The document discusses barriers to international trade. It explains that governments may impose tariffs or quotas on imported goods to protect domestic industries from foreign competition. However, trade barriers ultimately cost consumers more by forcing them to pay higher prices. Recently, countries have sought to reduce trade barriers and form free trade zones like the European Union and NAFTA to promote more open trade.

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.
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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.
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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.
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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.
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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.
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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.
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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.