INTERNATIONAL TRADE

International Trade - DefinitionInternational Trade - Definition

International trade involves the _________ of ________or services between nations.

This is described in terms of – ________: the goods and services _______in ________: the goods and services _______in

foreign markets. foreign markets. – ________: the goods or services _________________: the goods or services _________ from from

foreign producers. foreign producers.

Free Trade vs. Trade BarriersFree Trade vs. Trade Barriers

Nations can trade ________ with each other or there are trade.– _______Trade: Nothing ________ or gets in

the way from two __________trading with each other.

– Trade __________: Trade is __________ because things get in the way.

There are _______ and _________ related to free trade as well as trade barriers.

Free Trade - BenefitsFree Trade - Benefits

When nations __________and _________, total When nations __________and _________, total world output or sales is _______________. world output or sales is _______________.

Companies can produce for foreign markets as well Companies can produce for foreign markets as well as ________ markets (markets in the home country). as ________ markets (markets in the home country).

This means there is potential for making more This means there is potential for making more __________as there are more _________ to __________as there are more _________ to _______ goods or __________ in._______ goods or __________ in.

More variety of __________ are available from a More variety of __________ are available from a _________ market than just a __________ market._________ market than just a __________ market.

Prices of goods are ___________through increased Prices of goods are ___________through increased ____________.____________.

Free Trade - CostsFree Trade - Costs

The _________ (home) country can ______ money because the foreign goods allowed into the market __________ competition and make it _____ likely people will buy ________ products. – Example: In the U.S., people might want to buy a

foreign automobile like a Honda or Toyota instead of an American made car.

Increased ___________ means ________ prices.

Less money will go into the __________ market place and this can cause _________ to be ________ and jobs to be ___________.

Trade Barriers – Three TypesTrade Barriers – Three Types

__________ to trade are things that hinder or get in the way of ___________.

They can be _______, physical , or _________– Cultural barriers: ________, currency,

or beliefs.– Physical barriers: _________, rivers, etc.

• Example: The ________ Mountains in Europe– ____________ barriers: government rules that _______,

block or discourage _____________ trade between countries.

Trade Barriers - EconomicTrade Barriers - Economic

The most common ________ restrictions are: – tariffs, which are ______ on

_________.– quotas, which are ________ on the

quantity that can be _________.– embargos, which are a complete

________ block usually for _________ purposes.

TariffsTariffs

A A tarifftariff is a _____ put on _______ imported from is a _____ put on _______ imported from abroad and sometimes referred to as abroad and sometimes referred to as _____________._____________.

It is the most _______ and most familiar _______of It is the most _______ and most familiar _______of trade restriction.trade restriction.

The effect of a tariff is to ________ the price of the The effect of a tariff is to ________ the price of the ____________ product. ____________ product.

It makes imported goods more __________ so that It makes imported goods more __________ so that people are more likely to purchase _________ people are more likely to purchase _________ __________. __________.

The money received from the tariff is _________ by The money received from the tariff is _________ by the ___________ government. the ___________ government.

QuotasQuotas

A A quota quota is a _______ on the amount of _______ that is a _______ on the amount of _______ that can be _____________. can be _____________.

Putting a quota on a good creates a _________, Putting a quota on a good creates a _________, which causes the _______ of the good to ______ which causes the _______ of the good to ______ and makes the ___________ goods less and makes the ___________ goods less __________for buyers. This encourages people to __________for buyers. This encourages people to _______ domestic ________. _______ domestic ________.

A quota on shoes, for example, might limit foreign-A quota on shoes, for example, might limit foreign-made shoes to 10,000,000 pairs a year. If Americans made shoes to 10,000,000 pairs a year. If Americans buy 200,000,000 pairs of shoes each year, this would buy 200,000,000 pairs of shoes each year, this would leave most of the market to ____________producers.leave most of the market to ____________producers.

EmbargoesEmbargoes

Embargoes are a _________ order which completely _________ trade with another __________.

If necessary, the ________ actually sets up a __________ to prevent ________ of merchant ships ______ and out of shipping ports.

Embargoes (con’t)Embargoes (con’t)

The embargo is the ________ type of trade ________ and is usually enacted for political purposes to ______ a __________ economically and thus undermine the _________ _________ leaders in charge.

Such was the case with the _________ embargo which has been in place since the 1960s.

Trade Barriers - BenefitsTrade Barriers - Benefits

Most barriers to trade are designed to _______ imports from __________a country.

Trade barriers provide many _________:– Protect ___________ industries from competition.– Protect ________.– help provide ________ _______for the

government. – __________ the number of ________ people can

choose from.– __________ the costs of these goods through

increased_________.

Trade Barriers - CostsTrade Barriers - Costs

Tariffs ________ the price of ________ goods.

Less _________from world markets means there is an _________ in the price.

The _____ on imported goods is passed along to the ________ so the price of imported goods is _________.