Global Analysis. Explain the interdependence of nations Explain the nature of international trade Explain the balance of trade List the three types of.

INTERNATIONAL TRADEGlobal Analysis

INTERNATIONAL TRADE: OBJECTIVES

Explain the interdependence of nations

Explain the nature of international trade

Explain the balance of trade List the three types of trade

barriers List three significant trade

agreements and alliances that foster worldwide free trade

NATURE OF INTERNATIONAL TRADE

International trade is the exchange of goods and services among nations.

Imports are goods and services purchased from other countries.

Exports are goods and services sold to other countries.

INTERDEPENDENCE OF NATIONS

Countries get some of their goods and services from other nations

Each country possesses unique resources and capabilities.

The Global MarketplaceThe Global MarketplaceInterdependence of Nations

Most countries need to get some of their goods and services from other nations. This is called economic interdependence. There are two types of advantages in international trade:

absolute

comparative

ABSOLUTE ADVANTAGE AND COMPARATIVE ADVANTAGE

ABSOLUTE Occurs when a

country has natural resources or talents that allow it to produce an item at the lowest cost possible.

COMPARATIVE Value that a nation

gains by selling what it produces most efficiently.

BENEFITS OF INTERNATIONAL TRADE

Consumers Benefit from the

competition that the foreign companies offer

Producers Many producers

expand business by conducting operations in other countries.

Workers Increased trade can

lead to higher employment rates both at home and abroad.

Nations Increased foreign

investment in a country often improves the standard of living for that country’s people.

The Global MarketplaceThe Global Marketplace

All nations control and monitor their trade with foreign businesses. The U.S. government monitors imports through the customs division of the U.S. Treasury Department.

Government Involvement in International Trade

GOVERNMENT INVOLVEMENT IN INTERNATIONAL TRADE

Balance of Trade Trade Deficit Negative

Consequences of a Trade Deficit

Trade Barriers Tariffs Quotas Embargoes Protectionism Protectionism and

Subsidies

Trade Agreements and Alliances The World Trade

Organization The WTO, For or

Against? North American Free

Trade Agreement European Union

BALANCE OF TRADE

The difference between exports and imports of a nation, Positive balance

of trade = trade surplus

Negative balance of trade = trade deficit

Trade Deficit Negative

Consequences of a Trade Deficit

TRADE DEFICIT

1. monthly U.S. exports and imports in dollars through November 2008

2. U.S. trade deficit / surplus as a percent of GDP since 1960 through Q3 2008.

U.S. TRADE DEFICIT

TRADE BARRIERS

Tariffs: tax on imports. Produce revenue for a

country Protective tariff-

increases the price of imported goods so that domestic products can compete

Quotas: limits either the quantity or the monetary value of a product that may be imported.

Embargo: total ban on specific goods coming into and leaving a country.

TRADE AGREEMENTS AND ALLIANCES The World Trade

Organization (WTO) Coalition of nations that

makes rules governing international trade

Successor to GATT North American Free

Trade Agreement (NAFTA) Eliminate all trade

barriers between Mexico, Canada and the U.S.

European Union (EU) Free trade among

member nations Euro Central Bank

NAFTA & EU