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International trade
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International trade

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  • 1. Why Nations Trade • In a recent year, about 8 percent of all the goods produced in the United States were exported, or sold to other countries. • A slightly larger amount of goods were imported, or purchased from abroad. • Trade is one way that nations solve the problem of scarcity. • Nations trade for some goods and services because they could not have them otherwise.
  • 2. Barriers to International Trade • Foreign countries with a comparative advantage can sell their product more cheaply than can companies making the product in their own country. • Consumers will likely buy the cheaper foreign product. • Workers who make the product in their own country may lose their jobs as sales drop. • When this happens, the government may impose trade barriers to protect the affected workers and industries. Click the mouse button or press the Space Bar to display the information.
  • 3. Barriers to International Trade (cont.) • A tariff is a tax on an imported good. • The goal is to make the price of imported goods higher than the price of the same good produced domestically. • As a result, consumers would be more likely to buy the domestic product. • When people want the product so badly that higher prices have little effect, countries may set quotas, or limits on the amount of foreign goods imported. Click the mouse button or press the Space Bar to display the information.
  • 4. • Trade barriers force consumers to pay higher prices for the sake of protecting inefficient industries. • In general, trade barriers cost more than the benefits gained. • For this reason, most countries now aim to achieve free trade. • They try to convince countries not to pass laws that block or limit trade. Click the mouse button or press the Space Bar to display the information. Barriers to International Trade (cont.)
  • 5. • A recent trend is for countries to join with a few key trading partners to form free trade zones. • The European Union (EU) is an organization of 15 European countries, which forms a huge market. • Goods flow freely among these nations because the EU has no trade barriers. • Most member countries also adopted a common currency, the euro. Click the mouse button or press the Space Bar to display the information. Barriers to International Trade (cont.)
  • 6. • In the 1990s, the United States, Canada, and Mexico signed the North American Free Trade Agreement (NAFTA). • This deal eliminated all trade barriers among these countries. • Opponents of NAFTA contended that American workers would lose their jobs because U.S. plants would move to Mexico. Click the mouse button or press the Space Bar to display the information. Barriers to International Trade (cont.)
  • 7. • The World Trade Organization (WTO) oversees trade among nations. • It organizes negotiations about trade rules and helps countries trying to develop their economies. • Critics say that WTO policies favor corporations at the expense of workers, the environment, and poor countries. Click the mouse button or press the Space Bar to display the information. Barriers to International Trade (cont.)
  • 8. Exchange Rates • Most nations use a flexible exchange rate system, which allows supply and demand to set the price of various currencies. • If a nation’s currency depreciates, or becomes weak, the nation will likely export more goods because its products will become cheaper for other nations to buy. • A country has a trade deficit whenever the value of the products it imports exceeds the value of the products it exports. • It has a trade surplus whenever the value of its exports exceeds the value of its imports.