Are We Headed for a Boom or Bust in IB? Essay Example

 Are we headed for a boom or bust in IB?

A country’s economic growth is directly related to its exports. If a country’s export increases at a faster rate than its imports, it will definitely develop. An increase in export means increase in foreign exchange, which in turn increase the purchasing capacity of a country in the international markets. On the other hand, the export instability adversely affects the process of economic development.

It is imperative that fluctuation in export earning introduces uncertainty that adversely affects the level and efficiency of investments that hinders economic growth. Instability in export affects the developing countries more. The export fluctuation causes balance of payment complexity and thus raises their borrowing costs (Jun and Lisa 1). In addition, export instability stimulates inflation.

U.S has the largest GDP, followed by China. China is number one in exports merchandise followed by the U.S. However, this figure might be misleading in that when you relate GDP and to export, neither U.S nor China is a strong trading nation. U.S per capital income was ranked 10^th in 2013 while China’s was 89^th. Expressing export as a share of GDP gives a clear picture of the role of trade in national economies. One important factor to note is; most countries that depend on exports are in Europe, U.S, and China dependence in export is relatively low. In 2013, the U.S export equaled 14% of its GDP, China export to GDP ratio is at 26% while that one of Japan stood at 15%. Comparing those rate the to Germany 51%, Switzerland 52%, Belgium 86%, Taiwan 73% and South Korean 54%.

In the past three decades, the United States’ export of goods and services has grown tremendously. According to (The importance of exports 1), growth of U.S export and its relation to its economic growth depend on the composition of U.S exports, the trade partners, and valuation of the export over time. U.S exports both good services to other countries with goods accounting for majority of the country’s exports.

The bulk of U.S export has been destined for developed countries however, export share to developing countries has recently increased. In this context, U.S has four large exports destination that is, Europe, Asia, Canada, and Mexico. The increase in U.S share of export to any region is usually associated to increase in the GDP of that region. For instance, the decline to U.S export to Canada was associated to slow in growth of its GDP. Similarly, the growth of U.S export to developing county is associated to the recent growth in GDP witnessed in such countries. This fact point out positive correlation of the U.S exports growth with the foreign economic growth. This means that as a region GDP increase it tend to purchase more good and service from united state (Jun and Lisa 1). It is important to note that in the past, the U.S export growth was largely influenced by the growth trend in its large export destination such as Canada and Europe. However, it is important for the country to position itself strategically to benefit from the rapid growth of the emerging economies such as China, India, and Brazil.

Some of the obstacles to the U.S export growth include the federal budget deficit, diverting of U.S dollar in foreign spending to purchase America debt instead of goods and services, failure by foreign government to comply fully with trade agreements and the impending foreign trade agreement. In addition, some technical barriers such as high rate of obtaining health certificates and patent right in European market affect the ability of U.S small business to export (Vaclav 1). To increase the US’ export there is need to cut the federal spending to reduce the federal budget deficit and enforce the U.S trade laws and agreement to promote free trade and fair trade. Other efforts that can increase the U.S export include, promoting and expanding intellectual property system abroad, promotion of infrastructural development, and advocating for international telecommunication that will open international market. Provision of incentive can also boost U.S export. It will assist the U.S business to boost their productivity and efficiency continually thus giving them a competitive edge in the international markets.

Works Cited

‘The importance of exports in an economy. DailyOjo. 20^th march 2015. <http://dailyojo.com/articles/the-importance-of-exports-in-an-economy.html>

Jun N and Lisa ‘Taylor Economic Growth in Foreign Regions and U.S. Export Growth’ federal reserve bank of kansas city 2013. 20^th march 2015 http://www.kc.frb.org/publicat/econrev/pdf/13q2Nie-Taylor.pdf

Vaclav S ‘Who leads the world in tread?’economics The American’ October 29, 2014 , march 20^th2015<https://www.aei.org/publication/really-leads-world-trade/>