1. International Trade

2. Trade allows nations to specialize in some products and then trade them for goods and services that are more expensive to produce. Specialization - produce the things they do best and exchange those products for the things that other people do best. Exports – the goods and services that a nation sells to other nations. Imports – the goods and services that a nation buys from other nations

3. Why nations trade? Lack of goods at home Need for raw materials Specialization Exotic products Profits

4. The Basis for Trade Absolute Advantage – country’s ability to produce more of a given product than another country can produce Comparative Advantage – country’s ability to produce a given product relatively more efficiently than another country by doing it at a lower opportunity cost – Opportunity Cost – Cost of the next best alternative use of money, time or resources when making a choice

5. Barriers to International Trade Tariffs – tax placed on imports to increase their price in the domestic market. Quotas – a limit placed on the quantities of a product that can be imported. Other Barriers – Health Inspections – Licenses – Health Issues

6. Arguments for Protection Protectionists disagree with free traders over the best way to protect a country’s independence, industries and workers. Six arguments for protection: – Aiding National Defense – Promoting Infant Industries – Protecting Domestic Jobs – Keeping the Money at Home – Helping the Balance of Payments – National Pride

7. In 1947, 23 countries signed the General Agreement on Tariffs and Trade (GATT) extended tariff concessions and worked to eliminate import quotas. World Trade Organization (WTO) – an international agency that administers trade agreements signed under GATT. The WTO also settles trade disputes between nations, organizes trade negotiations, and provides technical assistance and training for developing countries.