Globalization is the tendency of businesses, technologies, or philosophies to spread throughout the world, or the process of making this happen. The global economy is sometimes referred to as a globality, characterized as a totally interconnected marketplace, unhampered by time zones or national boundaries

 The relationship between a nation’s imports and its exports is called its balance of trade  Investopedia video clip Investopedia video clip  When a nation exports more than it imports it has a positive trade balance  When a nation imports more than it exports it has a negative trade balance EOC study guide Globalization #11 & 12

 Come up with a list of the top five countries we import goods from…..  Come up with a list of the top five countries we export to….

RankCountryImports Percent of Total Imports ---Total, All Countries2,084.9 Billion100.0% ---Total, Top 15 Countries1,586.6 Billion76.1% 1 China % 2 Canada % 3 Mexico % 4 Japan % 5 Germany %

RankCountryExports Percent of Total Exports ---Total, All Countries1,448.2 Billion100.0% ---Total, Top 15 Countries1,033.6 Billion71.4% 1 Canada % 2 Mexico % 3 China % 4 Japan % 5 United Kingdom % 6 Germany %

 Began in 1970s when OPEC dramatically raised the price of oil  Imports of foreign oil continue to account for the large US trade deficit  Americans love of imported goods also plays a part  Lower labor and production costs in other countries contribute  Protectionist policies in other countries contribute

Protectionism is the use of trade barriers to protect a nation's industries from foreign competition  they can also be used to “punish” a foreign government EOC study guide Globalization #3

 Tariff—a tax on imported goods EOC study guide Globalization #3a

 Export subsidies—a Government payment to firms in its own country allowing the firms to sell their goods at lower prices EOC study guide Globalization #3 b

 Quota—a limit on the amount of a good that can be imported  Why is their corn in your coke? Why is their corn in your coke? EOC study guide Globalization #3c

But, How Do I Benefit From Trade? Determine where the shirt you are wearing was produced. (Look for the "Made in _______" tag.) 1.How do you benefit from being able to buy goods made in other countries? 2. Would you favor a policy that would raise the price on T-shirts and reduce the amount available?

 Trade barriers increase prices for foreign goods  This is bad for  Consumers  This is good for  Domestic producers of that good

 Sanctions are domestic penalties applied by one country (or group of countries) on another country  may include trade barriers and restrictions on financial transactions EOC study guide Globalization #4a

 Embargoes are the partial or complete prohibition of commerce and trade with a particular country.  As of May 2013, the United States has sanctions against:  Burma, since 1997  Cuba, since 1962  Iran, since 1979  Libya, since 2011  North Korea, since 1950  Sudan, since 2002  Syria, since 1986 EOC study guide Globalization #4b

Tariff

Sanction

Quota

Tariff

Arms Embargo

Export subsidy

 After WWII representatives from 44 countries created a fixed exchange-rate system for the US and much of western Europe  Because the US had the strongest economy with the most stable currency, the US dollar was at the center of the new system  Beginning in 1945, the conference participants agreed to fix their currencies to the US dollar  The International Monetary Fund (IMF) was created to make the system work EOC study guide Globalization #7 continued

 The foreign currency exchange rate is the value of a foreign nation’s currency in terms of the home nation’s currency  The dollar price you would pay to buy a euro is called the exchange rate  Suppose the exchange rate is $1 = ₡ 0.80, then for every dollar you will get 0.8 Euros in exchange  An increase in the value of a currency is called appreciation  A decrease in the value of a currency is called depreciation EOC study guide Globalization #13

 Outsourcing is when a company obtains goods or services from a foreign supplier who can provide it cheaper  Examples:  Dell buying some of its computer components from another manufacturer in order to save on production costs.  A business outsourcing book-keeping duties to an independent accounting firm, because its cheaper than retaining an in-house accountant.  Investopedia video clip Investopedia video clip EOC study guide Globalization #14

 How could the US reduce its trade deficit?  Tariffs, quotas, and other protectionist measures that encourage consumers to buy American rather than imported goods