University Economics Report: International Trade and Economic Growth

This report delves into the multifaceted realm of international economics, examining the interplay of political, social, and economic factors in shaping global trade dynamics. It explores the political arguments for and against free trade, highlighting how political commitment influences its benefits. The report then analyzes the economic growth of China and India, comparing their GDP and consumption trends with developed economies. It underscores the impact of state investment on their impressive growth. The report further investigates the divergence between theoretical trade policies and their real-world implementation, influenced by political structures. The role of political frameworks, particularly in the USA, in shaping trade relations, including embargoes, is also discussed. The report concludes by emphasizing the fluctuating nature of trade policies in response to evolving political landscapes, referencing the potential implications of recent political trends on global trade.

Running head: INTERNATIONAL ECONOMICS
International Economics
Name of the Student
Name of the University
Author Note

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Table of Contents
Answer 1:.........................................................................................................................................2
Answer 2:.........................................................................................................................................2
Answer 3:.........................................................................................................................................4
References........................................................................................................................................7

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Answer 1:
Along with economic, social and welfare aspects, there are political perspectives also
regarding the pros and cons of free trade in the international framework. There are political
arguments both in favor of as well against free trade. The political arguments which exist in the
international scenario in favor of free trade primarily suggests that it can be beneficial for the
well being of the residents of a country as a whole if there is political commitment on part of the
country to free trade (Mansfield & Milner, 2012). This is because in the absence of free trade,
though imposition of tariff and other trade restrictions and export subsidies can benefit some
sectors apparently, however, in practice, often these steps go in favor of several interest groups.
This in turn works towards economically benefitting the sectors, which are politically influential
by diverting the advantages of these restrictions to those sectors.
There has been mixed responses and outcomes regarding the above-discussed political
argument for free trade. While some countries, especially the developed ones have benefitted
from free trade, which actually increased the overall wellbeing of the people and headed for a
more equitable income distribution, in many low developed and poor countries free trade
actually aggravated the problem of poverty and class based inequality in income (Hillman,
2013).
Answer 2:
In the contemporary global economic scenario, China and India are evidently emerging
as the new economic giants for the near future era, with both the countries showing growth

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trends and economic booms, which are sometimes highly surpassing those of the developed
western world. In 2015, the growth of the per capita GDP of China was 6.4% and that of India
was 6.3%, while in 2016, the growth became 6.2% and 6.6% respectively for the two countries.
These growth rates are evidently few of the highest growth rates ever achieved by any country,
including the western economies. Compared to these countries, the developed economies had
hugely low rates of growth (1.3% in the USA, 0.2 in Japan and 1.6% in the European Union in
2016).
Figure 1: Change in the per capita GDP (2007-2015)
(Source: Huffingtonpost.com, 2017)
As can be seen from the above the GDP grew hugely for the two countries between short
intervals of 2007 to 2015. Apart from GDP, the consumption, especially household consumption

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of both the countries experienced a considerable pace in growth, thereby indicating that both the
countries are experiencing economic boom (Bardhan, 2012).
One of the primary things, which are common in the economic framework of both the
countries, is that both the countries have experienced a tremendous boost in the state investment
during the current period, with the goal of the governments of the countries being achieving
higher economic growth. This phenomenon, being highly subjective to these two countries, has
possibly contributed significantly to the impressive economic growth trends, which both of these
countries are showing (Rodrik, 2014).
Answer 3:
It has been observed in many cases that there remains a striking difference between the
theoretical notions regarding trade, especially free trade and the practical implementations of
such policies in the real global economic scenario. A significant share of these differences can be
attributed to the political construct and the political behavior prevailing in the concerned
countries (Gilpin, 2016).
What type of trade policies a country will adopt, depend on the political pattern
prevailing in the country. In general, a country with democratic framework supports the free
trade policy for the greater welfare of people in the country. However, in the countries with a
more autocratic political framework, there are mostly protectionist patterns regarding trade
agreements and trade policies. It often happens in many such cases that the politically influential
classes incline the trade policies towards their own benefits and forces the implementations of
restrictive and facilitative trade policies targeted to fulfill their vested interests, thereby creating a

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distortion in the benefit from trade across the different societal and economic strata of the
concerned countries.
Trade and the USA
The trade relations of the United States of America, in the international trading scenario,
are highly influenced by the political influences and the political parties, which come in power
with time, in the country. The USA, being the largest and the most influential and powerful
economies in the world, has significant implications in the international trade and commerce.
Their policies, both economic as well as political, have immense implications on the global trade
scenario as well as on the countries, which are actively in trade relations with the country or are
in the list of embargoes of the same (Draper, 2017).
Among the top trading partners of the country are Canada, China, Mexico, Japan,
Germany and the United Kingdom, with the first three enjoying significant shares of the total
valuation of the trade sector of the USA and having strong export and import relations with the
country. The strong bilateral commercial ties between the USA and these countries have
contributed immensely to the growth of the economies of both the countries over the decades. On
the other hand, there are several countries, which lie in the list of trade embargoes of the United
States of America. Among these countries, the primary ones are Burma, Cuba, North Korea and
others. The main reasons behind these sanctions on part of the USA are political or military
unrest, which reflects on their on their deteriorated and non-progressive economic conditions of
the countries (Oatley, 2015).
The embargoes and trade relations of the country, however, largely fluctuates with the
changes in the political conditions prevailing in the country. For instance, with the recent

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political trends prevailing in the country, according to the proposed executive orders of the new
president, there can be a more stringent embargo on the North Korea and a proposed on China.
This, however, if gets implemented will have tremendous implications on the trade relations as
well as on the overall economic and economic growth conditions of both the global economic
giants.

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References
Bardhan, P. (2012). Awakening giants, feet of clay: Assessing the economic rise of China and
India. Princeton University Press.
Draper, T. (2017). American business and public policy: The politics of foreign trade. Routledge.
Gilpin, R. (2016). The political economy of international relations. Princeton University Press.
Hillman, A. L. (2013). The political economy of protection. Taylor & Francis.
Huffingtonpost.com. (2017). Why Are China and India Growing So Fast? State
Investment. HuffPost. Retrieved 23 October 2017, from
https://www.huffingtonpost.com/john_ross-/china-india-growth_b_11655472.html
Mansfield, E. D., & Milner, H. V. (2012). Votes, vetoes, and the political economy of
international trade agreements. Princeton University Press.
Oatley, T. (2015). International political economy. Routledge.
Rodrik, D. (2014). The past, present, and future of economic growth. Challenge, 57(3), 5-39.
http://www.gcf.ch/wp-content/uploads/2013/06/GCF_Rodrik-working-paper-1_-
6.17.131.pdf

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