international economics lesson 5: barriers to trade

International Economics

Lesson 5: Barriers to Trade

Obtain Your Clickers

& look over your notes from yesterday.

Clicker Quiz

Look Over Your Notes For A Minute

If the USA exports $5 billion worth of goods/services, and imports $4

billion worth of goods/services, what is our balance of trade?

• A) -$1 billion

• B) $0

• C) $1 billion

• D) $3 billion

If the USA exports $2 billion worth of goods/services, and imports $4

billion worth of goods/services, then the USA is running a

• A) trade surplus

• B) trade deficit

In 1998, what was the dollar value of goods and services purchased from America by Canadians?

• A) $160 billion B) $175 billion• C) $15 billion D) -$15 billion

Top Ten Trading Partners of the United States (1998, in billions of dollars)

Country

Exports To

Imports from

Canada $160 $175 Japan $58 $122 Mexico $79 $95 China $14 $71 Germany $27 $50 United Kingdom $39 $35 Taiwan $18 $33 France $18 $24 South Korea $16 $24 Singapore $16 $18

Which of the following statements is incorrect?• A) The U.S. ran a

trade deficit with Taiwan.

• B) The U.S. balance of trade with Taiwan was -$15 billion.

• C) The U.S. ran a trade deficit with the United Kingdom of $4 billion.

• D) The U.S. balance of payments with France was $0.

Top Ten Trading Partners of the United States (1998, in billions of dollars)

Country

Exports To

Imports from

Canada $160 $175 Japan $58 $122 Mexico $79 $95 China $14 $71 Germany $27 $50 United Kingdom $39 $35 Taiwan $18 $33 France $18 $24 South Korea $16 $24 Singapore $16 $18

With which country was the U.S. running the largest trade deficit?

• A) Canada• B) Japan• C) China• D) United

Kingdom

Top Ten Trading Partners of the United States (1998, in billions of dollars)

Country

Exports To

Imports from

Canada $160 $175 Japan $58 $122 Mexico $79 $95 China $14 $71 Germany $27 $50 United Kingdom $39 $35 Taiwan $18 $33 France $18 $24 South Korea $16 $24 Singapore $16 $18

Leave Your Clickers On

It’s Survey Time!

How would you feel about the government putting a tax on soda?

• A) Strongly in favor.

• B) Somewhat in favor.

• C) Somewhat against.

• D) Strongly against.

How would you feel about the government putting a tax on orange

juice?

• A) Strongly in favor.

• B) Somewhat in favor.

• C) Somewhat against.

• D) Strongly against.

Assignment• 1/2 Page Essay• Why are you for/against a soda tax?• Why are you for/against an OJ tax?• If you feel that one is worse than the other, why

do YOU feel this way?• I’m interested in your opinion, not your

neighbor’s.• If you can’t fill 1/2 a page answering those 3

questions, answer these questions too:– Is it ever ok to tax specific goods? Why or why not?– What is the best way for a government to tax, and why

(income, sales, property, corporate tax, etc.)?

The U.S. government DOES tax orange juice.

Tariffs

taxes on imports

Trade Barriers

• tariff: tax on imports

• quota: limit on Q of imports

• subsidy: gov’t payments to domestic producers

Trade Barriers

• tariff: tax on imports

• quota: limit on Q of imports

• subsidy: gov’t payments to domestic producers

• embargo: all trade forbidden

Embargo video.

Listen, Don’t Write

• Trade embargo with Iran

• Airplanes- 17 Iranian passenger jets have crashed in 25 years, killing 1,500 people

• Oil- free trade with Iran would reduce the world price of oil by 10%.

When did each country get their 1st McDonald’s?

Trade Barriers

• tariff: tax on imports

• quota: limit on Q of imports

• subsidy: gov’t payments to domestic producers

• embargo: all trade forbidden

• standards: goods must meet criteria

Standards Example

• On imported beef, the U.S. requires• farm to fork trace-ability• enter U.S. through specified inspection

posts• country of origin to have adequate food

safety system

Reinheitsgebot

• Germany’s purity law

• Lasted from 1516 to 1993.

• “Beer can only be made using barley, hops, and water.”

• Restricted trade because beer-makers in many other countries used wheat and rye instead of barley.

