World Trade

Benefit of trading with other nations Each nation differs in the types and amount of factors of production it has available for use. Example- We get most of our bananas from South America because we don’t have a Tropical climate.

Imports: Goods bought from other Countries Exports: Goods sold to other countries

Things we import more of than we export: Toys Games Oil Computers Iron and steel

Things we export more of Airplanes Engineering and scientific instruments

World’s richest country, the USA finished third in exporting last year. America shipped $1.48 trillion worth of goods around the globe. Our top 5 exports: Machines Electronic equipment Oil Vehicles Aircraft

Our top imports: Oil Machines Electronic equipment Vehicles Medical equipment

Exchange Rates Fixed rate of exchange Governments set the value of their currency in relation to other currencies Eventually proved impractical Difficult to keep them fixed because of inflation Aug. 15, 1971 Nixon announced the end of fix rates Flexible Exchange Rates What we have today Supply and demand set rates Changes each day

The difference between the value of a nation’s exports and the value of its imports

Positive Balance Of trade- When the value of goods leaving the country exceed the Value of those coming in. Negative balance of trade- Value of goods coming into the country are great than those going out. Called a Trade Deficit. The US has had a trade deficit since the 1970’s. Deficit is not always a bad thing. Example- Volkswagen

1.Tariffs- tax on imports Revenue tariffs- tax to raise govt. revenue Protective tariffs- designed to raise the cost of imports to protect domestic producers 2. Quotas- limits the number of units of a good that can come into the country. 3. Embargoes-complete restriction on the import or export of a good- Example-Cuba Restrictions on World Trade The 3 major barriers to world trade:

WTO World Trade Organization The most important international trade organization members Today- 157 members The goal: promote free trade and stimulate economic growth Criticized because critics say they don’t treat less developed countries fairly Issues of safety, the environment and health are ignored.

Regional Trade Agreements NAFTA- North American Free Trade Agreement- Started in 1993 Between US/Mexico/Canada CAFTA- Central American Free Trade Agreement- Summer Most countries in Central America plus the Dominican Republic EU- European Union- 25 European countries- started 1993