Effect of Export and Import on Growth and Welfare of Selected Region

This report discusses the effect of international trading in different sectors of the economy, emphasizing specifically on the exporting and importing sectors of the Eastern Europe, Western Europe and North America. It also traces how international trade affects the overall welfare of the economies in the global scenario.

Running head: INTERNATIONAL ECONOMICS
Effect of export and import on growth and welfare of selected region
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Executive summary:
Second half of the 20th century is acknowledged as the economic integration across the globe
and enhancement in the international trade through establishment of multinational
commercial enterprises. This report was aimed to discuss the effect of international trading in
different sectors of the economy, emphasizing specifically on the exporting and importing
sectors of the Eastern Europe, Western Europe and North America. In addition to this, the
report was intended to trace, how the international trade affects the overall welfare of the
economies in the global scenario, keeping into account both the positive as well as the
negative implications of trading across countries. In the final section, the report tried to
recommend several strategies and policy frameworks which can be undertaken by the
governing authorities of various countries depending upon the hurdles which they face in
their own trading scenario.
From the analysis of the report it has been found that there is high level of integration among
the selected regions through bilateral trade that has enhanced most of the macroeconomic
variables towards positive direction while enhancing the welfare of all the economies under
consideration. In addition to this, the report has found that is highly important to discuss the
trade related issues when it comes to the North America, Eastern Europe and Western Europe
when it comes to the growth of the economies because they have faced their largest chunk of
growth due to the recent bilateral trade participation among them.

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Table of Contents
Introduction:....................................................................................................................................
Dynamics in the global trading scenarios over time:.......................................................................
Concept of Free Trade.....................................................................................................................
Trade scenario of selected regions:..................................................................................................
Export and import impact on the economic growth and welfare of selected regions:....................
Strategy recommendation:...............................................................................................................
Conclusion:....................................................................................................................................
Reference:......................................................................................................................................

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Introduction:
Second half of the 20th century is acknowledged as the economic integration across
the globe and enhancement in the international trade through establishment of multinational
commercial enterprises (O’brien & Williams, 2016). Since that era there has been constant
growth in the intra date between the industries, however, it become reality through the
international trade that started during ancient times. When the first international trade was
initiated, it is still not known very clearly, however at present day international trade is one of
the main issues that has been under rigorous research since decades due to its vastness and
opportunity. Aim of trading is to produce more amounts of goods and services through
optimal allocation of the scare natural resource so that both the trade participating nation can
enjoy mutual benefit (Baumol & Blinder, 2015). International trade plays a crucial role to
enhance the growth of a country as well as it enhances the general welfare of citizens of a
nation too. It has been seen that modern trade theories came into existence through Adam
Smith and according to the Classical economist’s trade is the lifeline of the future generation
towards sustainability (Peet & Hartwick, 2015). And at present scenario there are wide ranges
of trading theories available that describe trade as the key instrument of growth for a unified
global entity of different nations. More the time has spent since Adam Smith, trading theories
has been redefined through spontaneous researches and promoted international trade as the
primary factor of growth (Galbraith, 2015). Under this situation, this report is aimed to
discuss the effect of international trading in different sectors of the economy, emphasizing
specifically on the exporting and importing sectors of the Eastern Europe, Western Europe
and North America. In addition to this, the report is aimed to trace, how the international
trade affects the overall welfare of the economies in the global scenario, keeping into account
both the positive as well as the negative implications of trading across countries. In the final
section, the report tries to recommend several strategies and policy frameworks which can be

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undertaken by the governing authorities of various countries depending upon the hurdles
which they face in their own trading scenario.
Dynamics in the global trading scenarios over time:
As discussed in the above section of the report, trade and commerce scenarios have
experienced considerable changes and immense dynamics over centuries. Much of these can
be attributed to the international phenomena like Globalization, improvement in overseas
transport infrastructure and connectivity and the liberalization policies taken by almost all the
major economies in the global scenario (Fair, Bauch & Anannd, 2017). Over the years, the
countries across the world have started engaging themselves in different multi-lateral trade
activities, with the increased awareness of the comparative advantages of establishing trade
relations with other countries.
One of the primary theoretical framework, which has contributed immensely in
facilitating trade across nations is the Comparative Advantage Theory proposed by David
Ricardo. According to this notion, the welfare of the countries increases immensely if they
produce only those commodities or services in which they have higher comparative
advantages and efficiencies than other countries and exchange the same with those products
in which they do not enjoy comparative advantages in production (Hughes, 2018). This, as
Ricardo suggests, increases the total productivity and efficiency in the global scenario.
Concept of Free Trade
With the emergence of supportive theories in favor of international trade relations and
with the global infrastructure becoming more conducive in the aspects of setting up overseas
relations, the trade-related activities have developed considerably across different parts of the
world. To facilitate such trade relations, with the objective of increasing the economic
welfare of the trading countries, various policies and strategies have been designed as well as
implemented by the governing authorities of the countries. One of such strategies of key

