ch20slecture

8/8/2019 ch20slecture

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Presentation on trends in Foreign Trade

By

Shilpi Jain

Roll no. 9104



Describe the patterns and trends in internationaltrade.

1

Explain why nations engage in international trade

and why trade benefits all nations.2

Explain trade barriers reduce international trade.3

Explain the arguments used to justify trade barriers

and show why they are incorrect but also why some

barriers are hard to remove.

4

In this presentation«.



TRAD

E PATTERNS AND

TREND

S

Imports are the goods and services that we buy from

people in other countries.

Ex ports are the goods and services that we sell topeople in other countries.

We trade internationally:

Goods

Services



TRAD

E PATTERNS AND

TREND

S

In 2004, trade in goods accounted for

70 percent of U.S. exports

83 percent of U.S. importsThe rest of U.S. international trade was in services.

Trade in Services

U.S. international trade in services is large and growing.

Services include hotel and transportation servicesbought by American tourists abroad and foreign touristsin the United States, insurance, and banking services.



TRAD

E PATTERNS AND

TREND

S

The Outsourcing Trend

In 1960, the United States

Exported 5 percent of total output

Imported 4 percent of the goods and services

bought.

In 2005, the United States

Exported 10.5 percent of total output

Imported 16 percent of the goods and services

bought.



TRAD

E PATTERNS AND

TREND

S

Some of the increase arises from offshore

outsourcing²buying a good or service from a low-cost

overseas supplier.

Trading Partners and Trade Agreements

The United States has trading links with every part of

the world and is a member of several international

organizations that seek to promote international trade

and regional trade.



TRAD

E PATTERNS AND

TREND

S

U.S. Trading Partners

Biggest trading partner: Canada

Second biggest trading partners: Mexico and Japan

Other large trading partners:

China

Germany United Kingdom

Significant volumes of trade with:

South Korea, Taiwan, Singapore, and Hong Kong,



TRAD

E PATTERNS AND

TREND

S

Trade Agreements

A trade agreements are treaties between two countries

(called bilateral agreements) or among a group of nations (called multilateral agreements) to promote

greater trade and economic cooperation.

The United States is a member of:

North American Free Trade Agreement (NAFTA)

Central American Free Trade Agreement (CAFTA)

Asia-Pacific Economic Cooperation (APEC)



TRAD

E PATTERNS AND

TREND

S

North American Free Trade Agreement (NAFTA)

An agreement between the United States, Canada,

and Mexico to make trade among them easier andfreer.

NAFTA came into effect in 1994 and since then tradeamong these three countries has grown rapidly.



TRAD

E PATTERNS AND

TREND

S

C entral American Free Trade Agreement ( C AFTA)

A comprehensive agreement between the United

States, Costa Rica, the Dominican Republic, ElSalvador, Guatemala, Honduras, and Nicaragua.

The agreement has both trade and political goals, thelatter to promote freedom and democracy in Central

America.



TRAD

E PATTERNS AND

TREND

S

The Free Trade Area of the Americas (FTAA)

The governments of 34 democracies in the Americas

(all 35 countries excluding Cuba) have begun a FreeTrade Area of the America process.

The objective of this process is to achieve freeinternational trade among all countries in the Americas.



TRAD

E RESTRICTIONS

Governments restrict trade to protect industries from

foreign competition by using two main tools:

Tariffs Nontariff barriers

A tariff is a tax on a good that is imposed by the

importing country when an imported good crosses its

international border.

A nontariff barrier is any action other than a tariff that

restricts international trade. For example, a quota.



THE CASE AGAINST PROTECTION

Three Arguments for Protection

The national security argument

The infant-industry argument

The dumping argument




The National Security Argument

The argument that a country must protect industries thatproduce equipment and armaments and those on whichthe defense industries rely for their raw materials.

This argument can be taken too far.

In a time of war, all industries contribute to nationaldefense.

To increase the output of a strategic industry, it ismore efficient to use a subsidy rather than a tariff or quota.




The Dumping Argument

Dumping occurs when a foreign firm sells its exports

at a lower price than its cost of production.The argument is that a firm that wants to become aglobal monopoly might try to eliminate its foreigncompetitors by dumping.

Once it has a global monopoly, it will raise its price.Dumping is usually justification for temporarycountervailing duties.




Five New Arguments for Protection

Saves Jobs

The argument is that protection saves jobs becausewhen we buy shoes from Brazil or shirts from Taiwan,U.S. workers lose their jobs.

Allows Us to Compete with Cheap Foreign Labor

The argument is that with the removal of protectivetariffs in U.S. trade with Mexico jobs rushing to Mexicowould make a ³giant sucking sound.´




Brings Diversity and Stability

The argument is that protection brings a diversified

economy²an economy that fluctuates less than onethat produces only a few goods and services.

Penalizes Lax Environmental Standards

The argument is that many poor countries, such as

Mexico, do not have the same environmental standards

as the United States, so we cannot compete without

tariffs.




Protects National Culture

The argument that is commonly heard in Canada andEurope is that free trade in books, magazines, movies,and television programs means U.S. domination andthe end of local culture.

None of these five common arguments providesoverwhelming support for protection.



THE CASE AGAINST PROTECTION Why Is International Trade Restricted?

Two key reasons:

Tariff revenue

Rent seeking

Tariff Revenue

In some developing countries, governments cannot

use income taxes and sales taxes because financialrecord-keeping is poor.

In these countries, international trade transactions arewell recorded, so governments use tariffs on importsto raise revenue.



THE CASE AGAINST PROTECTIONRent Seeking

Rent seeking is lobbying and other political activity thatseeks to capture the gains from trade.

Free trade increases consumption possibilities on theaverage, but not everyone shares in the gains.

Free trade brings benefits to some and costs to others.

The uneven distribution of benefits and costs is theprinciple source of impediment to freer internationaltrade.



International Trade in YOUR Life

International trade plays and extraordinary large role in

y our life in three ways.

1.As a consumer, you benefit from a wide range of low-

cost, high-quality goods and services produced in other

countries.

2.As a producer, you benefit from huge global markets for

U.S. products. Your job prospects would be dimmer if

firm you work for did not have global markets in which to

sell its production.

3.As a voter, you have a big stake in the politics of free

trade versus protection. As a voter, you must decide

what trade policy serves the self-interest and what best

serves the social interest.

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