1. Barriers to Trade
SSEIN2a: Define trade barriers as tariffs, quotas, embargoes, standards, and subsidies.
SSEIN2b: Identify costs and benefits of trade barriers over time
SSEIN2c: List specific examples of trade barriers.

2. What are Trade Barriers?
Any form of governmental or operational activity or restriction that renders importation of some goods into a country difficult or impossible.

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

4. 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.

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

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

7. 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

8. Tariff’s
Definition: a tax placed on imports to increase their price in the domestic market.
Two types:
Protective tariff – designed to make domestic products cheaper than their foreign made rivals.
Revenue tariff – generates revenue for the government without making the product more expensive than the same domestic products.

9. Tariff’s: Costs: Price of goods increases. Reduced competition
Hidden costs of political and cross-industry retaliation.

10. Benefits of Tariff’s
Protect young domestic industries from foreign competition.
Protect aging and inefficient domestic industries from foreign competition.
To protect domestic companies from “dumping” from foreign companies or governments.

11. Examples of Tariff’s
In the year 2000, tariff’s were increased 8-30% on imported steel.
Goal was to save jobs in the U.S. steel industry.
Tariff’s are placed on imported cars depending on the value of the car.

12. Quota
Definition: A specific number or proportion of a good allowed to be imported into the country.

13. Quota: Costs and Benefits
Costs of Quota’s
Shortages
Higher prices
Benefits of Quota’s
Domestic job protection
Domestic industry protection

14. Quota’s: Examples
In 1981, President Reagan put a limit on the number of imported cars that foreign car produces could bring into the United States.
Consumers had fewer cars to choose from
Prices were higher than they would have been without the quota.
Sugar quota’s have been in effect for 50+ years
Limits the amount of imported sugar
Protects U.S. sugar industry.

15. Embargo’s Definition:
A government prohibition against the shipment of certain products to a particular country for economic or political reasons.

16. Embargo: Cost/Benefits
Costs:
Loss of imports
Human rights
Benefits
Political leverage
Increase in substitutes

17. Embargo Example: Cuba embargo began in 1963 and still continues today.
No imports or exports allowed
No free travel between the countries

18. Standards Definition:
Laws that promote the health and safety of products and services within the country.

19. Standards: Cost/Benefit
Costs:
Increased cost of inputs
Increased prices
Decreased competition
Benefits:
Safer products
Higher quality products
Recourse against products not made to specifications.

20. Cars must have seat belts Toys cannot be made with lead paint.
Standards
Examples:
Cars must have seat belts
Toys cannot be made with lead paint.

21. Subsidies
Definition: a government payment to an individual, business, or other group to encourage or protect a certain type of economic activity.

22. Subsidies: Costs/Benefits
Protects inefficient industries
When repealed, costs go up and producers leave the market
Benefits:
Lowers the cost of production
Encourages current produces to remain in the market and new producers to enter

23. Subsidies
Examples:
Dairy farmers receive subsidies to help them stay in business.
Research and production of biofuels

24. Trade Blocs
Groups of countries (usually in the same geographic region), that have agreed to eliminate or reduce barriers to trade among the participating countries.

25. Trade Bloc North American Free Trade Agreement NAFTA
United States, Canada, and Mexico
Gradual elimination of trade barriers between these countries

26. Trade Bloc European Union 26 European Union
Shared currency called the Euro
Great Britain opted out of the EU, June 23, 2016

27. Trade Bloc Association of Southeast Asian Nations ASEAN
Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Cambodia, Laos, Myanmar, and Vietnam
Elimination of most tariffs in this trading region