Trade Can Make Everyone Better Off

You have probably heard on the news that the Japanese are our competitors in the world economy. In some ways, this is true because American and Japanese firms produce many of the same goods. Ford and toyota compete for the same customers in the market for automobiles. Apple and Sony compete for the same customers in the market for digital music players.

Yet it is easy to be misled when thinking about competition among countries. Trade between the United States and Japan is not like a sports contest in which one side wins and the other side loses. In fact, the opposite is true. Trade between two countries can make each country better off.

To see why, consider how trade affects your family. When a member of your family looks for a job, he or she competes against members of other families who are looking for job. Families also compete against one another when they go shopping because each family wants to buy the best goods at the lowest prices. So in a sense, each family in the economy is competing with all the other families.

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