the other it provides a resource. Hence, selective immigration needs to be preferred with emphasis on high skilled workers who wish to migrate to US and thus add to the economy’s prowess by ensuring that skilled manpower is available (Lind, 2017).
• Exchange rates – The current trade deficit is very high for the US and in the long run there is a need to bring this down. As a result, the intervention from Federal Reserve is warranted to keep the USD at low levels so as to encourage exports at the cost of imports (McTeer, 2015).

References

Dombusch, R., Fischer, S. & Startz, R.(2012).Macroeconomics (10^thed.). New York: McGraw Hill Publications.Lind, D.(2017, March 1), Trump’s call for “merit-based immigration,” explained, Vox Website, Retrieved on April 20, 2017 from http://www.vox.com/policy-and-politics/2017/3/1/14773298/merit-based-immigration McTeer, B. (2015, January 24),

Is a Strong Dollar a Good Thing or a Bad Thing?, Forbes Website, Retrieved on April 20, 2017 from https://www.forbes.com/sites/bobmcteer/2015/01/24/is-a-strong-dollar-a-good-thing-or-a-bad-thing/#41c3cd49f26a