1. What is it supposed to do? Do you think it has been successful?
Bell Work
What is NAFTA?
What is it supposed to do?
Do you think it has been successful?
Why or why not?

2. Today I will…
Describe the restrictions governments place on international trade
List the arguments of protectionists for placing restrictions on international trade
Evaluate the advantages and disadvantages of trade agreements

3. Barriers to International Trade
Chapter 17, Lesson 2 pp

4. Restricting International Trade
Tariffs
A tax placed on imports to increase their price in the domestic market
Protective tariff
Tax that is high enough to protect less efficient domestic industries
Revenue Tariff
Tax that is high enough to generate revenue for the government without actually prohibiting imports

5. Restricting International Trade
Tariffs have been used more for producing revenue than for protection
Was the chief source of revenue for the federal government before the Civil War
Can give protection to selected groups at the expense of others
Adding a tariff to imported steel protects some jobs but hurts industries that use steel through higher prices

6. Restricting International Trade
Quotas
Limit placed on the quantities of a product that can be imported
Used to reduce the total supply to keep prices high for domestic producers
1981 – quota on Japanese cars to keep auto prices higher for domestic manufacturers

7. Restricting International Trade
Other Trade Barriers
Embargos – prohibit the movement of goods to a country
Inspections – imported foods are subject to a health inspections that are more rigorous than those given to domestic food
Licenses – high license fees or lag time in issuing licenses can restrict trade
Health Concerns – some European countries refuse to import GMO crops from the U.S.
Nationalism and Culture – Preference for regional/traditional products to imports

8. Arguments for Protection
Protectionists
People who favor trade barriers to protect domestic industries
Free Traders
Prefer fewer or even no trade restrictions

9. Arguments for Protection
Aiding National Defense
Without trade barriers, a country could become so specialized that it would end up becoming dependent on other countries
Things to consider
Cost of maintaining domestic production
Which industries would qualify

10. Arguments for Protection
Promoting Infant Industries
New or emerging industries should be protected from foreign competition
Legitimate if temporary

11. Arguments for Protection
Protecting Domestic Jobs
Tariffs and quotas protect domestic jobs from cheap foreign labor
Can provide temporary protection for some domestic jobs
Important to keep pressure on threatened industries to modernize and improve

12. Arguments for Protection
Keeping Money at Home
Buying American keeps the money here instead of sending it to a foreign country
Much of the money spent on imports comes back home through the sale of other exports

13. Arguments for Protection
Helping the Balance of Payments
the difference between the money a country pays out to, and receives from other nations when it engages in international trade
Dollars that come back to the U.S. stimulate employment in other industries

14. Arguments for Protection
Supporting National Pride
France protects its wine and cheese industries
The United States gave temporary protection to Harley-Davidson

15. Free Trade Movement Tariffs During the Great Depression
1930 – Smoot-Hawley Tariff Act
Set high tariffs on imported goods to protect American jobs
Prices of imports rose nearly 70%
Other countries did the same and international trade nearly came to a halt – tariffs hurt more than they helped

16. Free Trade Movement Tariffs During the Great Depression
1934 Reciprocal Trade Agreements Act
Reduced tariffs up to 50% if other countries agreed to do the same
Most Favored Nation Status
Gave other countries the same tariff reduction that the U.S. gives any other country with the same status
If the US negotiates a lower tariff agreement with Canada, all other Most Favored Nations get the same new, lower rate too

17. Free Trade Movement The World Trade Organization
An international agency that enforces trade agreements signed under GATT and settles disputes between them – 159 member nations today
1947 -General Agreement on Tariffs and Trade (GATT) -23 countries agree to reduce tariffs
1962 – Trade Expansion Act – gave the president the power to negotiate further tariff reductions
Has contributed to greatly improved international trade

18. Free Trade Movement NAFTA
An agreement to liberalize free trade by reducing tariffs between the U.S., Canada, and Mexico
Proposed by President G.H.W. Bush and concluded by president Clinton in 1993 (bipartisan)
Phased out tariffs by 2008
Made NAFTA the largest free trade area in the world
Did result in the loss of some jobs, but created more jobs in other areas (net gain)
Trade between the 3 countries has grown steadily since

20. Activity Options
Math Practice Worksheet :Calculating the Cost of a Pair of Shoes
Cartoon (next slide)
What is the message of this cartoon
Is this a fair commentary? Why or why not?
Is this cartoon meant to support free trade or protectionism? What evidence is there to support your claim?
Fair Trade Video and Question sheet (McGrawHill website)