International Trade

-Balance of Trade: calculated by subtracting imports from exports -When exports exceed imports, a nation is said to have a trade surplus. -When imports exceed exports, a nation is said to have a trade deficit.

-Balance of Payments: the funds received by a country and those paid by a country for all international transactions -When exports occur, the flow of goods headed in one direction out of the country is matched by a flow of payments coming back into the country. -Similarly, when imports occur, the flow of goods arriving in the country is matched by a flow of payments leaving the country.

-NAFTA (North American Free Trade Agreement): trade agreement signed between Canada, the United States, and Mexico in January 1994 -Purpose of the agreement was to eventually eliminate all tariffs on goods traded between the three countries

-EU (European Union): union of 28 countries located throughout Europe established in 1999 -Goal was to create a single market with the free circulation of goods, capital, people, and services in Europe

-ASEAN (Association of Southeast Asia Nations): economic organization of ten Southeast Asian countries established in 1967 -Member countries include Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam -One of many goals of the organization is to promote economic growth and free trade throughout the region

Trade Barriers laws passed by the government of a country with the intention of restricting trade between itself and another country

Tariff a tax placed on goods imported into a country Example: 25% Tariffs on steel imports into U.S.

Quota limits the quantity of a good imported into a country Example: Only 750,000 Japanese-made cars are permitted to be imported into the U.S.

Embargo completely bans trade with a country usually due to political disputes Example: The U.S. has trade embargoes with Cuba, North Korea, Iran, and Venezuela

Standard requirements a good must meet before it can enter the country as an import Example: Products must be produced in factories with humane working conditions

subsidy Payments that the government gives to businesses/industries Example: The U.S. agriculture and oil industry receive subsidies from the government