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importance is the strategy of free trade across the different nations in the global scenario.
Among many one of the latest addition in the free trade regime is the free trade zone of
European Union, free trade agreement of North America with Mexico and Canada, known as
the North America Free Trade Agreement (NAFTA) (Lake, 2017). These agreements were
came into existence during 1990s and since then it has impacted the economies of the
respective regions to a large extent. Outstanding outcome of the free trade agreement are as
follows:
Productivity enhanced:
With enhanced trade among the countries, trade agreements enhance the productivity
of the workers. Through rise in the demand of the exportable firms produce more amount of
goods that provide much needed efficiency to the workers and thus it aids to enhance the
wage rate leading better worker benefit under international trading scenario.
Consumer choice expanded:
Export and import between the nations allows more foreign goods and services to
enter into the market that enhance the choice availability to the consumers. For instance it can
be seen that products like maple syrup, different food items, and capital intensive items are
being exported to the selected European regions (moon, 2018). And the North American
economy imports textile products as well as digital services from the European regions that
has elaborated choices to the consumers of different regions.
Inter and intra industry trade growth increased:
Intra and inter industry trade has been enhanced by the international trading and it has
enhanced the growth of all the sectors of economy. Irrespective of the firm’s size export and
import of the goods and services from different regions has always enhanced the growth for
the selected region since decades (Rho & Tomz, 2017).
Job opportunity enlarged:

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With higher number of export and import it is often argued that job creation increase
over time and it enhance the economic growth. With rise in the trade between nations, it can
be seen that, producer face higher demand of the tradable that influence the producer to
produce more while enhancing the employee base.; however, it may not be the case always.
According to the xxx, enhanced trade deteriorates the employment opportunities rather
enhancing it. Due to rise in the trade, there will multinational organizations, who will
eventually overtake the export and import market and reduce the employment in order to
maximize profit (Dhingra et al. 2017). Thus free trade is often argued as dubious growth
stimulus that either can influence the economic growth or can lead it to reduced growth.
Contrary to the growth of various economic factors free trade agreements has caused
some negative impacts on the respective economies too. Considering the case of North
America, it can be seen that there has been substantially high level of unemployment
compared to its G7 counterparts due to NAFTA. In addition to this, it has reduced the
consumer as well as the producer surplus while enhancing the jibe of multinational
organizational on the economic movement of the trade participating countries (Finbow,
2017). On the other hand, when it comes to eastern European countries, then it can be
observed that the rise in export and import through agreements like free trade has caused lack
in job creation. Thus, though the export and import has caused high level of growth to the
selected regions trough enhancing the overall productivity, however it has caused the
economy to fall from microeconomic perspective (Villareal & Fergusson, 2017). In addition
to this it export and import enhancement also leads to the competition for the domestic
products and it germinates protectionism act that allow the government to deter market entry
of foreign producers. This further deteriorates the growth of the economy and much amount
of profit from trade gets wasted as deadweight loss.

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Trade scenario of selected regions:
North America and European states has trade relations for long time and during the
recent years it has been rising at a rampant rate. With rise in the goods and services being
exported and imported by the selected regions it can be seen that the level of integration
among them has also increased over time.
Figure 1: Trade flows among the selected regions
Source: (European Union, Trade in goods with NAFTA, 2017)
From the figure 1, it can be seen that over the year since 2009 post Global Financial
Crisis all the selected regions are highly indulged in trade and the trade balance over the time
has also enhanced. Highest growth in the export and import can be observed during 2015,
when the economic variables were at its best (European Union, Trade in goods with NAFTA,
2017).

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Figure 2: Trade flow among selected regions by type
Source: (European Union, Trade in goods with NAFTA, 2017)
Considering the figure 2 it can be seen that there has been high growth in animal and
vegetable oil trade between the selected regions and overall trade position has become better
during 2015 compared to the situation a year before. Growth in import and export from
European regions to the North America has enhanced over time that showcase the level of
interdependence among the selected regions.
Export and import impact on the economic growth and welfare of selected regions:
North America, Western and Eastern Europe enjoys a matured bilateral economic
relationship, which can be characterized by 4.5 trillion dollar of investment between the two
regions according to the report of 2015 (European Union - Market Overview, 2017). During
2016 North America has exported goods and services of around 503 billion dollar and it has
imported 596 billion dollar of goods and services from the different European regions
(European Union, Trade in goods with NAFTA, 2017). The figure has enhanced during 2017
by 1.7% and during the first quarter of 2018 the export and import value for the North
American region has increased by 2018 (Petri 2018). According to the EU commercial guide
this rise in the export and import of the selected regions has been influenced by the robust
performance of the respective economies during last two quarters of 2016 and the solid start
of the 2017 economic year (Rammeloo, 2017). According to the statistics, rise in the export
and import between the selected region has created 15 million jobs in the north American

