Transcript Ad-quipping Your Business - kristinaaustin

Economics LAP 4
Objectives
Explain why international trade is needed.
Describe issues in international trade.
Objective
Explain why international trade
is needed.
• Economic
Both the producers
journeys and
occur
buyers
when should
producers
benefit
and
buyers
from
international
trade.
trade.
• Will
 May
you?be in the same country
 Often, in different parts of the world
• Why trade with someone they never see?
 To get the best products at the lowest prices
 To get products available only from other
countries
• Producers benefit because buyers represent
new, profitable markets.
Types of Trade
Example:
Stereo
speakers are
built in
Canada.
Fresh pears grown
in Oregon and
marketed in Ohio
Shoes are often
Television
made insets
are
often made
Malaysia
or
in China.
Japan or
South Korea.
International
Domestic
Takes
Occurs
placewhen
whenproducers
a product is
and
produced
buyers are
in one
located
country
andinconsumed
the same country
in another
Countries can import or
export goods and services.
Buyers of exports include:
• Exports
Individuals
(importers)
are
goods
or services
that
Imports are
goods
or services
sell tofrom
otherproducers
countries.
• businesses
Businesses
that are bought
in other countries.
• Governments
Imports
Exports
General Examples:
The Tucci family of Seattle imports
• The United
exports
LavAzza
coffee, States
the largest
selling
manufactured
goods,
coffee
in Italy. Originally
operated
food.the
fromchemicals,
the family’sand
garage,
growing
business,
known
as Italia
• Canada
exports
machinery
Imports,
sells other itemsequipment.
including
and transportation
distributorships to other people.
Most
Exporters
countries
findhave
markets
government
for theiragencies
goods and
that
regulate
services
imports
in other
to countries.
make sure that imports:
• They must comply with local and
foreign trade regulations.
• Meet legal requirements
• They are responsible for shipping
the goods to their foreign • Are safe for consumers
importer.
• National, regional, and local
government agencies help
exporters find new customers.
Businesses can benefit by engaging
in international trade.
Example:
If you and a friend have
the exact same CD
collection, there would be
no reason to trade CDs.
If you and your friend had
10 different titles in your
respective collections, you
could trade your less
favorite CDs for ones that
you like. Both you and
your friend benefit from
this trade.
Businesses can benefit by engaging
in international trade.
A country might produce some goods better or
more cheaply because of:
Up-to-date
technology
Workers
Easy access
with to
special
raw materials
skills
Countries have different resources and trade to get
Countries
are generally
efficient when they produce
other resources
theymore
need.
goods and services for which their resources are best suited.
Types of Trade Advantages
Countries specialize in products they can make at a
lower cost than other countries.
U.S.-based Boeing manufactures
large passenger aircraft. Australia
doesn’t have the resources to
produce passenger jets. Therefore,
the U.S. has an absolute trade
advantage over Australia in jet
production.
An absolute advantage occurs when one nation has the
ability to produce a good or service with fewer resources
than another nation.
Types of Trade Advantages
If Italy has more resources
and is more efficient in
cheese-making, they have
Because labor costs are lower,
a comparative advantage
Portugal has an economic
Italy
and Portugal
can
in
cheese
production.
advantage over Italy in shoe
produce high-quality
production.
shoes and cheese.
Portugal would benefit by producing more shoes than it needs
so it could trade with Italy for cheese. Similarly, Italy could still
make shoes but would benefit more by making cheese and
Comparative advantage occurs when a country can
trading it to Portugal for shoes.
produce a product at a more efficient level than other
nations.
Specific benefits of international trade include:
Lower prices for
Enhanced
goodsrelations
and services
An improved
among
trading
due
to increased
standard
of
living
for
countries
competition
the citizens in both
countries
Increased income for the
shipping and/or airline
Possible
exchange
industry
to
increased
Adue
better
variety
Access
to
and
availability
of ideas and
freight
tourism
orand
quantity
of goods
of
scarce
resources,
such
technologyand
among
services
as oil and diamonds
countries
Objective
Describe issues in international trade.
Factors Affecting International Trade
Technological
advancements such as
satellites, cell phones,
and the Internet help
bring the world “closer
together” and foster
international trade.
A Nation’s Bank Account
A nation uses an annual accounting record (balance of payments) to
track all of its monetary transactions with other countries and includes:
Exports
Imports
Foreign aid
Business
investment
abroad
Money
spent by
tourists
A Nation’s Bank Account
Two components make up the balance of trade.
Money
coming
Money going
out
of the country
into the
country
(imports,
foreign
aid, and
(exports
and money
business
investment
abroad)
bycreates
tourists)
Aspent
nation
a
favorable balance by
having more money
coming in than going out.
reduces
increases
thebalance
balanceofofpayments.
payments.
The balance of trade is the difference between the
two components of a nation’s balance of payments.
A trade surplus exists
when the country
exports more goods
than it imports.
A trade deficit exists
when a country imports
more than it exports.
A nation can have a positive balance if other monies
coming in offset the trade deficit.
Competition
American automakers
compete with car
manufacturers in Japan,
Mexico, Germany, and
South Korea. This has
led to changes in U.S.
business practices.
