What trade policy would increase economic growth?

Question

If economic growth is caused by increasing the per capita, capital investment per worker (Von Mises), what trade policy would encourage capitalists (entrepreneurs) to invest their capital in the United States?

Would free trade not encourage them to invest their capital in foreign nations where labor it cheaper and regulations less strict, and then freely import their products back to the United States? And since the dollars are being "repatriated" though the purchase of debt instruments (MBS and government debt primarily) how could free trade possibly be beneficial?

(note: Please address my question, and do not go off on a tangent about specialization, which has nothing to do with my question and would occur no matter what trade policy is implemented.)

Answer 1

First of all, we're not going to do your homework here. That doesn't help you learn and is cheating! However, I will offer these helpful hints.

There are two ways economic growth can happen. You can either stimulate the import or export side of the equation.

On the import side, you can institute measures that would reduce the price we pay for imported goods. That makes consumers happy because they'll pay lower prices when they shop. And businesses will be able to get items and materials at lower prices. So we'll spend more!

On the export side, you can do things that will urge foreigners to buy more American products. In other words, make our goods cheaper than their own homegrown ones. So it's the exact reverse of the import side.

Now in your situation, you're looking at things from the perspective of you are a foreign investor. So you're outside the US!

Ask yourself this question: What would convince you to put your money into the US financial markets?

In other words, why shouldn't I put my money into my own country's market?

Answer 2

whatever the answerers are willing to contribute you should take that gratefully, instead of telling them what to do exactly... after all this is your homework/assignment and any help by them should be highly obliging for you...

anyway back to your question...

1. decrease in import tarrifs and excise duties, that way capital euipment can be imported in the country used to increase the investment and productive capacity of the country.

2. increasing quotas, this way instaed of importing 10 units it could be increased to 20.

3. abloshing embargoes, these are bans on imports.

4. reducing interest rates, this way entrepreneurs would be encouraged to invest as the cost of borrowing would be low even small scale businesses would set up.

5. concerntrating on exports.

6. introducing new technology that will reduce the cost of production and put the resources to a better use.

7. however if hot money is desired which is cash investment in a country's bank accounts that would require an increase in interest rates.

8. economic growth does not necessarily mean that the living standards of a country are improved.