International Trade Presentation contains information from the following source: Miller, R. L. & Stafford, A. (2010). Economic education for consumers (4 th ed.). New York: Cengage Learning.

What is International Trade?  Import: good or service that one country buys from another country  Products not produced in the United States  Export: good or service that one country sells to another  Nike shoes made in China and sold in the U.S. are exports for the Chinese and imports for Americans Presentation contains information from the following source: Miller, R. L. & Stafford, A. (2010). Economic education for consumers (4 th ed.). New York: Cengage Learning.

Why trade?  All countries can make some products more efficiently than other products  Efficiency: achieving the greatest value of output for the value of resources used  By making and selling the products they make efficiently, countries earn money they can use to buy products they can’t make as efficiently Presentation contains information from the following source: Miller, R. L. & Stafford, A. (2010). Economic education for consumers (4 th ed.). New York: Cengage Learning.

Absolute Advantage  Absolute advantage: Country is the most efficient at producing a product  Always one country that is able to produce the product at the lowest cost  Should specialize in producing the product that you have an absolute advantage in so that you can trade these products with others that you don’t have the advantage in Presentation contains information from the following source: Miller, R. L. & Stafford, A. (2010). Economic education for consumers (4 th ed.). New York: Cengage Learning.

Comparative Advantage  Comparative advantage: specializing in the production of a product that makes the most efficient use of the country’s resources  May not be the lowest cost and most efficient of all countries, but it makes sense and makes good use of that country’s resources Presentation contains information from the following source: Miller, R. L. & Stafford, A. (2010). Economic education for consumers (4 th ed.). New York: Cengage Learning.

Imagine…  You are your own country  Consider your skills and resources  Would you have an absolute advantage in anything?  Would you have a comparative advantage in anything?  Create a short iMovie advertising the absolute and comparative advantages that your “country” possesses.  The goal of this movie is to convince people to think of your “country” in a more positive light.

Trade Barriers and Agreements  Free trade: nation’s economic policy of permitting its citizens to buy and sell goods and services without restrictions regardless of where they were made  Trade is hardly ever completely free  Trade barriers that restrict trade:  Tariffs  Quotas Presentation contains information from the following source: Miller, R. L. & Stafford, A. (2010). Economic education for consumers (4 th ed.). New York: Cengage Learning.

Tariffs  Tariff: tax on imported goods or services  Make imports more expensive to buy  Higher the tariff, the higher the price  Law of Supply and Demand means that less of this product would be sold  Tariffs result in importing less product Presentation contains information from the following source: Miller, R. L. & Stafford, A. (2010). Economic education for consumers (4 th ed.). New York: Cengage Learning.

Quotas  Quota: A limit on the amount of a product that can be imported  Most often used when a country produces some, but not all, of a product that it wants  Once a product’s quota is reached, no more of that product may be imported Presentation contains information from the following source: Miller, R. L. & Stafford, A. (2010). Economic education for consumers (4 th ed.). New York: Cengage Learning.

Why Nations Create Trade Barriers  Protectionism: limits international trade in an attempt to protect some sector of a nation’s economy  Three basic reasons for protectionism:  To Help Young Industries  To Support National Security  To Protect Jobs Presentation contains information from the following source: Miller, R. L. & Stafford, A. (2010). Economic education for consumers (4 th ed.). New York: Cengage Learning.

Help Young Industries  When industries first operate, they are expensive and inefficient to run  Could fail if they had to compete with established industries in other nations  Usually establish tariffs on imported goods of that industry Presentation contains information from the following source: Miller, R. L. & Stafford, A. (2010). Economic education for consumers (4 th ed.). New York: Cengage Learning.

Support National Security  Some products are important for nations to produce themselves, even inefficiently  Products that run their economy or defend their country need to be developed by each country individually  If too many raw products are imported, it could put U.S. producers out of business and they would not be there in the event of a war Presentation contains information from the following source: Miller, R. L. & Stafford, A. (2010). Economic education for consumers (4 th ed.). New York: Cengage Learning.

Protect Jobs  Average hourly wage in America is $17  Average hourly wage in Mexico is $4  Low wages make some products less expensive to produce in other countries  Some U.S. workers may lose their job if production is sent to other countries or cutbacks occur  Tariffs would increase prices of imports and maybe help save jobs Presentation contains information from the following source: Miller, R. L. & Stafford, A. (2010). Economic education for consumers (4 th ed.). New York: Cengage Learning.

Imagine… Imagine you are creating a new product. Your new product is a hit, and you are trying to expand your sales into other states and, possibly, the world. 1. What would happen if the United States placed a tariff on your competitor’s good? 2. What would happen if the United States placed a quota on your competitor’s good? 3. How would you feel about other countries placing tariffs on your good? 4. How would you feel about other countries placing quotas on your good?

1. It would be more expensive for U.S. citizens to buy that good from other countries. Therefore, you may sell more of your good.

2. There would only be a limited supply of your competitor’s good allowed into the country. Therefore, you may sell more of your good.

3. Your goods will be more expensive to buy in other countries. You will not sell as many products to citizens of other countries.

4. Only a limited supply of your good would be allowed in other countries. You will not sell as many products in other countries.