Businesses must
Competition
forces
continue
companies
to evaluate
to keep their
prices
products
low andto
produce
stay
competitive.
better products.
Competition
Factors affecting a country’s ability to compete
worldwide include:
Keeps the economy• Inflation
lean and efficient. Forces
• High unemployment levels
companies to produce
quality products or be
• Government support
forced out.
• New, emerging economies
Competition is good for the economy.
Competition
Challenges that nations face in terms of competition
include:
Protecting
Investing inthe
factories
environment
and
equipment
Finding new trading
partners and dealing
Obtaining adequate
with trade barriers
wages for all workers
Training their workforce to compete
in the global economy
Strength of a Nation’s Currency
Examples:
Consumers, investors,
and tourists lost
confidence in the
Argentine peso after
two Argentine
presidents resigned in
10 days. As a result,
the peso experienced
a 70% drop in value.
In the 1990s, the U.S. dollar
was worth 20 to 30 cents
Currency values “float” or
more than the Canadian
change in relation to
dollar. American tourists
currency of other countries
could get more for their
due to economic factors and
money, which increased
political events.
tourism and helped the
Canadian economy.
Strength of a Nation’s Currency
Because the Japanese The Chinese government sets
Some European
the value of its Chinese yuan
yen
is
one
of
the
countries using the artificially low. Chinese
strongest
currencies
euro believe
it
exports are high and imports
inincreases
the world,competition,
the
Japanese are able to are low. The Chinese must
lowers prices, and
pay more for imported goods
buy
more
imported
creates a predictable than people in other
goods
that cost
less.
and stable
economy.
countries.
Strong
To
A weak
overcome
currency
currency
exchange
values
will generally
increase
rates, some
decrease
imports
European
from
imports
countries
countries
but will
with
weak
use
increase
the
currency
same
exports.
values
currency.
because foreign goods are less
expensive to buy.
Cultural and Political Differences
systems
CulturalPolitical
differences
include:
• International
traders must be aware
• Language
of the stability of a country’s
• Religion
political
system.
• Values
• They
should know the protection a
country
affords foreign traders.
• Customs
• Social relationships
Government Control of International Trade
Reasons for protectionism:
• To avoid trade deficits
Imported
products
• To protect
domestic industries against
Exported products
provide
citizens
with
foreign
competition
provide citizens more
more choices and
domestic jobs.
usually lower prices.
International trade
affects
economy.
Protectionism
occurs
when aa country’s
nation’s government
attempts to control trade with other countries.
Government Control of International Trade
Results of protectionism:
• Provides more employment
• Reduces competition
• Causes consumers to pay higher
prices at home
• Creates trade problems with other
nations
Governmental Control of International Trade
Trade barriers that governments use to limit trade:
Quotas:
Embargo:
Product
standards:
Product
U.S. cars
Licenses:
Standards
Tariffs:
Limitsthat
placed
on
Barrier
that
suspends
Specifications
products
Permits that nations use to
amount
ofthey
exports
Taxes
on
Cuba
all import-export
trade
must
meet
before
can be
regulate the amount of
or into
imports
that
certain
goods
with
another
country
imported
a
country
imports or exports into or out
move into or out of
of their country
a country
Government Support of International Trade
The European
Union has united
its members into
one economy.
Global organization that deals with the rules of
trade between nations
Establish organizations
Government Support of International Trade
The mission of the General
Agreement on Tariffs and
Trade (GATT) is to expand
world trade and improve
international trade relations.
The North American Free
Trade Agreement (NAFTA)
has eliminated almost all
trade barriers between
Canada, U.S., and Mexico.
Create trade agreements
Government Support of International Trade
Use other methods of improving international
trade relations:
Trade missions:
Trade talks:
Trade
centers:
Groups of business executives
Communication channel
and government officials who Offices
and display rooms in
that helps settle disputes
travel to foreign countries to major
foreign cities that assist
and improve the climate for
promote trade between two importers
and exporters
international trade
countries
Government Support of International Trade
Encourages growth of multinational
corporations (MNCs)
Organizations that conduct business in several countries
• TheDiscussion
United States
Questions
imports just over 64 percent of its
oil supply.
1. Should the U.S. keep relying
• Variety of factors affect what is paid at the gas pump.
on other countries to supply
• How
can U.S. lower its dependence on oil imports?
its oil?
 Drill in Alaska?
2. Should the U.S. tap into its
 Use
less oil
by driving fuel-efficient vehicles?
own
natural
resources?
3. Can the U.S. balance its
resource needs and protect
its natural environment?
• Select a product that you would like to import and sell.
• Conduct research to find countries or businesses that
produce the item.
• Determine if any of the countries are subject to embargoes
by accessing the Internet:
http://treas.gov (U.S.)
http://www.dfait-maeci.gcca/trade/sanctions-en.asp (Canada)
• Determine how the identified embargoes would affect your
ability to buy and sell the product.
MarkED
Acknowledgements
Original Developer
Christopher C. Burke, MarkED
Version 1.0
Copyright © 2005
MarkED Resource Center
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People of the World
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DIGITAL STOCK CORP.;
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