1. Chapter 17
International Trade

2. SSEIN2: Explain why countries sometimes erect trade barriers and sometimes advocate free trade
a. Define trade barriers as tariffs, quotas, embargos, standards, and subsidies

3. Trade Barriers Tariffs Embargos Quotas
Law passed or action taken by the government of a country to restrict the flow of goods and services between itself and other countries
Tariffs
Embargos
Quotas
Voluntary Export Restraints (VER)
Standards
Subsidies

4. Trade Barriers
Tariff
tax on imported goods, discourages consumers from buying those goods
Embargo
total ban on trading due to political disputes (Cuba)
Import Quota
limit on the quantity of a good that can be imported into a country

5. Trade Barriers Voluntary Export Restraint (VER)
reduction in exports, done to encourage another country to reduce trade barriers
Standards
Requirements a good must meet before it can enter the country as an import
Subsidies
Government transfer payment to exporting companies allowing them to compete with other nations at the international market price.

6. SSEIN2: Explain why countries sometimes erect trade barriers and sometimes advocate free trade
b. Identify costs and benefits of trade barriers over time.

7. Costs/Benefits of Trade Barriers
Tariffs
Provides revenue to importing country’s govt and protects domestic producers.
Higher prices for consumers
Inefficient use of resources
Quotas
Protection for domestic producers
Limited availability for consumers, no matter how much they are willing to pay

8. Costs/Benefits of Trade Barriers
Standards
Protects consumers from unsafe or poor quality products.
Protects producers making good products.
Consumers may pay more or have limited quantities
Subsidies
Protects producers in infant industries
Protects domestic jobs
Taxpayers pay for the subsidy.

9. Costs/Benefits of Trade Barriers
Protectionism
Preserve jobs and industries in your country
Save jobs that would go to countries with cheap labor
Protect an infant industry that needs time to develop
Protect national security for critical industries needed in a war

10. SSEIN2: Explain why countries sometimes erect trade barriers and sometimes advocate free trade
c. List specific examples of trade barriers

11. Trade Barriers - Examples
2002 U.S. Tariffs on Steel
After bankruptcies of several us steel companies, President Bush issued tariffs on imported steel.
European countries retaliated with tariffs on U.S. Steel
U.S. withdrew the tariff in 2003 after WTO came out against them.
U.S. Embargo against Cuba (1960-present)
Almost total ban of trade between U.S. and Cuba
Motivated by political opposition to Cuban govt.

12. Trade Barriers - Examples
U.S. Agricultural Subsidies
U.S. government provides transfer payments to agricultural businesses to allow U.S. farmers to compete in world market where prices are lower.
USDA Labeling Standards
Government requirement that all foods entering U.S. have proper nutritional and ingredient labeling.
To protect consumers and equalize requirements of domestic producers

13. SSEIN2: Explain why countries sometimes erect trade barriers and sometimes advocate free trade
c. List specific examples of trading blocs such as EU, NAFTA, and ASEAN

14. TRADE ORGANIZATIONS
Make a web on a piece of paper and in each circle list a type of trade organization and describe it

15. Trade Organizations

16. Current Free Trade Agreements
Reciprocal
Trade Agreement Act
1934
Gave FDR authority to adjust tariff rates, and power to negotiate bilateral trade agreements without prior congressional approval.
U.S. grants “normal trade relations” status to trade partners

17. Current Free Trade Agreements
World Trade Organization (WTO)
Acts as a referee in trade to reduce tariffs and restrictions
149 Members

18. Current Free Trade Agreements
European Union (EU)
Unified economy of 27 European countries
Many EU countries use a common currency (Euro) to further reduce obstacles to trade.
Allows free movement of goods and workers across borders

19. Current Free Trade Agreements
North American Free Trade Agreement (NAFTA)
Eliminates trade barriers between Canada, the U.S., and Mexico

20. Current Free Trade Agreements
ASEAN
Association of South East Asian Nations
10 countries in SE Asia
To promote free trade, economic growth, and collaboration between member nations

21. SSEIN2: Explain why countries sometimes erect trade barriers and sometimes advocate free trade
e. Evaluate arguments for and against free trade

22. Arguments for Trade Barriers
Protectionism
Protecting infant industries that need time to develop.
Protecting national security for critical industries needed in a war.
Protecting domestic employment.
Protecting workers in developing countries from unfair labor practices.
Protecting the environment in developing countries.

23. Arguments for Free Trade
Cheaper prices on many imported goods results in higher standard of living for all countries.
Free trade, efficient production leads to new industries and new jobs within those industries.
Environmental standards usually improve as developing nations become more industrialized and as the standard of living increases.
In the long run, developing countries tend to provide more rights and better conditions for workers as the labor force becomes more educated and richer.

24. Review
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Unit 4 Quiz: Trade and Trade Barriers