Trade Can Make Everyone Better off

Assignment 1

Lesson 5: Trade Can Make Everyone Better off associated with the concept "How people interact."

In this essay discussion concerning how people interact with one another connected with trade as determinant of making everyone better off, an explanation of trade and how it makes everyone better off will be given, followed by the description of a real life scenario reported on the 23rd of February 2011 on the Japanese Cooperate News Network website which shows how trade relations between Japan and China have helped with Japans economic recovery and finally an overview of the topic will be given.

Trade in simple terms can be described as the activities involved in the buying and selling of goods and services. It is these activities and interactions that enable people to participate in both global and domestic markets. To understand the importance of trade, we can make the assumption that trade did not exist. In this hypothetical world of no trade, people would rely on themselves to produce and grow relatively everything they need. However, no one sole individual or group can be good at producing everything. For this reason and factors like lack of resources or even lack of skills it is quite impossible for people to be self-sufficient. Mankiw (2007, p.8) affirms that trade, "Allows each person to specialize in the activities he or she does best." Trade ultimately gives people the benefit of producing goods their comfortable with making, whilst at the same time providing the possibility of exchanging them for goods they are not good at making. All in all, trade aids people to access goods and services from a greater variety and at lower cost (Baumol & Blindel, 2009). Thus as the principle states trade in deed makes everyone better off.

Japan for the last half a century has excelled at trade so much that it has overshadowed the fact that they have little natural resources. Their innovation and ability to trade are said to be the main reasons for their economic prosperity. Japan and China have enjoyed good trade relations for a long time. As the Japanese Cooperate Network (2011) reports, "Japan-China trade in 2010 exceeded US$300 billion to set new record." At a time when Japan was on the offset of a bad economic year, trade relations intensified which gave Japan much needed economic assistance. Japan's Cooperate News Network (2011) points out that Japan imported vegetables from China. This is due to the fact that Japan has unfavourable weather conditions. Japan also exported construction material and other infrastructure related goods to China. All in all, through trade Japan is better off because it can import food which it is unable to produce, whilst China is better off because it can import construction material which it cannot manufacture. Hence trade makes both of them better off.

To conclude, I