blog Four

In the 21^st century, The U.S has gone from the world’s number one creditor to being the number one debtor. During the Bush administration, the US deficit has been the highest its economic history, however the U.S government does not seem to worry about balancing the deficit anytime soon. Since the Nixon administration decided to abandon the Gold standard, the world has been following the economic path US has lay for the rest of the world. why isn’t U.S worried about the high deficit? There is a key difference between debt and equity investments. U.S. debt held by foreigners requires us to make scheduled payments of interest and principal, but foreign equity investments do not. Unlike the debt of most developing countries, U.S. debt is denom­inated in this country’s own currency, which US issues themselves. The U.S. financial position, perhaps the most worrisome of all, US economy does not hold the threat of triggering the kind of financial crisis we have seen recently in East Asia or Latin America.

In my personal opinion, the America can easily decrease its deficit through change of policy on import by establish tariff, this could and manipulate the value of US dollar. However the U.S economy is very unique in comparison to other economies in the world. For example, if the U.S. government increases tariffs, Americans will buy fewer imports, so reducing the current account deficit. But economic theory indicates that this reduction will occur only if one of the other factors changes to bring about a decrease in the capital account surplus. If none of these other factors changes, the reduced imports from the tariff increase will cause a decline in the demand for foreign currency for example Yen, which in turn will raise the value of the U.S. dollar. The increase in the value of the dollar will make U.S. exports more expensive and imports cheaper, offsetting the effect of the tariff increase. The result is that the tariff increase brings no change in the current account balance.

U.S government has it’s the upper hand in world economy, since all currencies are measure to the U.S dollar. U.S deficit also represents more currency flow in the world economy, this deficit has created financial opportunity for its trade partnering countries, however the current U.S economic recession is the perfect result of whether this debt phenomena is good or bad for Americans.

blog three

The U.S Democratic presidential candidate Barack Obama is once again putting on a flight on fair trade as he continues to promote “ CHANGE” in his country. As US prosper from economic growth in the last two decade, Asian countries has quietly knocking on the door of globalization. Today, as US economy suffers from unforeseen crisis caused by financial markets, makes people wonder what will be next?

Barack Obama maybe the most interesting US presidential candidate this century, caring the hope and dreams of people from the past and present, he is in favor of changing American’s lives instead of change America. his stands on free trade might differ from Senator McCain, however Obama is adjusting free trade to “fair trade “.

“It is absolutely critical that we engaged in trade, but it has to be viewed not just through the lens of Wall Street, but also Main Street” Senator Obama 2008.

In the past, as long as US economy is prospering, the citizens benefit from its growth, however the recent credit crisis has proven the danger economic cycle. Instead of planning America’s next economic revolution, Sen. Obama is in favor of looking after its own people instead of America’s competitiveness in globalization. For example Sen. Obama’s proposal of improving transition assistance; to help all workers adapt to a rapidly changing economy, Obama would update the existing system of Trade Adjustment Assistance by extending it to service industries, creating flexible education accounts to help workers retrain, and providing retraining assistance for workers in sectors of the economy vulnerable to dislocation before they lose their jobs. Regarding fair trade, Obama will pressure the WTO to enforce trade agreement and stop countries from continuing unfair government subsidies to foreign exporters and non-tariff barriers on U.S. exports. One of the most essential trade issue will be the NAFTA, Sen. Obama believes NAFTA was oversold to the American people, immigration from Mexico is one of evidence of why NAFTA needs revision, Obama will work with the leaders of Canada and Mexico to fix NAFTA so that it works for American workers.

Blog Two

European Union and NAFTA have similar purpose which is to ensure future trades agreements promoting progress in living standards, environment and human right. European Union has definitely done better job in outlining the qualification for countries to meet certain standards socially and economically. Unlike the EU, in January 1994, NAFTA added Mexico to the free trade zone without outline plans benefiting living standards or environment and human right, however it stress only on the economic benefits between US, Canada and Mexico.

In free trade, there are always going to be winner and losers, however European Union has structured to allow countries to benefit from trading with each other. As countries benefit individually, the goal is to enrich European Union as a whole by spreading the continent wealth. On the other hand, NAFTA has turns the countries working against each other. Here is an example, by NAFTA’s failure to enforece core labour laws in Maxico, Maxican wages have yet to rise, which create a competitive environment for the US since it creates too much competition for the US workers. This example shows although free trade agreement suppose to stimulate the economy through trade activities between the countries however in the case of NAFTA, lack of enforcing quality standard in Mexico has created problems instead of sucess for the USA.