WHY DO NATIONS TRADE? THE MOVEMENT OF GOODS AND SERVICES AROUND THE GLOBE Ask students "What does it mean to trade?"  (Possible answers include the exchange of something one has for something another possesses.)  Ask the students "Have you ever traded?"  (Possible answers might mention trades at lunch for food or answers on homework.)  Tell the students that human beings trade every day.  Sometimes it might be a good for a good such as an apple for a bag of chips.  It can also be the exchange of your money for an item you desire or the trading of your valuable time in order to accomplish a task. Emphasize to students that in all these cases, the exchange only occurs if the parties feel they'll be better off after the exchange.  Ask the students, "Have you ever heard of a transaction where this outcome didn't occur?"  (Possible answers maybe yes if they felt let down when a purchase didn't live up to their expectations or they believed a sacrifice of their time was a waste.)   

WHAT IS INTERNATIONAL TRADE? International Trade is the exchange of goods and services between nations across international borders. It occurs when one nation has something that another nation wants. Trade only occurs if the two nations feel they will be better off after the trade than they were before. Define international trade and points out that nations trade for the same reason, to access things not currently possessed and to improve the quality of life for their citizens.

WHY DO NATIONS TRADE? Nations trade when the benefit of the exchange is greater than the cost. Nations produce the goods and services they do best and trade for things they do not make well. Why make something in your own country when you can get it cheaper from another country? Have students recall the discovery they made in the bell ringer activity. Ask them, "Why is it so difficult to find items made in the U.S.A?"  The answer is comparative advantage.  

COMPARATIVE ADVANTAGE Comparative advantage refers to an economy's ability to produce goods and services at a lower opportunity cost than that of trade partners. Both the U.S. and Bangladesh can produce a shirt, but Bangladesh can accomplish the task with much lower production costs than the U.S. (wages). It doesn’t make sense for the U.S. to produce shirts and should trade with Bangladesh for them. Click to slide 4, which defines comparative advantage and provides an example of manufacturing a shirt. Both the U.S. and Bangladesh can make the same shirt but the U.S. has to use far more expensive resources to accomplish it, which would make the price of the shirt much higher and mean that many people wouldn't be able to afford it.  Therefore, to make goods more accessible to U.S. consumers, we should let Bangladesh make the shirt. 

It's nice of Superman to rescue a kitten, but has he considered the opportunity cost of doing so? The concept of comparative advantage suggests that Superman should focus on tasks that others can't do well, like stopping runaway trains or transporting nuclear weapons into deep space so they can detonate safely. Slide 5 provides a humorous example of Superman using his valuable time to save a cat.  Shouldn't he be using that time to accomplish things you and I can't do?  Ask students, "With all of the education you will have and all the money that will be spent to acquire it, would it make sense to put you to work in a shirt factory or send you into the labor force to accomplish bigger tasks?"  The answer should be to tackle more sophisticated problems.  Returning to the previous example, Bangladesh has a less-educated labor that makes them better suited for shirt making than more complex tasks. 

WHAT DO NATIONS TRADE? Nations trade goods and services Goods are physical items of value such as cars, oil, clothing and agriculture Services are intangible products of value such as education, insurance, tourism, banking, accounting, and expertise. Slides 6 introduces the concepts of goods and services.

WHAT IS AN IMPORT AND EXPORT? An import is a product your home country acquires from another country. An export is a product produced in your home country and sold to consumers in other nations. Slide 7 the concepts of import and export.  

ARE YOU AFFECTED BY TRADE? In the 19th Century, a settler on the Great Plains had to make his own shelter and clothes, grow his own food, find his own water and energy, provide his own medical care and education for the children, defend himself, and produce everything else for survival. Every moment of one’s life was consumed by pursuing the basics and little time was left for enjoyment. Life was extremely difficult and many families didn’t survive. Slides 8-10 discuss how we are affected by trade and the potential negative consequences of not trading. Resources would be poorly allocated, prices would rise and our standard of living would suffer.

ARE YOU AFFECTED BY TRADE? Today, we specialize in a line of work that we’re good at and get paid for our effort. The income allows us to trade for the things we don’t do well like growing food, making clothes, and providing health care. Because we specialize and trade, we have a much higher standard of living and have ample time for enjoyment and recreation.

WHAT WOULD HAPPEN IF NATIONS DID NOT TRADE? We would have to pay more money for items we want. There would be many items we couldn’t acquire because we would run out of or lack the resources to produce them. Many of us would have to work at jobs we’re not suited for just to make sure there are enough necessities for all. Slides 8-10 discuss how we are affected by trade and the potential negative consequences of not trading. Resources would be poorly allocated, prices would rise and our standard of living would suffer.