Article/Group Activity• A. Pick one trade restriction mentioned in the article, and provide a

general description of the trade restriction:– List the type of trade restriction (tariff, quota, etc.).– What product is trade being restricted on? – If a tariff, what’s the percentage? If a subsidy, what’s the dollar amount? If a

quota, how many are allowed?– What country issued the restriction?– Which countries are affected by the restriction?

• B. Who benefits from this trade restriction (List ALL who benefit)?• C. Who is harmed by this trade restriction (List ALL who are

harmed)?• D. Describe any retaliation taken by affected countries.

Example Article

Chad Seth Danielle

Zack Michael Baggott

Kyle Kendall Matth Nicole Arron

Hillary Michael Brannen

Shannon Lacey Haley Virginia Brandon

Teacher Desk/ Work Area

Erin Morgan Taylor Alex Dillon

Tim Megan Justin Xavier Andrew

Paige Cyndilee

Chris Charlee Ryan Stacey

Amanda Chelsea Brett Jessica Alison Courtney

Kylie

Teacher Desk/ Work Area

Forrest Lacey Daniel Emily Jordan Avery

Kristen Morgan Madison

KelseaRyneRaven

JustinPhillipCatherine

DaylanKayla

LaurenMandie

Andre’Jordan M

KaylaJordan ETeacher

Desk/ Work Area

MelissaDavidSoniaNickCourtney

JDHarley

KevinDrewBethanyAmberKaraSteven

(Empty)

JadeJonMaggieMoriahDee Dee

2-Act Plays

• Each play will tell the story of a particular trade barrier.

• As roles/actors, each group will have one King or Queen, a domestic producer, a foreign producer, and several consumers.

• Other group members will serve as writers and sign/money makers.

• Create price signs for each producer. If the trade restriction will cause a change in the price of one of the producer’s goods, make 2 signs for that producer.

What should occur in your play:

• Act 1-On day one, the domestic producer is the only group selling an item. Several transactions take place. Then, a foreign producer opens shop, & sells the same good at a lower price. All the consumers start buying from that producer. The domestic producer complains to the King (or Queen) that he/she is losing business.

• Act 2-In response to the domestic producer’s claims, the King (or Queen) imposes a trade restriction. Consumers then go back to buying the domestic producer’s product.

Other Stuff

• The domestic producer should show (& voice) how happy they he (or she) is about the trade restriction.

• Consumers should show how disappointed they are, either with the higher prices (from tariffs) or higher taxes (from subsidies) or inability to buy from the foreign producer (embargo or quota).

• The foreign producer should show (& voice) how angry he (or she) is about the trade restriction.

To Be Turned In:

• A script of everyone’s lines in the play.• Actors are encouraged to provide their

input in writing the lines they will be speaking.

• The writer should not not have a major speaking role. They could be a consumer.

• Names of all six group members should be written on the script.

Trade Restrictions Quiz

1) Embargoes are often the result of

• A) high tariffs.

• B) quotas.

• C) disagreements between countries.

• D) interdependence.

2) Which of the following is a limit on the quantity of certain imported goods

allowed in the country?

• A) Tariff• B) Quota• C) Embargo• D) Subsidy

3) Who is hurt by a U.S. tariff on imported peanuts?

• A) peanut farmers in Vietnam

• B) U.S. consumers

• C) both of the above

• D) neither of the above

4) The U.S. puts a tariff on tires from China. In retaliation, China

puts a tariff on cotton from the U.S. Who is hurt by these events?

• A) U.S. tire makers

• B) Chinese cotton farmers

• C) U.S. and Chinese consumers

• D) all of the above

• E) none of the above

5) Trade restrictions can cause…

• A) foreign producers to lose profits.

• B) domestic prices to rise

• C) retaliation by affected countries

• D) all of the above

• E) none of the above

6) A tariff can BEST be described as which of the following?

• A a tax on an imported good

• B a limit on the amount of imports

• C government payments to domestic producers to help them compete in world markets

• D a law that sets a limit on the amount of a good that can be imported

7) A tariff placed on foreign steel imports represents

• A a barrier to trade

• B a balance of payment deficit

• C a subsidy to domestic producers

• D an increase in domestic production

8) Which of the following is an attempt to punish another country

by refusing to trade with it?

• A) a tariff

• B) a subsidy

• C) an embargo

• D) a quota

• Tariff

• Quota

• Subsidy

• Standards

• Embargo

• Tariff

• Quota

• Subsidy

• Standards

• Embargo