Alfonso Llanes, Master Degree in International Development
Many industrialized countries around the world have almost entirely stopped producing some goods because of foreign competitive efficiency. This means that firms in other countries are able to produce these same goods faster, more cheaply, and of possibly better quality. This is the case with many types of clothing because clothes can be manufactured at lower cost in developing countries because they have low cost of labor. However, this practice is a source of much controversy and is currently being discussed in international forums.
The facts are that only a handful of goods or services a large country with abundant resources absolutely must import from other countries. Yet no country today, including the United States, can be totally self-sufficient without suffering a high cost. All countries need to—or choose to—import at least some goods and services for the following reasons:
- Goods or services that are either essential to the functioning of the economy or are attractive to consumers but are not available in the domestic market.
- Goods or services that satisfy domestic needs or wants can be produced at a lower cost or more efficiently by other countries, and therefore, can be sold at lower prices.
Multi-lateral trade agreements, trade blocs, customs unions and other forms of international trade cooperation. This in conjunction with lower cost and more efficient methods of transportation; it is now possible to have availability of products in domestic markets from faraway lands and/or marginal markets.
The capitalist system depends for its survival in constant expansion or growth of either domestic or international markets so that, when a producer becomes inefficient or has a higher cost of production it is rapidly replaced in the market with better methods of production. As markets expand on a global scale the supply chain becomes more dependent on supply and demand transportation networks for on time delivery of either accessory parts for assembly in another location or finish goods for wholesale and distribution.
Transnationals are now consolidating with other transnationals that can produce assembly parts more efficiently and at lower cost domestically for foreign assembly and sale of the finish products in all the participating markets. Perhaps an unintended consequence of this trend has been the creation of global vested interest that need to preserve peace in the world in order to maintain and grow their profits as a result of globalization.
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