1. CHAPTER 4 GLOBAL ANALYSIS

2. Objectives Describe the benefits of international trade.
Discuss the balance of trade.
Compare and contrast three types of trade barriers.
Discuss three significant trade agreements and alliances.

3. Main Idea
Nations rely on each other to provided goods and services. This interdependence creates a global marketplace.

4. SECTION 4.1 INTERNATIONAL TRADE

5. NATURE OF INTERNATIONAL TRADE

6. Nature of International Trade
The global marketplace exists because countries need to trade with one another.
The new global marketplace makes all people and businesses in the world not only potential customers but also potential employees or employers.

7. Nature of International Trade
International trade is the exchange of goods and services among nations.
Imports are goods and services purchased from other countries.
Exports are goods and services sold to other countries.

8. Interdependence of Nations
Most countries do not produce or manufacture all the goods and services they need. They get some of their goods and services from other nations. -- economic interdependence.
Economic interdependence happens because each country possesses unique resources and capabilities.

9. Absolute Advantage & Comparative Advantage
Some nations tend to specialize in certain areas. They specialize in products that they can produce most efficiently due to available resources in their countries:
absolute advantage & comparative advantage

10. Absolute Advantage & Comparative Advantage
Absolute advantage occurs when a country has economic resources that allow it to produce a product at a lower unit cost than any other country.
Comparative advantage occurs because some countries have an absolute advantage in more than one product. The must compare the unit cost of each product. Then they decided which ones to produce and which ones to import.

11. Benefits of International Trade
Consumers, producers, workers, and nations benefit from international trade in different ways.

12. Benefits of International Trade: Consumers
Consumers benefit from the competition that foreign companies offer. This competition encourages the production go high quality goods with lower prices. Variety increases as producers make their goods in other countries; individuals have more options when making purchasing decisions.

13. Benefits of International Trade: Producers
Many producers today expand their business by conducting operations in other countries. Businesses that want to be successful should consider using international trade.

14. Benefits of International Trade: Workers
Workers also benefit from international trade. Increased trade leads to higher employment rates both at home and abroad.

15. Benefits of International Trade: Nations
Nations as a whole benefit from international trade. Increased foreign investment in a country often improves the standard of living for that country's people. Individuals have more options to choose from when making purchasing decisions.

16. GOVERNMENT INVOLVEMENT IN INTERNATIONAL TRADE

17. Balance of Trade
Nations must keep track of their international trade to be aware of their own economic status.
The difference in value between exports and imports is called balance of trade.

18. Balance of Trade
A trade surplus occurs when a nation exports more than it imports.
A negative balance of trade or trade deficit, occurs when a nation imports more than it exports.

19. Trade Barriers
Free trade is the commercial exchange between nations that is conducted on free market principles without any regulations.
Tariff (duty) is a tax on imports. (may be used to generate revenue for a country)
An import quota limits either the quantity of monetary value of a product that may be imported.

20. Trade Barriers
An embargo is a total ban on specific goods coming into and leaving a country.
Protectionism is a government’s establishment of economic polices that systematically restricts imports in order to protect domestic industries.

21. Trade Agreements and Alliances
The World Trade Organization (WTO) is a global coalition of nations that make rules governing international trade.
The WTO was formed in 1995 as the successor to the General Agreement on Tariffs and Trade (GATT)
GATT was an international trade agreement designed to open markets and promote global free trade.
WTO was formed to police the agreement and resolve disputes among nations.

22. Trade Agreements and Alliances
The North America Free Trade Agreement (NAFTA; January 1, 1994) is an international trade agreement among the United States, Canada, and Mexico.
The main goal of NAFTA was to abolish all trade barriers and investment restrictions among the three countries by 2009.

23. Trade Agreements and Alliances
The European Union (EU)d is Europe’s trading bloc.
In 1992, the Maastricht Treaty created the EU and established free trade among its member nations. The treaty also created a single European currency (the euro) and a central bank.