Why is Trading with different countries so important and why did the US force japan to trade internationally even if they didn’t want to ?
In: Economics
Different countries are better at making different things.
For example if your country has a lot of oil and the country next to you has a lot of iron. Then you can trade your oil for their iron. In this way you are both better off. You can’t use all of your oil so the excess oil has little value to you and they have to much iron so the extra iron has little value to them.
When trade works correctly both sides of the trade are better off and this is why international trade is good.
Most countries can’t make everything they need. An those who can, will make some things very poorly. So a country must specialize an manufacturing/extracting a few products/commodities and trade the surplus for other products they cant make.
On the Japan point: the US forced them to open up the the world because Americans wanted to use Japan to supply their whaling fleets. It was a selfish decision by the Americans, but one which happened to also benefit Japan: opening up to the world also happened to greatly enrich Japan, and it industrialised in record time.
Each nation can try to make everything that their society needs to function, but for smaller countries that is very difficult.
Russia might be a good example of a country that is largert than the US, has a population 1/4th the size of the US, and is not very diversified.
When Ukraine was part of Russia, it was the “midwest” of Russia with good soil for mass-market farms, and moderate weather. So Russia must now import grain.
Russia has unique assets, like titanium deposits, but it’s major cash export is oil to the global market, and gas to the EU.
They make a lot of vodka, but everyone else does too, so nobody “needs” the Russian vodka.
The two large entities that don’t “need” the global market are China, and also the consortium made from the US/Canada/Mexico.
The EU is a modern group, but they have focused on taking in raw materials and making high-tech products for export.
More market to sell your products to. Facebook for instance desperately wants to enter the 1+ billion people Chinese market
while “Different countries are better at making different things”, with globalism in general and specifically Japan, trade was intentionally spread to create an incentive in order to prevent wars between countries, as it would be increasingly mutually beneficial to maintain peace
I can’t speak specifically to Japan, but for decades, US foreign policy was under the assumption that intertwined global markets would make it less likely that certain countries would violate international norms.
Like, mutual trade relationships would make a country less likely to be hostile towards US interest.
I don’t think it’s as simple as “Japan doesn’t want to trade internationally”. Japan needs to trade internationally because they don’t have much natural resources.
The idea is that if Japan wants other countries to let their people and companies buy Japanese goods, Japan has to do the same in return.
>Why is trading with different countries so important
2 main reasons come to mind:
1. Efficiency. Production of either higher quantity or quality means either better price or quality goods. No single country does everything best, some have better access to raw materials, some are better at cheap manufacturing, some are better at high quality manufacturing, etc.
2. International relations. Countries you have an active positive relation with are more likely to show you support on the world stage. This could be as simple as vocal support or as complex as military cooperation. Much as in the market, greater diversity insulates you from volatility. If you have wide positive international relations and one partner’s stability tanks, you have many others to fall back on. You’re also more likely not to make unpopular international decisions because it reflects poorly on your partners.
Point 2 is relevant to the Japan part of your question. For a more stable world you want a broadly interconnected web that (at least in theory) will push back on you for misbehaviour.
Trading is important due to specialization… some countries have lots of oil, others have none. Some countries have vast land for growing corn and wheat, others do no. Some countries have skills to build microprocessors or LED screens and others do not. Without international trade, people in Switzerland would still be riding horses and there’s be no cell phones in Africa. Very few countries are vast enough and diverse enough to be self sufficient.
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