Ms Tradebarriers 091022074652 Phpapp0ms2


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Ms Tradebarriers 091022074652 Phpapp0ms2

  1. 1. Trade Barriers
  2. 2. <ul><li>Involves the exchange of goods or services between countries </li></ul><ul><li>This is described in terms of </li></ul><ul><ul><li>Exports : the goods and services sold to other countries </li></ul></ul><ul><ul><li>Imports : the goods or services bought from other countries </li></ul></ul>International Trade
  3. 3. <ul><ul><li>Free Trade : Nothing hinders or gets in the way from two nations trading with each other. </li></ul></ul><ul><ul><li>Trade Barriers : Trade is difficult because things get in the way. </li></ul></ul><ul><li>There are costs and benefits related to free trade as well as trade barriers. </li></ul>Free Trade Vs. Trade Barriers
  4. 4. <ul><li>When nations specialize and trade, total world sales are increased </li></ul><ul><li>Companies can produce for foreign markets as well as domestic markets </li></ul><ul><ul><li>This means there is potential for making more money as there are more markets to sell goods or services in </li></ul></ul><ul><li>More variety of goods are available from all over the world (not just from the home country) </li></ul><ul><li>Prices of goods are decreased through increased global competition </li></ul>Benefits of Free Trade
  5. 5. <ul><li>The domestic country can lose money because more people are buying foreign goods (cheaper) </li></ul><ul><ul><li>Example: In the U.S., people might want to buy a foreign automobile like a Honda or Toyota instead of an American made car </li></ul></ul><ul><li>Less money will go into the domestic market place and this can cause factories to be closed and jobs to be eliminated </li></ul>Cons of Free Trade
  6. 6. <ul><li>Trade barriers are things that hinder or get in the way of trading </li></ul><ul><ul><li>Cultural barriers : language, currency, </li></ul></ul><ul><ul><li>belief system. </li></ul></ul><ul><ul><li>2. Physical barriers : mountains, deserts, </li></ul></ul><ul><ul><li>canyons,etc. </li></ul></ul><ul><ul><li>3. Economic barriers : government rules that tax, limit, or block international trade between countries (tariff, quota, embargo) </li></ul></ul>What are Trade Barriers?
  7. 7. <ul><li>The most common trade restrictions are: </li></ul><ul><ul><li>tariffs —taxes on imported goods </li></ul></ul><ul><ul><li>2. quotas —limits on the quantity of goods that are imported </li></ul></ul><ul><ul><li>3. embargos -- a complete ban on trading between countries </li></ul></ul>3 Economic Trade Barriers
  8. 8. <ul><li>A tariff is a tax put on goods imported from other countries </li></ul><ul><li>The effect of a tariff is to raise the price of the imported product </li></ul><ul><ul><li>It makes imported goods more expensive so that people are more likely to purchase products produced in the home country </li></ul></ul><ul><ul><li>EX) The European Union removes tariffs between member nations (cheaper goods), and imposes tariffs on nonmembers (more expensive goods) </li></ul></ul>What is a Tariff?
  9. 9. <ul><li>A quota is a limit on the amount of goods that can be imported from another country </li></ul><ul><li>Putting a quota on a good creates a shortage, which causes the price of the good to rise. Consumers are less likely to buy this good because it’s now more expensive than the good produced in the home country. </li></ul><ul><li>Quotas encourage people to buy domestic products, rather than foreign goods (boosts country’s economy) </li></ul><ul><ul><li>EXAMPLE: Germany could put a quota on foreign made shoes to 10,000,000 pairs a year. If Germans buy 200,000,000 pairs of shoes each year, this would leave most of the market to German producers. </li></ul></ul>Quotas
  10. 10. <ul><li>Government orders that completely ban trade with another country </li></ul><ul><li>If necessary, the military actually sets up a blockade to prevent movement of merchant ships into and out of shipping ports. </li></ul>Embargos
  11. 11. <ul><li>The embargo is the harshest type of trade barrier and is usually enacted for political purposes to hurt a country economically and thus undermine the political leaders in charge. </li></ul><ul><ul><li>EXAMPLE: the United Kingdom has placed an embargo on a Chinese toy-making company because they were using lead-based paint in their toys. UK no longer trades with this company. </li></ul></ul><ul><ul><li>EXAMPLE: US placed an embargo on Cuba after the Cuban Missile Crisis (still in effect today). </li></ul></ul>Embargos
  12. 12. <ul><li>Most trade barriers are designed to prevent imports from entering a country </li></ul><ul><li>Trade barriers provide many benefits: </li></ul><ul><ul><li>protect homeland industries from competition </li></ul></ul><ul><ul><li>protect jobs </li></ul></ul><ul><ul><li>help provide extra income for the government (boosts economy) </li></ul></ul><ul><ul><li>Increases the number of goods people can choose from. </li></ul></ul><ul><ul><li>Decreases the costs of these goods through increased competition </li></ul></ul>Benefits of Trade Barriers
  13. 13. <ul><li>Tariffs increase the price of imported goods </li></ul><ul><li>Less competition from world markets means there is an increase in the price. </li></ul><ul><li>The tax on imported goods is passed along to the consumer so the price of imported goods is higher. </li></ul>Cons of Using Trade Barriers