CHAPTER 8
International Trade IT
IS MUCH EASIER TO GET GOODS THAN IT IS TO GET
MONEY.
— J E R E M Y B E N T H A M , 1 78 9
found it necessary to trade with their neighbors at some point. Most have found it to be of great advantage. Initially such trade was in raw materials that were bartered, but over time finished goods and then services became part of the exchange process. Eventually, money, in the form of coined precious metals that had originally been traded for their intrinsic value as decoration, became the medium of exchange. Now goods and services were valued separately from a one-to-one bartering, and transactions became more complex. Precious metal currencies were eventually superseded by government guaranteed paper money, along with other forms of payment like checks, credit cards and electronic transfers. Besides enabling multi-party transactions, the development of money had the problematic effect of creating a scoreboard by which each nation could easily measure its imports against its exports.
ALL NATIONS HAVE
Trading with the Enemy As discussed in Chapter 2, many nations during the mercantile phase of their development chose to see gold as a commodity to be taken in exchange for goods exported to rivals, both economic and political. By maintaining this gold surplus, nations like England hoped to “beggar their neighbors” and thus make themselves the only nation financially capable of building and paying a large military. The amount of gold was, of course, limited, and keeping neighbors in a constant state of deficit proved problematic. Nowadays few nations maintain large gold reserves, and currency is given market value based on a national economy’s overall strength, not just imports and exports. Without gold, however, trade surpluses and trade deficits still occur, but for many different reasons. The political and economic ramifications of deficits and surpluses also remains important.
The Japanese–American Trade Conflict A country like Japan, with few natural resources, must import the majority of its raw materials. Japan, however, has an extraordinary manufacturing capacity for making finished goods. These value-added products are then exported to an eagerly awaiting world. Japan’s domestic market imports few finished goods from overseas, resulting in an overall surplus of trade of billions of dollars per year. The Japanese, in monetary terms, sell more than they buy when it comes to manufactured goods. Even though they are very wealthy on a per capita basis compared to the rest of the world, Japanese consumers save much of their money.
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