An Overview of the Theology of Commerce Essay Example

the new trade theory and Porter's theory of national competitive advantage suggest that some level of government intervention can be justified to support specific export-oriented industries.

The concept of mercantilism, the first theory of international trade, emerged in England during the mid-16th century. Its central idea emphasized the advantages of a country having a trade surplus, exporting more than importing. To accomplish this surplus, mercantilism advocated for government intervention. However, one flaw in mercantilism was its belief that trade operates as a zero-sum game, where gains for one nation result in losses for another.

Adam Smith and David Ricardo disagreed on the effectiveness of mercantilism, but both believed that trade is beneficial for all parties. However, some current political beliefs aim to boost exports and limit imports through selective trade liberalization. Therefore, it is important to examine if China can be labeled as a neo-mercantilist country due to its impressive economic growth driven mainly by exports.

China has utilized its affordable workforce to convert raw materials into goods that are exported to developed countries, such as the United States. By 2007, China had achieved a remarkable trade surplus of $262 billion and acquired foreign exchange reserves surpassing $1.5 trillion. Some critics contend that China is implementing a neo-mercantilist approach.

Suggested Discussion Questions

Are the claims that China is following a neo-mercantilist policy valid? Why or why not?

Discussion Points: China has been accused of adopting a neo-mercantilist policy, as evidenced by its deliberate efforts to keep its currency value lower than the dollar. Critics argue that this strategy aims to boost exports and limit imports. Many students may point out that China's recent economic growth has primarily been driven by exports,

which supports these claims. In 2007, China had a trade surplus of $262 billion and foreign exchange reserves exceeding $1.5 trillion, with 70 percent held in U.S. dollars.

China is under pressure from various countries, especially the United States, to permit foreign goods into its markets. The purpose of this pressure is to prevent any negative impact on China's impressive economic progress that could occur if it decides to open its markets. Nonetheless, China has adopted an import substitution policy and currently manufactures products like steel and paper that were previously imported. Despite the pressure, China may choose not to open its markets in order to safeguard its current economic growth. However, there is a possibility that China might be forced to make policy changes to appease other nations and avoid retaliatory trade measures.

Under pressure from the United States, China has already allowed its currency to appreciate in relation to the dollar. There is evidence of China pursuing an import substitution policy, which benefits the country. This policy involves replacing imported goods with domestically-produced ones, regardless of efficiency. Some students argue that this is happening in China as they used to import steel, aluminum, and paper but now manufacture these products domestically. Implementing this policy helps prevent outflows of money associated with imports.

China's greater reserves of foreign currencies give it economic power over other nations.