Cooperation and Trade Barriers Why do nations trade? Why is trade good for consumers?

Trade Barriers Trade Barriers- Laws or actions that restrict the flow of goods and services between nations. Free Trade- The unrestricted flow of goods, services and productive resources between countries Generally international trade is good, but nations often restrict the FREE exchange of goods. These are the major types of trade barriers:

Types of Trade Barriers TARIFFS-Any tax on imported goods. Pros Provides revenue (money) for the nation Protects American made products Cons Makes prices of imported goods higher. Inefficient uses of resources.

Types of Trade Barriers TARIFFS-Any tax on imported goods. Example: 2002-2003 The United States imposed tariffs on imported steel in an effort to protect American companies who were going bankrupt. The US withdrew the tariffs as European nations responded by imposing tariffs on American goods.

Types of Trade Barriers Import Quotas- A law that sets a fixed amount of a certain good that may be imported. Pros Provides some protection for domestic producers Cons Once the quota limit has been exhausted, consumers cannot purchase the product no matter how much they are willing to pay.

Types of Trade Barriers Import Quotas- A law that sets a fixed amount of a certain good that may be imported. Example: May 2005, the United States imposed a quota on imported Chinese textiles to slow the flood coming to the nation.

Types of Trade Barriers Embargo-A complete ban on trade with a particular nation. These are generally politically motivated. What embargoes have the United States placed on other nations?

Types of Trade Barriers Standards-Requirements that a good must meet before it can enter the country as an import. Example: USDA Labeling-Food and drugs must meet nutritional standards and be properly labeled before they can be sold in the United States

Types of Trade Barriers Subsidies-Payments given by the government to exporting companies so that they may more easily compete with international companies. Example: American farmers have received subsidies for decades so they may compete with lower priced goods from around the world.

Free Trade vs. Protectionism Many people believe that trade between nations should flow without government restrictions-FREE TRADE Others believe that domestic goods and the companies that produce them must be protected-PROTECTIONISM

Free Trade vs. Protectionism Arguments Against Free Trade Job Security: Trade Barriers are necessary to allow American businesses to compete with lower priced foreign goods.

Free Trade vs. Protectionism Arguments Against Free Trade National Security: Some believe certain industries, such as oil, must be kept in the hands of American companies to protect national security.

Free Trade vs. Protectionism Arguments Against Free Trade Infant Industries: New companies cannot compete with lower priced foreign competitors. They need temporary relief.

Free Trade vs. Protectionism Arguments For Free Trade Improved Products: All competition, including foreign competition leads to lower prices with better quality made by more efficient companies.

Free Trade vs. Protectionism Arguments For Free Trade Export Industries: Trade barriers encourage other nations to use trade barriers. This will result in unemployment for those who export American goods.

Free Trade vs. Protectionism Arguments For Free Trade Specialization and Comparative Advantage: Specialization allows “the little countries” to be part of the greater world community and leads to lower prices and better quality for all customers.

Free Trade vs. Protectionism Your assignment is to write a position paper. With this assignment you are to make an argument in favor of EITHER protectionism or free trade. Utilize the articles that are posted on econklin.weebly.com After studying the arguments of the two sides, present your argument that will convince the reader that your position is the correct one. It is expected that you will make reference to the articles on the website a minimum of 5 times. DO NOT copy from them, USE them. This assignment is to be uploaded to turnitin.com It is due by midnight, Sunday Nov. 4, no exceptions.