Final answer:
Global trade increases competition and fosters innovation by facilitating the transfer of technology and pitting domestic firms against international competitors, as exemplified by the automotive industry, where the entry of foreign manufacturers into the U.S. market has improved the quality of American cars. Option a.) It facilitates the transfer of technology, allowing former local assemblers to become creators is the correct answer.
Step-by-step explanation:
Global trade has an important effect on developing new competitors because it facilitates the transfer of technology, allowing former local assemblers to become creators. This influence of global trade has expanded due to the forces of globalization and advances in communications and information technology, which have intensified the level of competition many firms encounter by bringing in competitors from other regions and countries.
International trade contributes to income distribution effects and is disruptive to companies and industries, necessitating government intervention to mitigate market disruptions. It is highlighted that protecting domestic industries from such international competition could be counterproductive, as trade often brings greater economic benefits and innovation.
An example of the interplay between global trade and competition can be found in the automotive industry. The introduction of international brands like Toyota, Honda, and BMW to the U.S. market has compelled American carmakers to significantly improve their offerings due to the competitive pressure. This illustrates how global trade fosters competition and drives innovation, yielding better outcomes for consumers and the economy overall.