The United States' Strategy for Hemispheric Free Trade

Abstract

Nations trade to obtain the rewards of specialization and advancement. Every country is not suited to produce all the goods it demands because each country does not possess the same resources. All nations benefit if they produce their area of expertise and obtain other desired goods through exchange. Exporting nations benefit through the resultant increased demand of their goods thus raising production and increasing the level of employment in the country. Nations that import benefit from an enhanced variety of goods offered, causing an increase in competition which spurs new innovation. lower prices. and p~oduct improvement. When a nation increases its level of imports. prices fall; therefore. consumers have more money available and may refrain from spending all of their income. saving instead. When savings rise resources are freed for investment goods. boosting economic growth and future output. Developing nations. unable to produce capital equipment. must concern themselves with not only transferring resources to more efficient production. as trade develops, but also with how to convert resources into investment goods. (8. p. 268) Because developing countries do not have investment goods they must obtain capital equipment through exchange making trade essential for undeveloped nations' growth. Trade provides developing nations with technological advances that would take them decades to efficiently manufacture. As the economy continues to grow. incomes will rise. causing savings and investments to rise, stimulating even more growth.