7 th Grade Civics Miss Smith *pgs (21.4)

 Many countries specialize in producing certain kinds of goods and services  Interdependence means that countries depend on each other for different goods and services

 Absolute advantage- country’s ability to produce something more cheaply than its trading partners  Comparative advantage- country’s ability to make a product more efficiently  Opportunity cost- value of the next best alternative that is given up when a country specializes

 Trade barrier- limit on the exchange of goods  Also called protectionism  Protects domestic jobs from foreign competition

 Tariffs  Revenue tariffs raise money for the government  Protective tariffs encourage people to buy domestically made products  Import Quotas and Voluntary Restrictions  Embargoes  Bans trade with specific countries

 Reciprocal Trade Agreements  Reduce protective tariffs  Regional Trade Agreements  Reduce or eliminate trade barriers  International Trade Agreements  World Trade Organization (WTO)  The North American Free Trade Agreement (NAFTA)

 Reasons people support protectionism:  To protect industries and jobs  To maintain high wages  To protect national security  So as not to support countries with poor labor laws  Reasons people oppose protectionism:  Could harm the economy  Lead to price increases

 Balance of trade- difference between the value of a country’s exports and its imports  Trade surplus- when a country sells more than it buys  Trade deficit- when a country buys more than it sells