Ms Tradebarriers 091022074652 Phpapp0ms2
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Ms Tradebarriers 091022074652 Phpapp0ms2

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    Ms Tradebarriers 091022074652 Phpapp0ms2 Ms Tradebarriers 091022074652 Phpapp0ms2 Presentation Transcript

    • Trade Barriers
      • Involves the exchange of goods or services between countries
      • This is described in terms of
        • Exports : the goods and services sold to other countries
        • Imports : the goods or services bought from other countries
      International Trade
        • Free Trade : Nothing hinders or gets in the way from two nations trading with each other.
        • Trade Barriers : Trade is difficult because things get in the way.
      • There are costs and benefits related to free trade as well as trade barriers.
      Free Trade Vs. Trade Barriers
      • When nations specialize and trade, total world sales are increased
      • Companies can produce for foreign markets as well as domestic markets
        • This means there is potential for making more money as there are more markets to sell goods or services in
      • More variety of goods are available from all over the world (not just from the home country)
      • Prices of goods are decreased through increased global competition
      Benefits of Free Trade
      • The domestic country can lose money because more people are buying foreign goods (cheaper)
        • Example: In the U.S., people might want to buy a foreign automobile like a Honda or Toyota instead of an American made car
      • Less money will go into the domestic market place and this can cause factories to be closed and jobs to be eliminated
      Cons of Free Trade
      • Trade barriers are things that hinder or get in the way of trading
        • Cultural barriers : language, currency,
        • belief system.
        • 2. Physical barriers : mountains, deserts,
        • canyons,etc.
        • 3. Economic barriers : government rules that tax, limit, or block international trade between countries (tariff, quota, embargo)
      What are Trade Barriers?
      • The most common trade restrictions are:
        • tariffs —taxes on imported goods
        • 2. quotas —limits on the quantity of goods that are imported
        • 3. embargos -- a complete ban on trading between countries
      3 Economic Trade Barriers
      • A tariff is a tax put on goods imported from other countries
      • The effect of a tariff is to raise the price of the imported product
        • It makes imported goods more expensive so that people are more likely to purchase products produced in the home country
        • EX) The European Union removes tariffs between member nations (cheaper goods), and imposes tariffs on nonmembers (more expensive goods)
      What is a Tariff?
      • A quota is a limit on the amount of goods that can be imported from another country
      • 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.
      • Quotas encourage people to buy domestic products, rather than foreign goods (boosts country’s economy)
        • 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.
      Quotas
      • Government orders that completely ban trade with another country
      • If necessary, the military actually sets up a blockade to prevent movement of merchant ships into and out of shipping ports.
      Embargos
      • 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.
        • 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.
        • EXAMPLE: US placed an embargo on Cuba after the Cuban Missile Crisis (still in effect today).
      Embargos
      • Most trade barriers are designed to prevent imports from entering a country
      • Trade barriers provide many benefits:
        • protect homeland industries from competition
        • protect jobs
        • help provide extra income for the government (boosts economy)
        • Increases the number of goods people can choose from.
        • Decreases the costs of these goods through increased competition
      Benefits of Trade Barriers
      • Tariffs increase the price of imported goods
      • Less competition from world markets means there is an increase in the price.
      • The tax on imported goods is passed along to the consumer so the price of imported goods is higher.
      Cons of Using Trade Barriers