1. Today’s LEQ: How do trade policies impact economic development?

2. Intro…  Competition among sellers lowers costs & prices; encourages more production  Cost of gov’t policies sometimes exceeds benefits Think: Why would the gov’t implement policies that exceed benefits?!

3. Trade Barriers  Why restrict trade? Pressure from voters and/or special interest groups To avoid hurting some companies and workers Social goals other than economic efficiency pursued National defense

4. Costs > Benefits  Although barriers to int’l trade usually impose more costs than benefits, they are supported by those who expect to gain substantially from them  Usually done through taxation and is spread over a large number of people who each pay only a little and may not recognize the cost

5. Question…  How many of you enjoy sodas like Pepsi?

6. Another Question…  What makes Pepsi sweet?

7. Yet Another Question…  What would happen to the prices of this product, and of other products sweetened with sugar, if the price of sugar increased?

8. Where We’re Headed…  We’ll examine the effects on different groups in the economy resulting from high sugar prices caused by gov’t policies that protect U.S. sugar producers from foreign competition

9. Domestic Price  Price that results when goods are traded within a country, with only domestic sources for both demand and supply Closed economy (no international trade)

10. World Price  Price that results when goods are freely traded in nations all around the world  Reflects global sources of both supply and demand

11. Policies Restricting Trade  Tariffs – taxes on imports  Quotas – limits on quantities of products that can be imported  Subsidies – paid by the gov’t to producers of a product, lower the domestic price of the product, but are paid for by taxpayers

12. Visual 1

13. Outsourcing  The delegation of non-core operations or jobs from internal production within a business to an external entity that specializes in that operation Similar to a subcontractor or third party service provider  Think: The hospital in your area hires a local company called Sanitizers-R-Us to perform all its housekeeping services, from mopping floors to cleaning beds, surgical areas, and linens. The workers who perform these duties are employees of Sanitizers-R-Us, not the hospital. Is this outsourcing?

14. Offshoring  The movement of a business process done at a local company to a foreign country, regardless of whether the work done in the foreign country is still performed by the local company or a third party. Typically, work is moved due to a lower cost of operations in the foreign location

15. Activity 1  U.S. Sugar Subsidies – who gains and who loses?  Based on your assigned role, develop a summarizing statement defending your perspective on sugar subsidies in the United States. Be ready to share.

16. Visual 4  Summarizing the benefits and costs…

17. Activity 3: The High Cost of Protecting U.S. Jobs  Divide the annual total cost by the # of jobs saved to calculate the annual average cost per job  WERE YOU SHOCKED???