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Bell Ringer
•Examine your clothing tags and possessions . Where were they made?
•Locate the countries on www.freeworldmaps.net
Objectives• 0422.11.1 Distinguish between imports and
exports. • 0422.11.2 Discuss the interdependence of
nations. • 0422.11.3 Explain the advantages and
disadvantages of international trade.
• 0422.11.4 Discuss the U.S. balance of trade.• 0422.11.5 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•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 AlliancesWorld 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 AlliancesSupporters of WTO•Borderless Economy•Universally accepted rules•Ensure fairness and avoid damaging trade
wars
Trade Agreements and AlliancesCritics of WTO•Labor rights•Environment•Non-elected body given power to overrule
government
Trade Agreements and AlliancesNorth American Free Trade Agreement
(NAFTA)•Between United States, Canada, Mexico•Effective January 1, 1994•Rid all trade barriers and investment
restrictions
Trade Agreements and AlliancesEuropean 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?