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The Dynamic Environment of International Trade Chapter 2.

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Presentation on theme: "The Dynamic Environment of International Trade Chapter 2."— Presentation transcript:

1 The Dynamic Environment of International Trade Chapter 2

2 History of World Trade Early Twentieth Century Early Twentieth Century –Great Depression –World War II Late Twentieth Century Late Twentieth Century –Marshall Plan –Decolonization –Lowering of trade restrictions Source: www.marshallplan.freeterritorytrieste.comwww.marshallplan.freeterritorytrieste.com

3 History of World Trade Problems with internationalization in 1960s Problems with internationalization in 1960s –Resistance to U.S. investment –Increasing competition U.S. Balance of Trade U.S. Balance of Trade –1888-1971= Trade surplus –Since 1971= Trade deficit Free trade Free trade –NAFTA Asian markets Asian markets Source: www.globalization101.org

4 History of World Trade Recent Trends Recent Trends –Rise of other economies –Smaller companies going global

5 Balance of Payments What is it? What is it? Receipts from other countries (plus side): Receipts from other countries (plus side): –Export sales –Money spent by foreign tourists –Foreign investments into the U.S. –Foreign government payments Payments to other countries (negative side): Payments to other countries (negative side): –Imports –Spending by American tourists overseas –New overseas investments –Cost of economic and military aid

6 Balance of Payments Three types of accounts Three types of accounts –Current account –Capital account –Reserves account If a countrys expenditures > income, its citizens must reduce standard of living, or its money will lose value against other countries. If a countrys expenditures > income, its citizens must reduce standard of living, or its money will lose value against other countries. –Deficit= Loss of value for the dollar

7 Protectionism Acts to protect a countrys markets from foreign competitors Acts to protect a countrys markets from foreign competitors –Why? Infant industry Infant industry National defense National defense Industrialization of underdeveloped countries Industrialization of underdeveloped countries

8 Protectionism Tariffs Tariffs –A tax on imported goods Quotas Quotas –A unit or dollar limit placed on a good –Sometimes paired with tariffs Voluntary Export Restraints Voluntary Export Restraints Boycotts and Embargoes Boycotts and Embargoes –Whats the difference?

9 Protectionism Monetary Barriers Monetary Barriers –Blocked currency –Differential exchange rate –Government approval to secure foreign exchange Standards Standards Antidumping Penalties Antidumping Penalties

10 Easing Trade Restrictions Market access Market access –Allows US to retaliate against protectionism Export expansion Export expansion –Easier to gain an export license –Government responsible for exporter needs Import relief Import relief –Offers assistance to companies impacted by imports

11 Easing Trade Restrictions General Agreement on Tariffs and Trade General Agreement on Tariffs and Trade –U.S. and 22 other countries –Reduces tariffs –Set up an organization to monitor trade –Resulted in deep cuts of tariffs

12 Easing Trade Restrictions World Trade Organization World Trade Organization –Began in 1995 –Governs trade –Settles disputes and issues penalties against countries practicing protectionism

13 Easing Trade Restrictions International Monetary Fund International Monetary Fund –Stabilize exchange rates –Lends money to member countries –Special drawing rights Average base of value to counter fluctuations in world gold values Average base of value to counter fluctuations in world gold values

14 Easing Trade Restrictions World Bank Group World Bank Group –Lend money and provide assistance to developing countries –Mediate between investors and foreign governments


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