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market alone and when it comes to the European market, then it has employed more than 8.7
million workers (United States Unemployment Rate, 2018). Trade between the selected
region has also caused rise in the GDP growth of the European region by 1.8% during 2017
and north American economy has been lifted upward by 1.7% that showcase how important
trade is for the selected region (European Union - Market Overview, 2017). In addition to
this, it can be seen that intra and inter industry trade between the the selected regions has
influenced the domestic demand as well as it has reduced the inflation to 1.7% (Nugent,
2017). According to the same source, higher amount of export from the western and Eastern
Europe has increased the demand of domestic currency in the North American market that
has appreciated the currency, leading to fall in the interest rate too. Due to fall in the interest
rate European region has lowered debt levels and the overall unemployment level is also
deteriorating that highlights good economic growth of the region. Next to this, through export
and import of the goods and services North American has introduced newer services to the
EU border free Schengen area that has allowed all the selected regions to achieve higher
amount of benefit from trade. Additionally not only the physical goods and services are being
exported and imported among the selected region, rather it has enhanced the transatlantic
digital economy too. According to latest survey around 15 terabits of data flow each second
between the selected trade participating countries that has enhanced the economic integration
of them (Molle, 2017). Being the largest net exporter, these economies has enhanced their
revenue from export and import of data by 70% by 2017as compared to the 2015 (Rugman &
Verbeke, 2017). North America imports 54% of its total electronic data from different
economies of the Western Europe and Eastern Europe and contrary to it, these European
regions does import 74% of their electronic data from the North American servers
(Schuknecht, 2017). In monetary terms North America import 184.2 billion dollar of digital
data from the different European region and different European region import 131.6 billion

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dollar of digital data from the North America (Van, Verburg & Verkerk, 2017). The
economic cooperation between the selected regions has been on the rise since decades and
according to the estimation bilateral trade is ought to rise by 1.9% in coming years.
Strategy recommendation:
Considering the above analysis it can be seen that all the selected trade participating
regions are highly indulged in bilateral trade among each other since decades. Through export
and import of goods and services, these economies has maintained good macroeconomic
variables for their respective economies; however there is always ample scope to develop.
Considering the present trade agreement like Transatlantic Trade and Investment Partnership
(TTIP) between North America and European states there are various scope to develop the
intra trade further. Recommendation in order to gauge the possible loopholes and to enhance
the trade among the selected regions are as follows:
According to the recent survey there are more than 71% population in north America
who believes government need to take necessary steps in order to enhance the protect
their home industries, which are being highly impaired due to rising international
competition from European states (Jančić, 2017).
North American government need to stimuli their domestic demand because over the
year it has become saturated, which has reduced the productivity of the economy.
Lack of consumer protection law under present trade laws are liberal and does not
meets with the consumer desire. Thus government need to plan their trade
protectionism laws in order to ensure higher trust on the trade, which indirectly will
influence the domestic demand.
Though the trade between selected regions is on the rise, jibe of the multinational
companies has enhanced sufficiently that has caused loss in consumer and worker

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surplus. Thus government under the latest trade pact between the selected regions
need to take constructive steps in order to ensure surplus for both the parties.
Conclusion:
This report was aimed to discuss the economic impact and welfare growth of through
export and import among the selected region. From the analysis of the report it has been
found that there is high level of integration among the selected regions through bilateral trade
that has enhanced most of the macroeconomic variables towards positive direction while
enhancing the welfare of all the economies under consideration. In addition to this, the report
has found that is highly important to discuss the trade related issues when it comes to the
North America, Eastern Europe and Western Europe when it comes to the growth of the
economies because they have faced their largest chunk of growth due to the recent bilateral
trade participation among them. Moving forward the report has portrayed the general
economic framework of trade and it has found that international trade is one of the dubious
economic growth stimulus because it can enhance the economic growth and welfare and on
the other hand reduce the same if not utilized properly. The report next to this has considered
the recent TTIP pact among the selected trade participating regions and has portrayed various
recommendations that can gauge the loopholes of the pact and make it more beneficial for
both the nations. Thus to conclude it can be stated that the selected region poses high
influence to the bilateral trade and without this they would not have been there where they are
now.

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