For Eng.Kelvin Only !!! 15 April

Introduction

In the current world, importing and exporting of goods and services is practiced in most countries across the globe. A major example of what America imports are the natural resources such as crude oil, which states such as Pennsylvania and Ohio import. America, on the other hand, engages in manufacturing of machinery, which is exported to countries such as Britain, United Arab Emirates, Japan and even China. These machineries basically are airplanes, which the U.S. is a major manufacturing hub.

In U.S. there is distinct states, which have specialized in the export of finished products. These states for example engage in the refining of petroleum products; which include states such as Texas, New Jersey and Mississippi in which is their main export. There are other minor exports in other states such as Michigan, which exports trucks and corn, which is export from Iowa.

Up to date trade figures, apparently, reflects that Americans have imported more consumer goods in March compared to February whereby more vehicles were imported by 10%. Statistics reveal that cars have been imported with a greater value; this is an implication of the states such as New Jersey, Oregon, California, and Georgia.

The United States comparative and absolute advantage concerning exported and imported goods and services

First of all absolute advantage means the ability of a country to produce a service or a good at a lower cost per unit than the cost at which any other entity produces that good or service.(www.investopedia.com). These individuals or countries use a smaller number of inputs in their production process but engage in more efficient processes of production as compared to entity producing the same product. The united states have this absolute advantage; it can be experienced during the manufacture of airplanes. These airplanes are major exports of the United States which are assembled through efficient process and have a lower cost per unit.

On the other hand, comparative advantage is basically a commercial application meaning the ability of a particular economic actor to manufacture goods and services at a lower opportunity cost as compared to the other economic participants. Since the United States has technical advancement, they have the comparative advantage. With that concept the USA relies a lot on importation of consumer goods, this means that they have to concentrate more on capital goods industries. ( Keuschnigg, M. (1999)

The effect of "buy American" has on imports

Buy American just means promoting American made products rather than imported products. This is a strategic move to grow their own local industries rather than support an alien industry or company. The above mean that there will be an increased demand for American goods and services and a decreased demand for imported goods. Increased demand for American goods will imply that there would be an increase in production of these American-made products and a relatively reduced production in the imports from the alien industries. An illustration below explains the above concept of supply and demand of goods.

In part A the demand of the imported goods goes down, therefore, forcing the price and quantity produced to go down too. In the second scenario part, two the increase in demand for an American-made product goes up, therefore, creating a need for more quantity to be produced and also means that their prices should shoot from P1 to P3. (Allen, C. L., & Humphrey, D. D. (1956)

Is comparative advantage good?

The discussed are essentially a bad idea. According to the disciplines of comparative advantage, if it is costly to produce goods and services on our own, it would be more reasonable rather than import them if they would be cheaper. This move will save on the enormous cost of production and resource since other foreign countries can produce goods at a lower cost per unit.

It would be easier to trade cheap goods for cheaper goods with foreign countries. By doing so, it will help to improve international relations. Apart from that, it is simpler to phase out substandard products and services throughout the globe. ( Keuschnigg, M. (1999)

Conclusion

Imports and exports of goods and services is essential since not a single country can produce all the goods it requires and a great example is a super power country such as America which will rely on other countries to provide it with raw products. When America processes raw products, it can give finished products which can be traded at a good profit. America also engages in exporting goods such as corn which is grown by states such as Iowa. America supplies many countries which machinery such as airplanes which they can manufacture efficiently due to technological advancement.

References

Allen, C. L., & Humphrey, D. D. (1956) American Imports. Southern Economic Journal, 22(4), 503.