1. Warm Up

2. Economy of the Middle East
SS7E5, SS7E6

3. SS7E5 The student will analyze different economic systems.
SS7E5. C. Compare and contrast the economic systems in Israel, Saudi Arabia, Turkey, and Iran.

4. Israel
Has almost no natural resources or farmland.

5. Israel
Developed good relations with much of Western Europe and the United States.
Economy based on advanced technology.

6. Saudi Arabia Rich oil reserves.
Profit from oil allows them to buy most goods they are unable to produce themselves.

7. Saudi Arabia
King and his advisors make most decisions about how and where to spend the oil profits.
Invested much wealth in technology and services which allows them to produce goods not usually found in a desert climate.

8. Iran
Great oil wealth.
Command economy has not been efficient in recent times.

9. Iran Shift to a more mixed economy.
Despite the oil wealth, the Iranian people do not share in the money.

10. Turkey Least economic freedom of these four countries.
In earlier times, the gov’t has controlled airlines, railroads, telephone, and television.

11. Turkey Recently the gov’t has loosened its hold on these industries.
Have allowed some private ownership
More laws have been passed to protect business owners

12. SS7E6. The student will explain how voluntary trade benefits buyers and sellers in the Middle East
SS7E6.a. Explain how specialization encourages trade b/w countries.

13. Specialization
Not every country can produce the goods and services it needs.
So they “specialize” in producing a good or service that they can produce most efficiently.
They can then trade that product for goods and services they need.

14. Specialization
Way to build a profitable economy and earn money to buy what it needs.
Saudi Arabia specializes in the production of oil and gas.
Israel specializes in agricultural technology even though they have a limited supply of farm land.

15. SS7E6. The student will explain how voluntary trade benefits buyers and sellers in the Middle East
B. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.

16. Trade Barriers
Anything that slows down or prevents one country from exchanging goods with another.
Some protect local industries from lower priced goods made in other countries (keeps competition away).

17. Trade Barriers
Some created due to political problems between countries.

18. Tariff
Tax placed on goods when they are imported into one country from another.

19. Tariff
Purpose is to make the imported good more expensive than the similar item created locally.
“protective tariff”-protects local manufacturers from competition

20. Quota
Different way of limiting the amount of foreign goods than can come into a country.

21. Quota
Sets a specific amount of particular goods that can be imported in a certain time frame.

22. Embargo
When one country announces that it will no longer trade with another country in order to isolate the country and cause problems with that country’s economy.

23. Embargo Usually result of a political dispute.
1973-OPEC decided to stop all sales of oil and gas to countries supporting Israel in the Arab-Israeli war.

24. SS7E6. The student will explain how voluntary trade benefits buyers and sellers in the Middle East
c. Explain the primary function of the Organization of Petroleum Exporting Countries (OPEC)

25. OPEC Created in 1960 by countries with large oil supplies.
Countries wanted to work together to regulate the supply and price of oil exported to other countries.

26. OPEC
First five countries: Kuwait, Iraq, Saudi Arabia, Iran and Venezuela.
Continue to decide how much oil they will produce and that determines the price on the world market.
Basic principles of supply and demand.

27. Voluntary Trade in the Middle East
SS7E6 The student will explain how voluntary trade benefits buyers and sellers in Southwest Asia (Middle East).

28. SS7E6 a. Explain how specialization encourages trade between countries
Not every country can produce all the goods and services it needs
Because of this, countries specialize in producing those goods and services that they CAN provide most efficiently.
They then look for others who may need those goods and services so they can sell their products to those who need them.

29. SS7E6 a. Explain how specialization encourages trade between countries
So What Does That Mean?
Countries trade with one another to get everything they need for their country. In order to do that, each country produces what they can make the best. Then they trade with one another.

30. SS7E6 a. Explain how specialization encourages trade between countries
In international trade, no country can be completely self-sufficient.
Which means….no country can produce all the goods and services it needs
Specialization: a country makes the products it can produce best and that are in demand on the world market
This is a way to build a profitable economy and to earn money to buy items that cannot be made locally

31. SS7E6 a. Explain how specialization encourages trade between countries
Some countries in the Middle East are very rich in oil and natural gas
HOWEVER…they lack farmland and the ability to produce enough food
SO…they money earned on the world market with oil is used to purchase food

32. EXAMPLES of SPECIALIZATION:
SS7E6 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.
EXAMPLES of SPECIALIZATION:
***Saudi Arabia: produces oil and natural gas to sell at great profit on the world market. Then they turn around to and use the money made to purchase food AND the technology needed to make their agriculture system more efficient.
***Israel: has become leader in agricultural technology even though they have a limited supply of land suitable for farming. They can sell this technology to earn money to buy food they are unable to produce.
IT”S ALL A TRADE OFF…

33. Let’s Review The Three Types of Trade Barriers!!
SS7E6 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.
Let’s Review The Three Types of Trade Barriers!!
Tariff
Quota
Embargo
All three of these are considered to be trade barriers. They slow down or prevent one country from exchanging goods with another.

34. Why have trade barriers?
SS7E6 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.
Why have trade barriers?
To protect local industries from lower priced goods made in other countries
Political problems between countries (trade would be stopped until the political issues are settled)

35. SS7E6 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.
Tariff: a tax placed on goods when they are brought (imported) into one country from another country.
Purpose: Make the imported good more expensive than a similar item made locally.
Called a “protective tariff” because it PROTECTS local manufacturers from competition coming from cheaper goods made in other countries

36. SS7E6 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.
Quota: sets a specific amount or number of a particular product that can be imported or acquired in a given period
Purpose: a different way of limiting the amount of foreign goods that can come in to a country.
EX: Israel could decide that only 1500 cars could be brought into the country from Japan in a given year. That would make it more likely that people buying cars would have to buy Israeli made cars, if Japanese cars were not available.

37. SS7E6 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.
Embargo: when one country announces that it will no longer trade with another country in order to isolate a country and cause problems with that country’s economy.
Purpose: to punish OR persuade a country
Example: Member countries of OPEC decided to stop all sales of oil and gas to the countries supporting Israel in the 1973 Arab-Israeli war.

38. Most countries in Southwest Asia have their own type of currency.
SS7E6 d. Explain why international trade requires a system for exchanging currencies between nations.
Most countries in Southwest Asia have their own type of currency.
In order to pay for goods as they trade with each other, they had to establish a system of changing one type of currency to another.
Exchange Rate
In order for them to trade with each other, they have to be able to figure out what goods cost in each currency.
To sum it all up…This makes it possible to buy and sell goods between nations with different types of money.

39. The Iraqi Dinar
The Saudi Riyal

40. Iranian (Persian) Rial
Israeli Lira