What does the United States export more of than anything else on the global market? The answer might surprise you (hint: think food). And which country purchases more U.S. exportsChina or Mexico? In fact, the United States exports twice as much to Mexico as to China in terms of value. Are there similar surprises to be found when we look at Japan, for example, or Brazil? More generally, what factors determine which goods a country produces for trade with other countries? Classical economists Adam Smith and David Ricardo noticed that countries will tend to produce an abundance of goods that they are especially good at producing and trade their surplus for other goods that they are not as skilled at producing. Smith and Ricardo also believed that such trades would always benefit both countries. Yet, as we see, the world has grown increasingly complex over the past two centuries, and, despite obvious advantages to free trade, there are also reasons for caution. This chapter considers some of these issues and discusses ways in which national governments have addressed them.
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