International Trade Chapter 4.1

Bell Ringer Examine your clothing tags and possessions. Where were they made? Locate the countries on

Objectives Distinguish between imports and exports Discuss the interdependence of nations Explain the advantages and disadvantages of international trade Discuss the U.S. balance of trade Identify trade barriers, trade support and trade agreements.

International Trade Exchange of goods and services among nations Global Marketplace exists because countries need to trade with one another.

International Trade Imports – goods and services purchased from other countries Exports – goods and services sold to other countries

Interdependence of Nations Fundamental to Global Marketing No nation can produce or manufacture everything they need Each country has unique resources and capabilities

International Trade Absolute Advantage – country has natural resources or talents to produce item at the lowest cost possible ▫China – 80% of world’s silk

International Trade Comparative Advantage – value nation gains by selling what it produces most efficiently ▫Specialize in products or services ▫Emerging nations – advantage in labor-intensive industries  Large, unskilled, low cost labor force

Assignment: Graphic Organizer Make a T-graphic organizer listing the advantages and disadvantages of international trade

International Trade Advantages of International Trade Disadvantage of International Trade

International Trade Advantages Lower prices Variety of goods increase Increase sales and profits Stabilize seasonal market fluctuations Reduce dependence of existing markets Enhance potential for expansion of business Sell excess production capacity

International Trade Disadvantages Loss of domestic jobs Domestic industries may not be able to compete (US steel industry) Increased environmental pollution and environmental problems (China) Increase Dependencies on others.

Government Involvement Balance of Trade – difference in value between exports and import of a nation Trade Surplus – positive balance – sell more than buy Trade Deficit – negative balance – buy more than you sell

U.S. Trade Deficit World’s biggest exporter Purchase more goods than other nations Focus on providing services rather than manufacturing and farming Reduces a nations’ revenues – more money leaves than comes in

U.S. Trade Deficit Debtor Nation – rely on foreign investors to buy U.S. securities Increase Unemployment – lose jobs to foreign competitors who take business away from domestic business

Trade Barriers Restrictions on Trade Free Trade – commercial exchange between nations that is conducted on free market principles– without restrictions

Trade Barriers Tariff or Duty --- tax on imports Produce Revenue Protective – purpose of raising price of imported goods to protect domestic products and jobs

Protective Tariff or Duty In 2002 George W. Bush ordered tariffs on steel imported from overseas. Russia, China, Brazil and other developing nations were being accused of dumping steel on American markets., and despite raising their productivity by shifting production from the obsolescent big mills to efficient mini-mills, domestic producers still couldn’t compete against the cheaper foreign steel.

Trade Barriers Quota – limits the quantity or monetary value of a product that can be imported Embargo – total ban on specific goods coming into or leaving a country ▫Health Reasons ▫Political or diplomatic reasons (Cuba)

Trade Barriers Protectionism – government establishes economic policies to restrict imports in order to protect domestic industries ▫Opposite of free trade Tariffs Quotas Other countries can retaliate Subsidizing domestic industries

Trade Agreements and Alliances Common goal to establish trade guidelines Set up trade alliances ▫Making it easy to buy and sell goods between the members of the alliance ▫Making it harder for other countries to sell into the alliance

Trade Agreements and Alliances World Trade Organization (WTO) Coalition of nations Make rules governing international trade Successor to General Agreement on Tariffs and Trade (GATT) Created to police agreements and resolve disputes Protect intellectual property rights

Trade Agreements and Alliances Supporters of WTO Borderless Economy Universally accepted rules Ensure fairness and avoid damaging trade wars

Trade Agreements and Alliances Critics of WTO Labor rights Environment Non-elected body given power to overrule government

Trade Agreements and Alliances North American Free Trade Agreement (NAFTA) Between United States, Canada, Mexico Effective January 1, 1994 Rid all trade barriers and investment restrictions

Trade Agreements and Alliances European Union (EU) Europe’s trading bloc Established 1992 Free trade among member nations Single European currency (euro) Central Bank

Multicultural Activity Textbook page 78 Case Study The New Calcutta What is the biggest drawback about outsourcing jobs to Calcutta?

321 Summary 3 trade barriers 2 trade alliances 1 type of trade advantage