International Trade & its Benefits

Why do Nations Trade?

• To obtain goods they cannot produce• To reflect comparative advantage- when one country produces the

product at a lower cost. - this promotes specialization• Create jobs

Barriers to International Trade

• Tariffs- tax on an imported good• Quotas- blocking trade by limiting the amount a country can buy• Sometimes barriers do not work and they force consumers o pay

higher prices.• Many countries now promote free trade.

Trade Agreements

• European Union (EU)- no trade barriers in Europe• North American Free Trade Agreement (NAFTA) - No trade barriers in North America (Canada, US, Mexico)• World Trade Organization – WTO - Negotiate trade rules and helps countries develop their economy

Economies in Transition

Changing Economies

• Transitions can occur because of the success of market economies• Russia changes from a command economy to a market economy after

the 1991 collapse of the Soviet Union.

Developing Countries

• Developing countries are those whose average per capita income is a fraction of an industrialized country• Most developing countries have traditional economies - based on custom and habit

Problems of Developing Countries

• High rate of population growth -Population grows faster than GDP, therefore the per capita GDP declines- each person has a smaller share of what the economy produces -Rapid population growth also results in a lack of food and housing• Geography and natural resources -Do not have access to resources and/or ocean trade routes • War -War produces debt• corruption

Growth and Development of Developing Countries

• Developing countries are responsible for their own development -World Bank created recommendations for developing countries.• Many developing countries have trade barriers to protect inefficient

industries. This hurts their ability to trade and grow.

Global Changes

Economic Interdependence of the WorldAdvantages of global trade-Profit-Increased competition results in lower prices and more products from which to chooseDisadvantages of global trade-competition forces weak companies to collapse-Protectionism: placing a tariff on imports; causes prices to increase and leads to trade wars; creates tension and trade barriers -Too much dependency

General InformationThe United States is a developed country because…- It has natural resources and/or easy access to resources- It’s citizens are educated, healthy and accustomed to work/businessDeveloped Countries…- Manufacture goods sold around the world- Consume most of the natural resources- Have more technology- Tend to have higher standard of living- Try to help developing countries through foreign aid