What is Trade?

Trade: The action of buying and selling goods and services. A basic economic concept that involves multiple parties participating in the voluntary negotiation and then the exchange of one's goods and services for desired goods and services that someone else possesses.

Specialization A method of production where a business or area focuses on the production of a limited scope of products or services in order to gain greater degrees of productive efficiency within the entire system of businesses or areas. United States North Carolina

Specialization and Interdependence One country depends on another country for something and that country may depend on another country, which eventually creates global interdependence. Why does Importing and exporting of goods and services highly contribute to global interdependence?

Import + Export Import – bring (goods or services) into a country from abroad for sale. Export – send (goods or services) to another country for sale.

Government policies on International Trade Tariff – Tax on Imported Goods Embargo – an official ban on trade or other commercial activity with a particular country. Sanctions – any actions taken by one nation or group of nations to harm the economy of another nation or group, often to force a political change

Comparative Advantage The ability of a country to produce goods and/or services at a lower opportunity cost than other firms or individuals. A comparative advantage gives a country the ability to sell goods and services at a lower price than its competitors and have stronger sales margins.

Absolute Advantage The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost at which any other entity produces that good or service.

Specialization A method of production where a business or area/country focuses on the production of a limited scope of products or services in order to gain greater degrees of productive efficiency. Problems of Specialization? Many countries specialize in producing the goods and services that are native to their part of the world. Examples of this?

Interdependence and Globalization Interdependence is a relationship in which each member is mutually dependent on the others. Globalization is the tendency of businesses and technologies to spread throughout the world.

US in World Economy Top exports Top imports Petroleum Refining Organic Chemical Manufacturing Car and Automobile Manufacturing Plastic and Resin Manufacturing Brand Name Pharmaceutical Manufacturing Top imports 1. Oil Drilling and Gas Extraction 2. Petroleum Refining 3. Car and Automobile Manufacturing 4. Brand Name Pharmaceutical 5. SUV and Light Truck

NC in World Economy See Other Powerpoint! North Carolina’s largest market in 2012 was Canada ($6.9 billion) followed by China ($2.5 billion), Mexico ($2.3 billion), Japan ($1.7 billion), and Germany ($1 billion). See Other Powerpoint!

Protecting Domestic Industry

Tariff, Embargo, and Sanctions Tariff – a tax on imports or exports Embargo – an official ban on trade or other commercial activity with a particular country. Sanction – a threatened penalty for disobeying a law or rule.

Trade Organizations WTO The World Trade Organization deals with the global rules of trade between nations. EU The European Union is an economic and political union of 28 member states that are located primarily in Europe.

Trade Organizations North American Free Trade Agreement – NAFTA A regulation implemented on Jan. 1, 1994, that decreased and eventually eliminated tariffs to encourage economic activity between the United States, Mexico and Canada. NAFTA The CAFTA-DR is the first free trade agreement between the United States and a group of smaller developing economies. This agreement is creating new economic opportunities by eliminating tariffs, opening markets, reducing barriers to services, and promoting transparency CAFTA

Trade Organizations In September of 1954, the United States, France, Great Britain, New Zealand, Australia, the Philippines, Thailand and Pakistan formed the Southeast Asia Treaty Organization. The purpose of the organization was to prevent communism from gaining ground in the region SEATO

Trade Organizations IMF International Monetary Fund An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating the expansion and balanced growth of international trade. 3. Assisting in the establishment of a multilateral system of payments for current transactions.

Trade Organizations World Bank World Bank Group – Five international organizations dedicated to providing financial assistance and advice to countries struggling with poverty and economic development.