Trade barriers

What is a trade barrier? Trade -- the action of buying and selling goods and services. Barrier -- an obstacle that slows down or prevents movement or access. Synonym- exchange, transaction, deal, sales Synonyms – restrictions, policies, laws, sanctions Now, you write a definition in your notebook…

Important Effect: to raise the price of the imported product. Restrictions or obstacles that governments place on imported goods and services. Ex. Tariff, quota, embargo. Important Effect: to raise the price of the imported product. Purpose: to make imported goods or services less competitive than locally produced goods and services.

Tariff – tax on imports *Important effect: to raise the price of the imported product. *Purpose: to “protect” the domestic product from competition.

Quota-limitation on the quantity of a product that may be imported *Important effect: Countries become self-sufficient protects jobs and productivity promotes purchase of domestic goods. *Purpose: Encourages domestic production of goods and services that will be used by the country. Limits the reliance a country has on other countries.

Embargo-a complete or partial block of trade between two nations. Important Effect: Governments use embargoes to create complete economic isolation on another nation...money talks. Purpose: It’s a political tool intended to change unfavorable policies of the embargoed nation. Unfavorable policies such as: human rights violations, support of terrorists, and political oppression. Countries currently or recently under U.S. embargo for some or all trade include Iran, Cuba, Sudan, Syria and North Korea.

Time for… Trade barrier identification stations

Candy Economics

“Hey kids! What kind of candy did you get? Well since I drove you around so you could trick-or-treat, I need to charge you a tax on your candy in order for you to bring it home.

“Alright kiddos…I’m glad you had fun trick-or-treating “Alright kiddos…I’m glad you had fun trick-or-treating. But you know I have a rule when it comes to candy… You can only have 3 pieces of candy each day. I have to limit the candy so you don’t get sick.

“Alright I let you go trick-or-treating because it is a fun tradition “Alright I let you go trick-or-treating because it is a fun tradition. But I’m sad to tell you, that you cannot have any of your candy. You each had 2 cavities at your last dentist appointment, so you cannot have any of that sugary, sticky, cavity making candy. Sorry!

Currency Exchange rate – the value of one country’s currency (or money) in relation to another country The balance of trade influences currency exchange rates through its effect on the supply and demand for foreign exchange. Currency exchange rates the price of one currency is described in terms of another. For example, one U.S. dollar might be equal to 11 South African rand. In other words, an American business or person exchanging dollars for rand would buy 11 rand for every dollar sold, and a South African would buy $1 for every 11 rand sold.

European Union The European Economic Union (EU), composed of the major nations of Western Europe, had removed nearly all tariffs and quotas among member nations by 1993. Members of the EU in 2012 include: *Countries not in the European Monetary Union. Note that a number of countries, while participating in the EU and benefiting from its freer trade, are not members of the European Monetary Union and do not use the euro or accept EU monetary policies. Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden United Kingdom