1. Standard SSEIN1: Explain why we trade internationally.
SSEIN2: Explain the arguments for and against trade

2. Trading
People and organizations in different countries often trade goods and services because they value the things they buy more than they sell

3. What is trade?
A transaction in which good, services or information are sold or purchased between two or more parties.
International trade: the exchange of capital, goods, and services across international borders or territories.

4. What are the benefits of trade?
Can help countries grow
Reduce poverty
Increases the total world output of goods and services

5. Types of Trade Barriers

6. Trade Barrier: Tariffs
A Tax placed on imports
Two Types:
Protective tariff: tax that is high enough to protect less efficient domestic industries
Revenue tariff: tax that is high enough to generate revenue

7. Trade Barrier: Tariffs
Tariffs increase the cost of imports
Provide protection for U.S. industries
In 2002, President Bush placed Tariff on steel imports to protect the U.S. industry. It was lifted in 2003.

8. Trade Barrier: Embargo
A ban on trade for political reasons
Usually does not meet intended goals
Harms a countries economy
Enables countries a way to apply political pressure in a targeted way
US placed an embargo on Cuba in 1962

9. Trade Barrier: Quota
A limit by the government on quantities of a product that can be imported
Leads to overall higher prices
Protects domestic industry from foreign competition
Example: The U.S. government limits the amount of sugar that can be imported into our country.
1.6 million tons can be imported. Annual consumption is ~11 million tons.

10. Trade Barrier: Standards
Laws or regulations establishing health and safety standards for imported goods
Makes entering a market difficult
Ensures product safety.
Examples: Toys cannot contain lead paint

11. Trade Barrier: Subsidies
Government payments to businesses to encourage production
Keeps inefficient businesses afloat and/or makes certain businesses rely on the government for assistance.
Can be used to relieve some type of burden
Example: Often given to farmer’s because of low market prices.

12. Two Arguments Free Traders: favor fewer or even no trade restrictions
Protectionists: favor trade barriers that protect domestic industries

13. Trade Organizations

14. NAFTA North American Free Trade Agreement
Established in 1994, it allows for free trade between Mexico, Canada and the United States.

15. EU European Union 28 member countries across Europe
Began in 1950 with 6 countries during the ‘cold war’
Almost all use the same currency – the Euro, which started in 1999

16. ASEAN Association of South East Asian Nations 10 member countries
Founded in 1967 to and aims to:
Accelerate economic growth, social progress and socioeconomic evolution
protect regional peace and stability

17. OPEC Organization of Petroleum Exporting Countries
Established in 1960, it now has 12 member countries
Considered a “cartel” – an organization that sets formal agreements to fix prices and dictate sales rules

18. Free Trade vs. Protectionism

19. The arguments- Which side are you on?
The Issue
Free trade
Protectionism
National defense
Disadvantages of a smaller supply
What happens when you can’t get foreign goods because of war?
Promoting infant industries
Protection will eventually be removed
Industries need to gain strength before competing globally
Protecting Domestic Jobs
Best not to interfere
Provide temporary protection
Keeping money at home
America dollars going abroad come back
Keep money in the United States
Balance of payments
dollars return to stimulate employment
Restrictions help balance