Voluntary Trade in Africa

Voluntary Trade Key to a healthy market economy Key to a healthy market economy Occurs when both parties in the transaction will be able to gain something from the exchange Occurs when both parties in the transaction will be able to gain something from the exchange No government restriction or regulation No government restriction or regulation Encourages people and industries to specialize in production that is more efficient and profitable Encourages people and industries to specialize in production that is more efficient and profitable In Africa, regional trade organizations have developed to make trade among nations more open and mutually supportive. In Africa, regional trade organizations have developed to make trade among nations more open and mutually supportive.

Specialization Not every country can produce all of the goods and services it needs. Not every country can produce all of the goods and services it needs. Countries specialize in producing goods and services they can produce most efficiently. Countries specialize in producing goods and services they can produce most efficiently. Countries export these products and use the money gained from exporting to buy the goods they need or are unable to produce. Countries export these products and use the money gained from exporting to buy the goods they need or are unable to produce.

Specialization in Africa Most of the countries in Africa are trying to find products they can produce and markets in which to sell them. Most of the countries in Africa are trying to find products they can produce and markets in which to sell them. South Africa has specialized in the development of their mineral wealth and has a thriving precious metals industry. South Africa has specialized in the development of their mineral wealth and has a thriving precious metals industry. Nigeria has specialized in oil production. The US gets almost 15% of our oil from Nigeria. This specialization has left other parts of Nigeria’s economy behind and now Nigeria has to import food. Nigeria has specialized in oil production. The US gets almost 15% of our oil from Nigeria. This specialization has left other parts of Nigeria’s economy behind and now Nigeria has to import food.

Trade Barriers Trade barriers are anything that slows down or prevents one country from exchanging goods with another. Trade barriers are anything that slows down or prevents one country from exchanging goods with another. Some trade barriers are put in place to protect local industries from lower priced goods made in other countries. Some trade barriers are put in place to protect local industries from lower priced goods made in other countries. Other times trade barriers are created due to political problems between countries. Other times trade barriers are created due to political problems between countries.

Tariff A tax placed on goods when they are imported (brought into a country) A tax placed on goods when they are imported (brought into a country) Protective Tariff – makes the imported item more expensive than a locally produced item Protective Tariff – makes the imported item more expensive than a locally produced item Tariffs are designed to make the sales of the imported goods decrease and the sales of locally produced goods increase. Tariffs are designed to make the sales of the imported goods decrease and the sales of locally produced goods increase.

Quota Sets a specific amount of a particular product that can be imported in a given time frame Sets a specific amount of a particular product that can be imported in a given time frame By limiting imports, people will buy products made locally. By limiting imports, people will buy products made locally. A quota can also be a limit on how much of a product is produced A quota can also be a limit on how much of a product is produced Nigeria is a member of the Organization of Petroleum Exporting Countries (OPEC), which places a quota on how much oil a country can produce to keep prices at levels they want. Nigeria is a member of the Organization of Petroleum Exporting Countries (OPEC), which places a quota on how much oil a country can produce to keep prices at levels they want.

Embargo When one country announces it will no longer trade with another country When one country announces it will no longer trade with another country The goal is to isolate the country and cause problems within that country’s economy. The goal is to isolate the country and cause problems within that country’s economy. Usually happens between countries that are having political problems Usually happens between countries that are having political problems During apartheid, many countries in the United Nations placed an embargo on South Africa in an effort to get South Africa to end apartheid. The embargo lasted for several years. Once apartheid ended, countries began to trade with South Africa again. During apartheid, many countries in the United Nations placed an embargo on South Africa in an effort to get South Africa to end apartheid. The embargo lasted for several years. Once apartheid ended, countries began to trade with South Africa again.

Exchanging Currencies In order for countries to trade with each other, a system of exchanging currencies is necessary. In order for countries to trade with each other, a system of exchanging currencies is necessary. Most countries have their own type of money. Most countries have their own type of money. Currency from countries with stronger economies is usually easier to exchange because it has a more dependable value. Currency from countries with stronger economies is usually easier to exchange because it has a more dependable value. Many of the currencies of African nations are harder to exchange because there have been so much political unrest and economic problems. Many of the currencies of African nations are harder to exchange because there have been so much political unrest and economic problems.

CFA Franc Highlighted countries use the CFA franc The CFA franc was created after World War II when economies were unstable. It was tied to the French franc. Today there are two versions of the CFA franc: West African CFA franc and Central African CFA franc. They are now linked to the Euro, which is used by the European Union.