Question

106 A Citizen's Guide to Economics EXERCISES Write your answers in the space provided. 1. Why do companies outsource certain functions to other companies? 2. What are the benefits of free international trade? 3. What are the costs of trade restrictions? 4. Does our current trade deficit pose a problem for the United States? Why or why not? C.ha nnete to society exceed the benefits to

Answer 1

1.Outsourcing is an organization's practice of outsourcing major functions to skilled and reliable service providers who ultimately are trusted business partners. Outsourcing requires, in some situations, shifting workers from the business to the outsourcing corporation. There are many explanations why some business tasks may be outsourced by a corporation. Some of the most common reasons include: reducing and managing operating costs (the largest driver) Enhancing business emphasis Access to world-class assets Freeing internal resources for other purposes Maximizing the use of external resources Managing risks with a partner company

2. Free trade enhances opportunity for Americans and all participating nations ' people by encouraging consumers to purchase more, better-quality products at lower costs. It drives economic growth, increased efficiency, increased innovation, and greater fairness that goes hand in hand with a system based on rules. As overall trade exports and imports increase, these benefits increase. Free trade means increased production. At least half of US imports are not consumer goods; according to economists from the Bureau of Economic Analysis, they are inputs for US-based manufacturers. Freeing trade reduces the cost of import-input, thereby reducing the cost of manufacturing firms and promoting economic growth.

Free trade promotes creativity and productivity. Free trade interacts with other business mechanisms over time to shift workers and capital to more productive uses, allowing more competitive businesses to prosper. The results are higher wages, investment in things like infrastructure, and a more dynamic economy that keeps creating new jobs and opportunities.
Competitiveness is motivated by free trade. Free trade requires American companies and workers to adapt to the worldwide marketplace's shifting demands. But to remain competitive, these changes are crucial, because competitiveness is what drives long-term growth.

3. Export subsidizing could cost governments much more money than programs aimed at moving uncompetitive production to more productive or profitable sectors at international level. In the American automotive industry, one instance of this can be seen. Another critique of import restrictions and export subsidies is that the covered companies and sectors are prevented from making the necessary changes to counter foreign competition. Having received government support in the form of import restrictions or export subsidies, covered companies may have less incentive to improve their performance and management. Last but not least, trade restrictions are a major obstacle to development efforts. Thanks to high tariffs and restrictions, developing countries are unable to export their goods abroad. In addition, cheaper, subsidized goods from abroad are flooding their domestic markets.

4. When a nation imports more than it exports, a trade deficit occurs. For example, the United States exported $2,500 trillion in goods and services in 2018 while importing $3,121 trillion, leaving a $621 billion trade deficit. Services, such as tourism, intellectual property and finance, account for approximately one-third of exports, while major export products include aircraft, medical equipment, refined petroleum and agricultural commodities. While, imports are dominated by capital goods such as computers and telecommunications equipment; consumer goods such as clothes, electronic equipment and cars; and crude oil. China is by far the main bilateral trade deficit. In 2018, the U.S. ran a trade surplus of $419 billion with China. The European Union, followed by Mexico at $81.5 billion, Japan at $67.6 billion, and Malaysia at $26.5 billion, is the next biggest contributor to the goods deficit, at $151 billion. The deficit threatens national security by relying on foreign debt and foreign investment to finance it. In renegotiating the North American Free Trade Agreement (NAFTA), the Trump administration made reducing the deficit with Mexico a priority. It also pointed out that it will step vigorously in the fight against activities considered unjust by the WTO. Another such activity is dumping, where countries are subsidizing goods like steel and selling them for less than their market value internationally.