Would Americans be better off if we purchased less from foreigners?

International Trade In what ways do you engage in trade?

Specialization What do you plan to specialize in?

Milton Friedman—The story of a pencil

The Basis for all Trade: Absolute and Comparative Advantage KarateEconomics

Absolute Advantage When a country can produce a good more efficiently than another country CoffeeCashews Country A 204 Country B 51

Comparative Advantage The ability to produce a product relatively more efficiently, aka, a lower opportunity cost CoffeeCashews Country A 400 Country B 06 Total 406 Before Trade After Trade

History of American Trade Smoot-Hawley Tariff Act—1930 – Raised tariffs on 20,000 imported goods – Result: huge decline in standard of living across all trading groups

History of American Trade WWII and after— promotion of free trade NE—Wheelan: why would we put sanctions on ourselves?

NAFTA

Signed in 1994 by Clinton—created a trade bloc between US, Canada, and Mexico

Protectionism Tariffs Quotas Regulations

Why Protectionism? Protect domestic industries and employment Strategic/National interest goals Political pressure Protect culture

Neo-colonialism? Mexico Bribery Scandal Mexico Bribery Scandal

Fair Trade? International trade with a focus on quality of life and a more equitable global economic trading system Top 5 Worst Sweatshop Offenders Top 5 Worst Sweatshop Offenders

Alex Tabarrok--Economic Growth