1. Trade and Global Market Factors

2. Objectives Examine global influences on domestic trade Identify the role of currency markets in prices Analyze the costs/benefits of various restrictions on trade C2 PO1d, C3 PO7, C5 PO6

3. Trade Techniques Since people cannot produce everything they need themselves, people trade Generally, trade leads to specialization, and a higher standard of living for both parties – Trade allows economies of scale (focused production) – Allows efficient use of marginality Countries import and export according to their needs

4. World Trade The World Trade Organization helps countries coordinate global trade – Imports are things a country brings in by trade – Exports are things a country sends out in trade – For example, an American buying a Ferrari (import) employs an Italian autoworker, a Liberian sailor and a US car salesman (Trade benefits producers, transporters, promoters, retailers, customers, government (via taxes)

5. Export Traders Top Export Traders 2009 EU 27 (external) 1.5 Trillion PR China 1.2 Trillion Germany 1.1 Trillion USA 1 Trillion #14 Mexico 230 Billion Lowest Trader 2009 Nauru64,000 Niue201,000 Tuvalu1 million Cook Islands 5 million Palau5.5 mil

7. Import Traders Top Traders 2009 EU 27 external1.67 Trillion USA1.61 Trillion PR China1 Trillion Germany931 Billion France551 Billion #13 Mexico306 Billion Lowest Traders Niue9 million Tuvalu12 million Nauru20 million Kiribati55 million Marshall Is.79 million Most of these imports are funded by foreign aid donations of medicine, tools, ect.

8. Currency Markets World Trade also operates based on differing values of currencies (types of money) Currencies rise or drop in value based on supply and demand – Mexican Pesos vs US Dollars The also by more or less in a given country, called Purchasing Power Parity (PPP) – For example, it is cheaper to build TV’s in Mexico than the US because Workers expect less pay The Mexican peso consistently drops in value vs US Dollar One US Dollar will buy more material in Mexico than in USA

9. GDP-PPP Richest Per Capita Rank Country Intl. $Intl. $ 1 Qatar 83,841Qatar 2 Luxembourg 78,395 3 Norway 52,561LuxembourgNorway 4 Singapore 50,523Singapore 5 Brunei 49,110Brunei 6 United States 46,381 7 Switzerland 43,007United StatesSwitzerland 8 Netherlands 39,938 9 Ireland 39,468NetherlandsIreland 10 Australia 38,911Australia Mexico #60 13,628 Poorest Per Capita 169 Afghanistan 935Afghanistan 170 Mozambique 934Mozambique 171 Madagascar 932Madagascar 172 Malawi 885Malawi 173 Togo 826Togo 174 Sierra Leone 759Sierra Leone 175 Central African Republic 745Central African Republic 176 Niger 719Niger 177 Eritrea 680Eritrea 178 Liberia 424Liberia 179 Burundi 400Burundi 180 Zimbabwe 355Zimbabwe 181 Congo, Democratic Republic of the 332Congo, Democratic Republic of the

10. World GDP-PPP Map (2008)

11. Limiting Trade Politics often interferes with trade Tariffs place a special, high tax on imports – Japan places a high tax on rice imports – China places tariffs on imported cars Embargo is a law against trading some or all goods and services – US embargo vs. Cuba since 1962 – Also embargoes against North Korea, Syria, Iran

12. German embargo Example If the US stopped importing cars from Germany, who would be the most likely to benefit? Suffer? How might Germany react?

13. Taxes and Trade Three kinds of taxes slow trade: – Progressive= tax% increases based on income Example: US Income Tax – Proportional=tax percentage based on flat % Example: Arizona Sales Tax – Regressive=tax amount based on flat $$ fees Example: Drivers license fee

14. QT QT 72-80, 83