Presentation on theme: "Free Trade versus Protectionism Chapter 17.2. Benefits of International Trade uIncreased variety of goods uLower costs uIncreased competition and better."— Presentation transcript:
Benefits of International Trade uIncreased variety of goods uLower costs uIncreased competition and better quality products. uEnhanced flow of ideas
International Free Trade Agreements uThese agreements result from cooperation between at least two countries to reduce trade barriers and to increase trade with each other.
International Free Trade Agreements uThe North American Free Trade Agreement (NAFTA)- In 1993, NAFTA lowered the trade barriers among U.S., Mexico, and Canada. uThe European Union – a regional trade organization made up of European nations that abolished trade restrictions among members and adopted uniform tariffs for nonmembers. uBoth of these have established free trade zones for member nations.
World Trade Organization The World Trade Organization (WTO) was originally founded as GATT. Its purpose was to reduce tariffs and expand world trade. It now has three main functions: – To ensure countries are acting according to their agreements – To negotiate new trade agreements – To resolve trade disputes
Trade Barriers uTrade Barriers are strategies that countries use to limit foreign imports in order to protect domestic producers from foreign competition. uThese types of policies are known as protectionism.
Types of Trade Barriers uTariffs are taxes on imported goods. uThey raise the price of imported goods above the price of domestically produced goods making domestically produced goods more affordable. uImport quotas specify a maximum amount that can be imported during a certain time period. uThis reduces the supply and raises the price of these goods. The foreign importer cannot sell as much, but does receive a higher price for each item. uQuotas are more effective than tariffs at protecting domestic industries.
Effects of Trade Barriers They increase the cost of goods and services to consumers. They reward inefficient industries by protecting them from more efficient foreign competition. They reduce the choices consumers had. They lead to trade wars and other trade disputes with other nations.