[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

Chapter 19
INTERNATIONAL
TRADE AND TRADE
POLICY
∂
Exchange was one of the core concepts in economics discussed in Chapter 1.
Economists often use the words trade and exchange interchangeably. When
Chip goes to work, he exchanges, or trades, his labor services for income.
When Juanita purchases a new cell phone, she exchanges, or trades, income for the
product she chooses. The subject of international trade—the exchange of goods and
services across national borders—is an extension of the basic principle of exchange.
Individuals in our economy are involved in countless voluntary trades. They “trade”
their labor services (time and skills) to their employer for dollars. They then trade
dollars with a multitude of merchants for goods (such as gasoline and groceries)
and services (such as plumbing and hairstyling). A firm trades the goods it produces
for dollars, and then trades those dollars for labor services.
Why is it that people engage in all these complex sets of economic exchanges
with one another? The answer is that people are better off as a result of trading.
Just as individuals within a country find it advantageous to trade with one another,
so too do countries find trade advantageous. And just as it is impossible for any individual
to be self-sufficient, it is impossible for a country to be self-reliant without
sacrificing its standard of living.
Trade Between Countries
The United States has long been part of an international economic community.
Its participation has grown in recent decades—a process often referred to as
globalization—increasing the interdependence among the United States and its trading
partners. How has this development affected the three major markets in the
U.S. economy?
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