Presentation on theme: "Trade Mini Peer Presentations"— Presentation transcript:
1 Trade Mini Peer Presentations Group 1: Definition & Why is trade necessary? Trade balance, surplus & deficitGroup 2: Problems faced by LEDC countries & trade imbalanceGroup 3: Trade blocs, tariffs, quotasGroup 4: Free trade & Arguments for and againstActivity: Each group will present on their section – it is also really important to take notesthroughout these presentations - this is all really crucial information or the semester examCome up with 5 questions to make sure everyone has understood your presentation – you will askthese at the end
2 Presentation points to remember: Engage the audienceTry not to use notesEveryone in the group must participateThink of an interactive and imaginative way to get the information across
3 The exchange of goods and services for money Trade defined:The exchange of goods and services for moneyDiscuss with a partner, and write a few sentences explaining why trade is necessary
4 Why trade is necessary ?No country is self sufficient in the full range of raw materials that are needed by its inhabitants. To try to achieve this, countries must trade with each otherTrade is the flow of commodities from producers to consumers, and it is important in the development of a country.Countries that trade with other countries are said to be interdependent
5 Trade Surplus & Deficit If the value of a countries exports is more than its imports it has a trade surplus and if the value of the imports is more than the exports then it is a deficitTrade balance is the difference in value between a countries imports and exportsActivity: Work out the trade balance for countries A, B, C & D, and state whether they have a trade surplus or deficit1) Country A exports $560 billion worth of goods to its trading partners each year. In return it imports $290 billion worth of goods each year.Calculate the trade balance of this country. __________________________What sort of balance of trade will this country have?____________________2) Country B exports $200 billion worth of goods to its trading partners each year. In return it imports $290 billion worth of goods each year.3) Country C exports $720 billion worth of goods to its trading partners each year. In return it imports $400 billion worth of goods each year.
6 Trade deficits & surpluses Trade deficits – does it damage a countries economy?The successful American business man and investor Warren Buffett was quoted in the Associated Press (January 20, 2006) as saying"The U.S trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to political turmoil... Right now, the rest of the world owns $3 trillion more of us than we own of them."If a country has a deficit – then it is paying other countries a lot of money- then those countries can use that money to buy shares in companies from the country they have traded with
7 Trading relationships should be balanced…… According to the economist, John Maynard Keynes - "If the economic relationships between nations are not, by one means or another, brought fairly close to balance, then there is no set of financial arrangements that can rescue the world from the impoverishing results of chaos."
9 What are the trade problems for LEDCs? Countries that relay on one commodity can be a problem because:Prices and demand for these products fluctuate annually – and the price paid for these commodities is often fixed by MEDCsOverproduction or world recession can also impact prices of these goods, also stocks of that particular commodity (e.g. a mineral) can also become exhaustedMost exports are bought by TNC’s (transnational corporations) so the profits don’t go back to the producers (its not fair trade)LEDCS are not selling high value goods – there is very little value added to the good through secondary sector industry (manufacturing the goods)
10 Reasons for imbalance of trade between MEDC and LEDC counties MEDC’s process primary goods – and add value to them -MEDCs then export these manufactured goods – which are high in value, whereas LEDCs only have limited primary goods to sellMEDCs also have the high tech quaternary industries, and possess the skills and technology to develop high value productsMEDCs retain profits within their countries and the profits don’t go back to the LEDCsLEDCs often only relay on the export of two or three productsTrade is hindered by poor internal transport networks
12 Examples of countries imports and exports You can clearly see that Sierra Leone – an LEDC really relies on theexport of minerals, whereas MEDCs exports and imports are moresimilar to each other
13 Trading BlocksNations belonging to a mutual trade pact and agree to give each other reduced trade tariffs while imposing trade barriers and restrictions to nonmember nations.Some trade blocks such as the EU have also developed close political ties, as well as a common currency, the EuroWithin these trading blocks countries trade with each other freely. This makes for a large market, increasing the number of customers for businesses, and strengthen the alliances between those nationsAn alliance is an agreement between two or more parties, made in order to advance common goals and to secure common interests
14 Trading BlocksMake sure you know some of these trading blocks!
15 Tariffs & QuotasTariffs are taxes or custom duties paid on imports. The exporter has to pay a percentage of the value of the goods to the importer.Tariffs can be used to raise money, and they increase the price of imported goods in order to make them more expensive, and less competitiveTariffs increase the costs of imports (they may be imposed to by countries to encourage a trade balance) or protect home made productsQuotas limit the amount of goods that can be imported. Quotas tend to restricted to primary goods to they work against LEDCsThese both go against free trade
16 Free TradeFree trade: Trade between nations without protective customs tariffs and quotas.Discuss the arguments for and against free tradeArguments against free tradeArguments for free trade
17 Free Trade: Arguments for and against Free trade: Trade between nations without protective customs tariffs and quotas.Arguments for free tradeArguments against free trade1) It's important to protect the economy of your country – free trade can mean that products will be bought from overseas rather than made at home2) Other nations might treat their workers who make products they export unfairly – their rights cannot be guaranteed.3) Foreign companies can buy up companies within ones own country- this could be seen as a threat to national security4) Free trade does not mean fair trade- and countries producing primary products don’t benefit as much as the countries manufacturing themIt will deliver the greatestGood to the greatest amountOf people (the utilitarian argument)2) Countries that depend oneach other for trade, rarely goto war ( this is called the Dell Theoryof Conflict Prevention)3) Countries can develop throughTrading- exporting what they have,And importing what they don’t have
18 The world is spiky!Check out the distribution of indicators throughout the world:E:\CURRENT\IB Psych\IB Psy G 12 08_09\comparitive
19 Quick Quiz 1) Why can trade deficits be a big problem for nations? 2) What did John Maynard Keynes say about the importance trade balance?3) Who has the largest share of the worlds trade?4) What are tariffs?5) What are quotas?6) What are trading blocks?7) Identify three trade blocks8) Identify two arguments in support of free trade and three arguments against free trade