2. Read to Learn
Describe free trade.
Indicate who benefits and who does not benefit from free trade.

3. The Main Idea
Protectionism is the practice of putting limits on foreign trade to protect businesses at home. However, protectionism decreases competition and generally increases the prices that consumers pay for goods and services. More nations are moving toward free trade.

4. Key Concept
Protectionism and Free Trade

5. Key Term
the practice of the government putting limits on foreign trade to protect businesses at home
protectionism
a tax placed on imports to increase their price in the domestic market
tariff

6. Key Term
a limit placed on the quantities of a product that can be imported
quota
a ban on the import or export of a product
embargo

7. Key Term
free trade
when there are few or no limits on trade between countries

8. Protectionism and Free Trade
Global competition often leads to trade disputes.
Protectionism and free trade are two opposing points of view involved in trade disputes.

9. Protectionism
Japan practices protectionism in the areas of rice farming and auto production.
protectionism
the practice of the government putting limits on foreign trade to protect businesses at home

10. Reasons to Restrict Trade
Protectionism
Reasons to Restrict Trade
Foreign competition can lower the demand for products made at home.
Companies at home need to be protected from unfair competition.
Industries that make products related to national defense need to be protected.

11. Reasons to Restrict Trade
Protectionism
Reasons to Restrict Trade
The use of cheap labor in other countries can lower wages or threaten jobs at home.
A country can become too dependent on another country for important products.
Other countries might not have the same environmental or human rights standards.

12. A tariff is an example of a trade barrier.
Protectionism
A tariff is an example of a trade barrier.
tariff
a tax placed on imports to increase their price in the domestic market

13. Trade Sanctions
A government can impose a trade sanction, or penalty, on other countries, usually by adding tariffs.

14. A quota is another example of a trade barrier.
Protectionism
A quota is another example of a trade barrier.
quota
a limit placed on the quantities of a product that can be imported

15. Protectionism
An embargo is a trade barrier that is usually used for political or military reasons.
embargo
a ban on the import or export of a product

16. Free Trade
Supporters of free trade think all countries should be free to compete anywhere in the world without restrictions.
free trade
when there are few or no limits on trade between countries

17. Free Trade Free trade opens up new markets in other countries.
Benefits of Free Trade
Free trade opens up new markets in other countries.
Free trade creates new jobs.
Competition forces businesses to be more efficient and productive.

18. Free Trade
Benefits of Free Trade
Consumers have more choices in the variety, prices, and quality of products.
Free trade promotes cultural understanding and encourages countries to cooperate with each other.
Free trade helps countries raise their standard of living.

19. Free Trade
To reduce limits on trade, nations form trade alliances.
NAFTA (North American Free Trade Agreement) combined the economies of the United States, Canada, and Mexico.

20. Free Trade
Some people opposed NAFTA because they feared some workers would be displaced when trade barriers were lowered.

21. Graphic Organizer North American Free Trade Agreement (NAFTA)
Association of Southeast Asian Nations (ASEAN)
European Union (EU)
United States, Canada, Mexico
Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, United Kingdom
Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam

22. Give three reasons for protectionism.
protects businesses from unfair competition, from countries that violate U.S. human rights or environmental standards, and from overdependence on another country’s products

23. Give three reasons for free trade.
encourages competition, gives consumers more choices for products, promotes cultural understanding

24. What are some of the major trade alliances in the world today?
NAFTA, the EU, and ASEAN

25. End of