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Voluntary Trade in Latin America SS6E2 The student will explain how voluntary trade benefits buyers and sellers in the global economy.

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Presentation on theme: "Voluntary Trade in Latin America SS6E2 The student will explain how voluntary trade benefits buyers and sellers in the global economy."— Presentation transcript:

1 Voluntary Trade in Latin America SS6E2 The student will explain how voluntary trade benefits buyers and sellers in the global economy

2 SS6E62 a. Explain how specialization encourages trade between countries Not every country can produce all the goods and services it needs Not every country can produce all the goods and services it needs Because of this, countries specialize in producing those goods and services that they CAN provide most efficiently. Because of this, countries specialize in producing those goods and services that they CAN provide most efficiently. They then look for others who may need those goods and services so they can sell their products to those who need them. They then look for others who may need those goods and services so they can sell their products to those who need them.

3 SS6E2 a. Explain how specialization encourages trade between countries So What Does That Mean? So What Does That Mean? Countries trade with one another to get everything they need for their country. In order to do that, each country produces what they can make the best. Then they trade with one another. Countries trade with one another to get everything they need for their country. In order to do that, each country produces what they can make the best. Then they trade with one another.

4 SS6E2 a. Explain how specialization encourages trade between countries In international trade, no country can be completely self-sufficient. In international trade, no country can be completely self-sufficient. Which means….no country can produce all the goods and services it needs Which means….no country can produce all the goods and services it needs Specialization: the products a country makes best and that are in demand on the world market Specialization: the products a country makes best and that are in demand on the world market This is a way to build a profitable economy and to earn money to buy items that cannot be made locally This is a way to build a profitable economy and to earn money to buy items that cannot be made locally

5 SS6E2 a. Explain how specialization encourages trade between countries Some countries in Latin America are very rich in oil and natural gas Some countries in Latin America are very rich in oil and natural gas HOWEVER…they lack farmland and the ability to produce enough food HOWEVER…they lack farmland and the ability to produce enough food SO…the money earned on the world market with oil is used to purchase food SO…the money earned on the world market with oil is used to purchase food

6 SS6E62 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos. EXAMPLES of SPECIALIZATION: ***Venezuela produces oil and natural gas to sell at great profit on the world market. Then they turn around and use the money made to purchase food AND the technology needed to make their agriculture system more efficient. ***Brazil: has become leader in agricultural technology even though they have a limited supply of land suitable for farming. They can sell this technology to earn money to buy food they are unable to produce. ITS ALL A TRADE OFF…

7 SS6E62 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos. Lets Review The Three Types of Trade Barriers!! 1.Tariff 2.Quota 3.Embargo All three of these are considered to be trade barriers. They slow down or prevent one country from exchanging goods with another.

8 SS6E62 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos. Why have trade barriers? Why have trade barriers? To protect local industries from lower priced goods made in other countries To protect local industries from lower priced goods made in other countries Political problems between countries (trade would be stopped until the political issues are settled) Political problems between countries (trade would be stopped until the political issues are settled)

9 SS6E62 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos. Tariff: a tax placed on goods when they are brought (imported) into one country from another country. Tariff: a tax placed on goods when they are brought (imported) into one country from another country. Purpose: Make the imported good more expensive than a similar item made locally. Purpose: Make the imported good more expensive than a similar item made locally. Called a protective tariff because it PROTECTS local manufacturers from competition coming from cheaper goods made in other countries Called a protective tariff because it PROTECTS local manufacturers from competition coming from cheaper goods made in other countries

10 SS6E62 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos. Quota: sets a specific amount or number of a particular product that can be imported or acquired in a given period Quota: sets a specific amount or number of a particular product that can be imported or acquired in a given period Purpose: a different way of limiting the amount of foreign goods that can come in to a country. Purpose: a different way of limiting the amount of foreign goods that can come in to a country. EX: Israel could decide that only 1500 cars could be brought into the country from Japan in a given year. That would make it more likely that people buying cars would have to buy Israeli made cars, if Japanese cars were not available. EX: Israel could decide that only 1500 cars could be brought into the country from Japan in a given year. That would make it more likely that people buying cars would have to buy Israeli made cars, if Japanese cars were not available.

11 SS6E2 d. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos. Embargo: when one country announces that it will no longer trade with another country in order to isolate a country and cause problems with that countrys economy. Embargo: when one country announces that it will no longer trade with another country in order to isolate a country and cause problems with that countrys economy. Purpose: to punish OR persuade a country Purpose: to punish OR persuade a country Example: Member countries of OPEC decided to stop all sales of oil and gas to the countries supporting Israel in the 1973 Arab-Israeli war. Example: Member countries of OPEC decided to stop all sales of oil and gas to the countries supporting Israel in the 1973 Arab-Israeli war.

12 SS6E2 The student will give examples of how voluntary trade benefits buyers and sellers in Latin America and the Caribbean and Canada. Most countries have their own type of currency. Most countries have their own type of currency. In order to pay for goods as they trade with each other, they had to establish a system of changing one type of currency to another. In order to pay for goods as they trade with each other, they had to establish a system of changing one type of currency to another. Exchange Rate Exchange Rate In order for them to trade with each other, they have to be able to figure out what goods cost in each currency. In order for them to trade with each other, they have to be able to figure out what goods cost in each currency. To sum it all up…This makes it possible to buy and sell goods between nations with different types of money. To sum it all up…This makes it possible to buy and sell goods between nations with different types of money.

13 Mexican Pesos The Euro

14 Australian DollarBrazilian Real 1000 bolivar Venezuela


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