1. AIM: How can U. S. trade impact us as consumers
AIM: How can U.S. trade impact us as consumers. OBJECTIVE: SWBAT analyze how international trade benefits consumers. SWBAT analyze the impact of the U.S. trade deficit. DO NOW: What is a tariff? Why does Trump want to create various tariffs?

2. Imports and Exports
Imports: is a product brought in for sale from a foreign country
*Fuel * Bauxite
Exports: is a product sent to a foreign country for sale
*Automatic data and processing equipment
Types:
Manufactured goods - wireless phones Producer goods – Automobile parts Agricultural goods - Bananas Services - Accounting Raw materials – like petroleum and iron

3. Why might Nations Trade?
If one nation lacks a resource it may spark a trade with one that has it.
To specialize in a certain good rather than manufacturing several goods. Adam Smith, an 18th century Scottish economist proved this effective.

4. Ways International Trade Benefits You and Others
Benefits of Trade
Ways International Trade Benefits You and Others
Consumer Choices
Increased Competition
Expanded Markets
Benefit workers they employ
International Relations
Prosperity and Peace

5. Currencies and Trade
If two countries with different currency want to do business with one another the buyer must convert its money to the sellers currency.

6. Exchange Rates
The cost of one currency expressed in terms of another currency is called exchange rate.
At one time, currency exchange rates were fixed. They were set by governments and rarely changed.

7. Flexible Exchange Rates
Under this system, the price of buying a particular currency rises and falls from day to day because of demand and supply.
For importers and exporters, flexible exchange rates can make the cost of doing business unpredictable.

8. Factors Affecting Exchange Rates cont.
Changes in interest rates
A country that offers high interest rates increases the demand of currency.
A currency’s value is also effected by economic and political stability.
The U.S. is considered a stable nation so other investors around the world often prefer to invest with us.

9. How Exchange Rates Affect Trade
The strength or weakness of nation’s currency affects the willingness of other countries to trade with the nation.
If the U.S. dollar is weak, exports from the U.S. tend to increase.

10. Understanding the Trade Deficit
Balance of Trade~ difference between value of a nation’s exports and it’s imports
Trade Deficit~ negative balance of trade
Occurs if country spends more on imports

11. Understanding the Trade Deficit
Balance of payments~ an accounting of all financial transactions that involve other countries and financial dealings
All imports/exports recorded in balance of payments with the goal equally zero

12. The U.S. Trade Deficit
U.S. has had a trade deficit almost every year since 1970’s
Some people think the trade deficit is harmful because of the increase in foreign investment and are concerned with unemployment
Some people see foreign investment not as a problem, but as a sign that the U.S. economy is strong enough to attract investors and is prosperious.

13. Ways to Restrict Trade Tariff – tax on imports
Most common trade restriction
Discourages from buying out of country
Revenue-used for government revenue
Protective-straight to the producer

14. Ways to Restrict Trade
Quota - a government limit on the quantity or value of a certain imported product

15. Ways to Restrict Trade
Embargo - government order prohibiting trade
Specific product or country
Used for political reasons

16. Free Trade-a policy of minimizing trade restrictions.
Protectionism Versus Free Trade
Protectionism-a policy of using trade restrictions to protect domestic business from foreign competition.
Free Trade-a policy of minimizing trade restrictions.

17. Arguments for Protectionism
National Security
Job Security – imported products costs less than those made in U.S. because workers from other countries are paid less
Infant Industries
Environmental Protection
Unfair advantages

18. Arguments for Free Trade
Effects on Export
Effect on consumers – more for their money
Benefits of Specialization
Benefits of Competition – Can improve production efficiency, quality of products, and lower prices
Alternatives

19. International Trade Agreements
Between WW1 and WW2 international trade was hindered by different countries practice of protectionism.
In order to increase trade many countries began to adopt a free trade policy after WW2 to decrease trade barriers.

20. GATT and the WTO World Trade Organization (WTO)
General Agreement on Tariffs and Trade (GATT)
Signed by 90 countries in 1941
Promotes international trade.
New GATT signed in 1994 to reduce or remove trade barriers.
World Trade Organization (WTO)
An international organization that governs trade between over 140 nations.

21. North American Free Trade Agreement
NAFTA
Wide ranging regional trade agreement between U.S., Canada, and Mexico to give legal protections to investors and international business.
Started January 1, 1994

22. European Union Organization of European nations
Goal is to create a unified and strong market
Euro is the European Union’s common currency.

23. Global Economy
Technology
making the world smaller.
Media influence
Companies
Multi-National- companies with divisions in more than two countries