ASIA ECONOMIC UNDERSTANDINGS Specialization, Trade, Trade Barriers, & Exchange Rates Standard SS7E9

ASIA economic UNDERSTANDINGS Standard SS7E9: The student will explain how voluntary trade benefits buyers and sellers in Southern and Eastern Asia. a. Explain how specialization encourages trade between countries. b. Compare and contrast different types of trade barriers, such as tariffs, quotas, and embargoes. c. Explain why international trade requires a system for exchanging currencies between nations.

FIRST FIVE Agenda Message: Celebrate, today is the 1st Day of Spring!!! CDA- IV Study Guides go home Wednesday, March 22nd. CDA-IV is March 30th. Standard: Explain how specialization encourages trade between countries. Compare and contrast different types of trade barriers, such as tariffs, quotas, and embargoes. Essential Question for Monday March 20th: Why does economic specialization make trade between countries easier? Warm-up: What are the three basic economic questions? Today We Will: Review Quick Quiz on Environmental Issues of S&EA Start review of economies, specialization, trade, & trade barriers

answers E.Q. Answer for Monday March 20th: Specialization is where countries produce those things that they make best and trade with others for the things they need. Warm-Up: What goods and services will be produced? How will goods and services be produced? Who will consume or use the goods and services that are produced?

ASIA economic UNDERSTANDINGS Specialization Helps Everyone Specialization is where countries produce those things that they make best and trade with others for the things they need. Every country has different natural resources, human capital, capital, and entrepreneurial resources.

ASIA economic UNDERSTANDINGS Countries specialize in what they do best. Specialization is an efficient way to work, and the cost of items produced is much lower as a result of specialization. One example of specialization is trade between Australia and Japan. Japan has few natural resources, however, it has developed industries like automobile manufacturing.

ASIA economic UNDERSTANDINGS Japan buys many of the raw materials from Australia, a country rich in natural resources. Japan “specializes in” auto manufacturing. Australia “specializes in” exporting raw materials. In the end, Australia imports lots of cars from Japan!

ASIA economic UNDERSTANDINGS Barriers to Trade Countries sometime set up trade barriers to restrict trade. Why? The reason is that they want to produce their own goods and sell them in their own country. These trade barriers include tariffs, quotas, and trade embargoes.

ASIA economic UNDERSTANDINGS Tariff A tariff is a “tax” placed on imported goods. Tariffs cause the consumer to pay a higher price for an imported item, increasing the demand for a lower-priced item produced domestically.

ASIA economic UNDERSTANDINGS Quota A quota is a “limit, on the amount of goods or products that can be imported into a country”. Quotas will often cause shortages that ultimately force prices to rise.

ASIA economic UNDERSTANDINGS Trade Embargoes Trade embargoes “forbid or stops trade completely” with another country.

ASIA economic UNDERSTANDINGS Examples of Trade Barriers In the 1980’s, quotas were set restricting how many Japanese cars could be imported into the U.S. to protect the U.S. car manufacturing industry. India imposes tariffs on agricultural products in order to protect its own farming industry.

ASIA economic UNDERSTANDINGS Examples of Trade Barriers cont. Beginning in 2001, the U.S. imposed tariffs on steel imported from China, India, and several other nations to protect the U.S. steel industry. In 2005, the U.S. imposed temporary quotas on certain types of cotton clothing from China in order to protect U.S. clothing manufacturers.

ASIA economic UNDERSTANDINGS Examples of Trade Barriers cont. After the Vietnam War, the United States imposed a trade embargo against Vietnam to pressure the Vietnamese government to provide information on Americans missing in action (MIA’s) during the war.

Practice test question In order to protect a nation’s car manufacturing industry from foreign car producers, the government charges the importer a tax for each imported car. This trade barrier is designed to make the imported car more expensive and encourage people to buy a locally made car. This is an example of what type of trade barrier? Subsidy Tariff Quota Embargo

Practice test answer Answer: b. Tariff Because a tariff is a “tax”

Practice test question China’s government was concerned about recent military actions from North Korea. They decided to halt all food exports going to North Korea. This halt to trade is an example of what type of trade barrier? Tariff Boycott Quota Embargo

Practice test answer D. Embargo Because an embargo halts or stops trade all together