Current government issues - Essay Example

International trade is very important to the U.S. economy. Just like other countries, we must import goods that our local producers cannot efficiently produce and in turn, some of our products must be exported to other countries. Through these transactions, needs and wants of the citizens are met and at the same time, international trade constitutes part of our Gross Domestic Product (GDP). But every time we import goods from other countries there is the tendency for these goods to compete with the locally produced ones and the more we keep importing goods from them, the more we become dependent on them for their goods. The U.S.

is almost entirely dependent on other countries for bananas, cocoa, coffee, spices, nickel, tin, natural rubber and diamonds (McConnell and Brue, 92). Of course, international trade has to be a two-way street. Many of our industries also rely on markets abroad. Almost all segments of our agricultural sector depend on their exportation of rice, wheat, cotton, and tobacco. Other industries such as the computer, chemical, semiconductors, aircraft, automobile, machine tool and coal sell significant amount of their output in foreign markets.

One of the current issues that the government is facing is related to the country’s balance of payments. The U.S. . This is not a good sign for the government and its economy. This is when trade becomes unfavorable for a nation. Trade deficit is an unfavorable balance of trade because it happens when the amount by a nation’s imports of goods and services exceeds its exports of goods and services (McConnell and Brue, 379). The trade deficit is not a new thing for the U.S. economy. Back in 2002, the U.S. had a sizable trade deficit mainly with China, Japan and members of Organization of Petroleum Exporting Countries (OPEC).

This means that the U.S. imported goods from these countries exceeded exported goods to them. This year, the deficit is being experienced again as the U.S. Commerce Department reported. The department said the April-to-May decrease in exports reflected lower sales of industrial supplies and materials; consumer goods; and foods, feeds and beverages. The rise in imports reflected more industrial supplies and materials; capital goods; and automotive vehicles, parts and engines (Hauser, p.6). In addressing the problem with the trade deficit, Federal Reserve policy makers were divided on whether the economy needed additional stimulus as minutes of the central bank’s June 21-22 meeting showed .

Some members said a further slowdown in growth would signal a need for additional support, while others said the growing risk of inflation would require withdrawing stimulus sooner than currently anticipated (Kowalski, p.5). For sure the stimulus will directly put money in the consumers’ pockets and certainly save millions of jobs just like what it did in rescuing General Motors and Chrysler. Our problem with the trade deficit was also seen and interpreted by diffrent people from