Why do people trade?

at the basic level – - gains to be had, allows for specialization, and specialization based on resources available - access to a variety of goods that may be less expensive, better quality, or unavailable otherwise - without trade, person relies on themselves to make ends meet

international trade trade that crosses international borders - government policies regulate trade or control trade, policies to encourage trade or limit trade - economic gains for countries – new markets for products, boosting economies of allies

Comparative Advantage a business, person, or nation with the resources to produce a good or service more efficiently than another has a comparative advantage. Saudi Arabia could produce rice, but it makes more sense for it to produce petroleum and trade with a country with a comparative advantage in rice production

Negative impacts of trade: Could disrupt local economies, putting some companies out of business while other flourish govts. can also choose to focus resources on industries with comparative advantage, others may lose out though Trade can benefits everyone, but not everyone equally Ex. Costa Rica exports vs. Germany’s exports

Protectionism – a governmental economic strategy to limit trade Free trade – trade without any trade barriers/protectionist measures, promoted by West after WWII, but in reality, all countries still have some barriers

Benefits and Disadvantages of Free Trade Economists think free trade is good, everyone benefits Others argue that countries need to develop certain industries in order to be successful on the world market, thus they need protection for a time Human Rights Activists’ and Labor Advocates’ Criticisms in Industrialized Countries: Free trade allows for child labor and poor environmental standards Free trade is unfair because labor is cheaper in poorer countries, and workers in rich countries lose jobs Others say that rich countries have more advantages like technological expertise, poor countries have advantage of low labor costs