What is Trade?

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Transcript What is Trade?

What is
The action of buying and selling goods and
A basic economic concept that involves multiple parties
participating in the voluntary negotiation and then the
exchange of one's goods and services for desired goods and
services that someone else possesses.
United States
• A method of production
where a business or area
focuses on the
production of a limited
scope of products or
services in order to gain
greater degrees of
productive efficiency
within the entire system
of businesses or areas.
North Carolina
Specialization and Interdependence
One country depends on
another country for
something and that country
may depend on another
country, which eventually
creates global
Why does Importing and
exporting of goods and
services highly contribute to
global interdependence?
Import + Export
results in a positive or negative balance of trade
Import – bring (goods or
services) into a country from
abroad for sale. $ is lost
Export – send (goods or
services) to another country
for sale. $ is gained
Government policies on International Trade
Tariff – Tax on Imported Goods;
quota – limit on # of goods
Sanctions – any actions taken
by one nation or group of
nations to harm the economy
of another nation or group,
often to force a political
Embargo – an official ban on
trade or other commercial
activity with a particular
Comparative Advantage
The ability of a country to
produce goods and/or
services at a lower
opportunity cost than other
firms or individuals.
A comparative advantage
gives a country the ability to
sell goods and services at a
lower price than its
competitors and have
stronger sales margins.
Absolute Advantage
The ability of a country,
individual, company or region
to produce a good or service
at a lower cost per unit than
the cost at which any other
entity produces that good or
A method of production where a business or area/country
focuses on the production of a limited scope of products or
services in order to gain greater degrees of productive
Problems of Specialization?
Many countries specialize in
producing the goods and
services that are native to
their part of the world.
Examples of this?
Interdependence and Globalization
Interdependence is a
relationship in which each
member is mutually dependent
on the others.
Globalization is the tendency
of businesses and
technologies to spread
throughout the world.
US in World Economy
Top exports
Petroleum Refining
Organic Chemical
Car and Automobile
Plastic and Resin
Brand Name
Top imports
1. Oil Drilling and Gas
2. Petroleum Refining
3. Car and Automobile
4. Brand Name
5. SUV and Light Truck
NC in World Economy
North Carolina’s largest
market in 2012 was Canada
($6.9 billion) followed by
China ($2.5 billion), Mexico
($2.3 billion), Japan ($1.7
billion), and Germany ($1
Gross State Product
• The sum of all value added by industries
within the state and serves as a counterpart to
the gross domestic product (GDP). In other
words, a GDP for the state.
• NC’s is $424.9 Billion
• 9th wealthiest state
NC Largest Outputs (Agriculture)
Sweet Potatoes
NC Agriculture and Manufacturing
• NC is a national leader in Agricultural Outputs
• Ranked 8th in the nation in manufacturing
• Manufacturing and agricultural sectors are
losing jobs to places like Asia overseas.
• Experiencing growth due to the banking and
finance industry
• 2nd largest banking center in the US, just
behind New York
• Home to 8 fortune 500 companies
Other Important Industries
 Information
 Biotechnology
 Furniture
 Banking
 Film
 Arts
 (Notice, like in Forsyth County, there are many
service- related industries that are essential for
North Carolina’s economy.) Wells Fargo, GMAC,
Forsyth + Baptist Hospitals.
Protecting Domestic Industry
Tariff, Embargo, and Sanctions
Tariff – a tax on imports or exports
Quota – limit on # of items imported
Embargo – an official ban on
trade or other commercial
activity with a particular
Sanction – a threatened
penalty for disobeying a law
or rule.
Trade Organizations
WTO The World Trade Organization
deals with the global rules of
trade between nations.
EU The European Union is an
economic and political union
of 28 member states that are
located primarily in Europe.
Trade Organizations
NAFTA North American Free Trade Agreement –
A regulation implemented on Jan. 1, 1994, that
decreased and eventually eliminated
tariffs to encourage economic activity
between the United States, Mexico
and Canada.
The CAFTA-DR is the first free trade agreement
CAFTA between the United States and a group of smaller
developing economies. This agreement is creating
new economic opportunities by
eliminating tariffs, opening markets,
reducing barriers to services, and
promoting transparency
Trade Organizations
SEATO In September of 1954, the United States, France,
Great Britain, New Zealand, Australia, the
Philippines, Thailand and Pakistan formed the
Southeast Asia Treaty Organization. The purpose of
the organization was to prevent communism from
gaining ground in the region
Trade Organizations
IMF International Monetary Fund
An international organization created for the
purpose of:
1. Promoting global monetary and exchange stability.
2. Facilitating the expansion and balanced growth of
international trade.
3. Assisting in the establishment of a multilateral
system of payments for currency
Trade Organizations
World Bank World Bank Group – Five international
organizations dedicated to providing financial
assistance and advice to countries struggling
with poverty and economic development.