2. International Trade “Trade Creates Wealth” The magic of international markets

3. (Color = Country) so as trade barriers were eliminated wealth or st. of living increased collectively Some inherited scarce & desirable resources--& thus started with a trade advantage. Was it permanent? Did it assure success? T~ C ~ W Traders are wealthier than non traders—both expect to gain! (China) Standard of living? traders v. non

5. (p. 443-445) What might be the result if Carl specializes in BH & Kate attempts to keep the Ab. Advantage in BH & T’s? Principle: Produce & specialize in your lowest opportunity cost by comparison EX: Oil deep v. oil easily found According to this--what should your major be in college?

6. US Trade Data

7. Benefits of Protectionism Security, Predictability, Stability, Job security, Less stressed Costs of Protectionism Lower Standard of Living, less quality goods, less variety of goods, behind the times, less competition means higher prices No economist argues for protectionism!!! They DO argue over the safety net for FT.

9. World Trade Organization est. 1995 Global international organization dealing with the rules of trade between nations 144 member countries (as of January 2002). WTO oversees trade agreements reductions in tariffs; specific industries agricultural trade; trade in services; protection and enforcement of “intellectual property” unfair competition & environmental issues

10. Stronger US dollar implies 1.U.S. can buy foreign goods cheaper 2.Foreigners find U.S. goods more expensive and demand falls Cost of purchasing foreign goods falls Does not help firms that produce for exports Weaker U.S. dollar implies 1.Foreigners buy more U.S. goods 2.Foreign goods become more expensive Demand for imports falls Helps firms that rely on exports US Dollar / Euro exchange rate