Increased Global Competition

3 Jul

Increased Global Competition

Free International trade has brought a harsh competition among producers from different countries. Imports have an important effect on different industries from any country. Also many firms from, let’s say, Japan have become very wealthy and well-known on international market like: Nintendo, Sony, Honda, Panasonic, Mitsubishi. However, there are a lot of firms that can’t compete, because their international competitors make better quality products or price of their goods are relatively lower, or even both these qualities may be present.

So is this competition among firms from the entire planet good or bad? Even if domestic producers may get hurt and a lot of people should find new jobs, foreign competition clearly benefits consumers and society in general. Imports break down monopoly of existing firms, and decrease the price of goods and services. Foreign competition forces domestic producers to improve their production quality and productive efficiency. However many domestic firms may compete successfully in the global market system.

What about Firms which aren’t able to compete? The truth is that they should go out of business. Economic losses mean that the scarce resources aren’t used efficiently. Alternative uses of them may be more profitable and improve the output of the whole country.

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One Response to “Increased Global Competition”

  1. Art Powell July 4, 2012 at 2:51 AM #

    There is a lot of international trade but i”m not sure much of it could be described as free as there are so many tariffs and quotas. If any country really wanted free trade that country should unilaterally remove all quotas and tariffs and it would probably become much better off.

    Another argument in favor of free trade is the law of comparative advantage which refers to the ability of a person or a country to produce a particular good or service at a lower marginal and opportunity cost over another. Even if one country is more efficient in the production of all goods (absolute advantage in all goods) than the other, both countries will still gain by trading with each other, as long as they have different relative efficiencies

    (The author of this comment has a web log on economics at https://economics102.wordpress.com/)

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