Globalization and International Trade

1. Module VII – The global
Economy
International Trade, International
Economic Development

2. International Trade
 Export –
 Goods sold to another country
 Import –
 Goods bought from another country–

3. Exports by nation

4. Advantages of International Trade
 Obtaining scarce goods – nations trade for
goods that they can otherwise not get on their
own
 EX – diamonds in the US, commercial aircraft
to the rest of the world
 Comparative advantage – ability of one
country to produce a good more efficiently
than another.
 Japan makes TV’s better than the US does, so
we get our TV’s from them

5. Advantages of International Trade
 Creating jobs – by exporting products,
producers expand market and thus can hire
more workers

6. Supporting domestic industries
 Tariffs – tax on imports to make them more
expensive to buy than domestic goods
 Some foreign luxury cars are more expensive
than domestic luxury cars
 Quotas – limit on the amount of foreign goods
imported
 Reagan put a limit on Japanese cars in the
1980’s to save American autoworkers

7. Free Trade Zones
 Area where goods may be handled and
manufactured without the intervention of
customs
 Sea ports, international airports,

8. Free Trade Agreements
 WTO – oversees and organizes trade rules,
settles trade disputes, and helps developing
countries
 Criticism
 Favors major corporations instead of workers,
environment, and poor countries

9. International Trade as a political
Weapon
 Embargos – nation’s agree to block trade with
a target nation
 WWII, embargo against Germany, Japan by
USA.

10. International Trade as a political
Weapon
 Trade Agreements – reduce or eliminate
restrictions between nations to promote free
trade

11. Trade
 Balance of trade – difference between value
of exports and imports
 Trade surplus – exports > imports = making
money
 Trade deficit – exports < imports = losing
money

12. Negatives of a trade deficit
 Lower GDP
 Higher national debt
 Higher unemployment
 Lower savings rates

13. Globalization

14. Warmup 5/18
 What do you think the term globalization
means?

15. Free Trade Agreements
 NAFTA – USA, Mexico, Canada – eliminated
barriers to trade between the countries
 EU – goods, services, and people can move
freely between these countries; uses euro as
currency

16. Free Trade Agreements
 IMF – allows countries to donate to money
pool and then borrow when they need to
meet payments
 CAFTA – USA, Costa Rica, El Salvador,
Guatemala, Honduras, Nicuragua, Dominican
Republic
 SEATO – Australia, France, New Zealand,
Pakistan, Philippines, Thailand, UK, USA (no
longer in effect)
 World Bank – provides loans to developing
countries

17. What has the increase in international
trade created among nations of the
world?
 Income inequality

18. Concerns over international trade
 Environmental – difficult to monitor
multinational (MNC) businesses b/c of
varying environmental regulations
 Worker exploitation – MNC’s use nations with
cheap labor to increase profit margin’s at
expense of worker safety and health.

19. Internationalism
 Nations should cooperate to promote
common aims

20. United Nations (UN)
 Environmental – Leaders signed treaties to
safeguard animal and plant life and limit
global pollution
 Income inequality – called on businesses to
promote economic development in the
countries they operate in.

21. United Nations (UN)
 Human Rights – basic freedoms that all
people should enjoy
 Universal Declaration of Human Rights – basic
rights that all people should have (movement,
seek asylum, nationality, property, have a
family, etc)
 International Tribunals – courts that hear and
make judgments on violations of human rights