Lesson 4 free trade - power point - duke-1

Free Trade

Free Trade: International trade left to its natural course without tariffs, quotas, or other restrictions.

Three Rules to Free Trade

1. Trade must be voluntary.

2. All trading parties must benefit.

3. Trade moves products from people who value them less, to people who value them more.

Why Do We Trade?There are 6 reasons…

1. Natural Resources – Materials found in nature that is used to make a good or service.

2. Human Capital – Knowledge of making the good/ providing the service.

3. Physical Capital – Objects used to produce the good or service.

Why Do We Trade?There are 6 reasons…

4. Economic Activity Patterns – Producing, exchanging, consuming, saving, & investing.

5. Unequal Distribution of Resources – Knowledge of making the good/ providing the service.

6. Need for Trade – Objects used to produce the good or service.

TRADE SIMULATION

Clear your desks please…..some things toconsider…..

1. Trade moves goods from people who value them less to people who value them more.

2. Trade allows us to specialize in the things we do best.

3. Trade lowers per-unit costs by using mass production methods and lower labor costs.

Trading Simulation Rules

Goals/Rules

1. Improve your economic situation creating more wealth for your country.

2. Trade must be voluntary.

3. You can trade all or any portion of your bag.

Let the Trading Begin…

After each round, you will rate your overall

satisfaction level with what you have in your

bag.

Round 1: you will be trading with your row only.

Round # 1My satisfaction level after round # 1 is ___________.1. The U.S. has a trade deficit resulting

in a negative trade balance (Japan and China).

2. The U.S. is the largest importer. China is the largest exporter in the world.

Trading PartnersEuropean Union - EU is largest single trading partner with the United States.

25 Member Nations -

Round # 2My satisfaction level after round # 2 is ___________.

Protectionism: Use of trade barriers to protect U.S. goods from foreign competition.

Trade Barriers: (restrictions) limit free trade.

Round # 3

My satisfaction level after round # 3 is ___________.

1995 World Trade Organization (WTO) was established to negotiate new trade agreements, resolve trade disputes, and enforce trading rules.

What’s Wrong With Free Trade?

What’s Great About Free Trade?

How Free Trade Helps Less Developed

Countries

How Free Trade Hurts Less Developed

Countries

How Free Trade Helps the United States

How Free Trade Hurts the United States

How Free Trade Helps Less Developed

Countries

How Free Trade Hurts Less Developed

Countries

• Provides jobs for unskilled workers

• Raises the standard of living

• Increased social equality

• Increases the flow of goods to their country

• Specialization = no subsistence farming

• Efficient use of their scarce resources

• Higher rates of income inequality

• Poor working conditions

• Higher rates of corruption

• Increased environmental degradation

How Free Trade Helps the United States

How Free Trade Hurts the United States

• Provides cheap goods which increase one’s income

• Increases the flow of goods to and from the country

• Efficient use of their scarce resources (Specialization)

• Creates competition

• Creates dependency on other nations

• Ships jobs abroad

• Provokes the use of protectionism which can lead to trade wars

• Increased environmental degradation

Quick-Write

Does free trade benefit the poor?