Download Powerpoint 4.1 - Marketing Education

International
Trade
Chapter
4
Global Analysis
• Section 4.1 International Trade
• Section 4.2 The Global Marketplace
International Trade
Key Terms
international
trade
Objectives
imports
• Explain the interdependence of nations
exports
• Explain the nature of international trade
balance of trade
free trade
• Discuss the balance of trade
tariff
• List three types of trade barriers
quota
embargo
protectionism
• List three significant trade agreements and
alliances that foster worldwide free trade
World Trade
Organization
(WTO)
North American
Free Trade
Agreement
(NAFTA)
European Union
(EU)
Marketing Essentials Chapter 4, Section 4.1
International Trade
Study Organizer
On a chart like this one, organize the key concepts related to
international trade.
Marketing Essentials Chapter 4, Section 4.1
Global Marketplace
• Global marketplace =
• a worldwide trading system in which goods can be produced
wherever the production costs are cheapest and are ultimately
sold wherever
• market encompassing the whole world
• all people and businesses in the world are potential customers,
employers, or employees
Global Marketplace
• Why do you think the marketplace is Global?
1. Countries don’t have all 4 resources
• Land, labor, capital, entrepreneurs
2. Countries don’t produce all the goods & services
they need
3. Need to trade with other countries to obtain products
that meet the wants and needs of their people
Nature of International Trade
International trade is the exchange of goods and
services between nations
Imports X are goods and services purchased from
other countries
Exports X are goods and services sold to other
countries
• These exchanges
• Occur between the businesses involved
• Are Controlled by the governments involved
Interdependence of Nations
Interdependence of Nations: when countries must rely
on each other to produce all the goods they need to survive
Why does Economic interdependence occur?
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countries do not produce all the goods and service they
need
Each country possesses unique resources and capabilities
Have limited resources in one or more of the factors of
production
Different countries can produce specific goods such as:
• U.S. and Canada: Agriculture
• Saudi Arabia and Russia: Oil
• India and Japan: Computer science and Technology
Two Types of Economic Advantages
Economic Advantage: Where one country
does something better than other countries
There are two types of advantages in
international trade:
• Absolute Advantage
• Comparative Advantage
1. Absolute Advantage
Absolute Advantage: When a country has
natural resources or talents that allow it to
produce an item at the lowest cost possible
Example:
• China produces 80% of all silk in the world
• China has an absolute advantage in the
production of silk
Marketing Essentials Chapter 4, Section 4.1
2. Comparative Advantage
Comparative Advantage: The value a nation
gains by selling what it produces most
efficiently
Example:
• US produces high-tech products because of
strong infrastructure, raw materials and
educated labor force
• Airplanes, computers, high tech machinery,
entertainment, and telecommunications
Who Benefits from International Trade
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Consumers
Producers
Workers
Nations
– All benefit in different ways
Benefits of International Trade
Consumers:
• competition encourages the production of highquality goods with lower prices
Producers
• gain higher profit by expanding their operations
into international markets
Benefits of International Trade
Workers
• leads to higher employment rates at home and
abroad
Nations
• foreign investment in a country often improves
the standard of living for that country’s people
Government Involvement in International
Trade
• All nations control and monitor their trade
with foreign businesses
• In the U.S., the customs division of the
Treasury Department monitors all imports
•
All imports into US subject to search and review
• All U.S. citizens and firms must meet custom
requirements of foreign countries
Marketing Essentials Chapter 4, Section 4.1
Balance of Trade
All nations track their international trade
• Shows their economic status
• balance of trade - The difference in
value between the exports and imports of
a nation
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•
A positive balance happens when a nation
exports more than it imports
A negative balance (aka trade deficit) is when
a nation imports more than it exports
Balance of Trade
A trade deficit (negative balance of trade)
reduces a nation’s revenue
•
When more money leaves a country than
comes in, the country is in debt or is a
debtor nation
•
Unemployment can also be another negative
result of a large trade deficit.
Marketing Essentials Chapter 4, Section 4.1
Trade Barriers
Many countries favor and practice free trade trade that is done purely on free market
principles, without restrictive regulations
Other nations impose trade barriers -controls
and restrictions that regulate the flow of
goods and services
Trade Barriers
There are three main types of controls (trade
barriers):
1. Tariffs
2. Quotas
3. Embargoes
1. Tariffs
A tariff X is a tax on imports. Also known as a duty,
tariffs come in two different types:
• Revenue-producing: tax as a source of income
for the government
• Normally low in price
• Protective: raises the price of imports to
encourage consumers to buy locally made goods
• high price to increase price of imported goods
2. Import Quota
An import quota X limits either the quantity or
the monetary value of a product that may be
imported
• These help local business compete with
foreign companies
• Ex: quota on cars imported into US so U.S.
manufacturers can sell their autos
• Some countries will impose their own
quota’s on exports to improve relationship
with another country
3. Embargos
embargo X a total ban on specific goods coming into
and leaving a country
An embargo can be imposed for different reasons:
• Poisoned or defective goods
• Political reasons
Protectionism X is a government’s establishment of
economic policies that systematically restrict imports
in order to protect domestic industries
• It is the opposite of free trade
Trade Agreements and Alliances
Trade Agreements: Governments make agreements
with each other to establish guidelines for international
trade and to set up trade alliances
Three Trade agreements & Alliances:
1. World Trade Organization (WTO
2. North American Free Trade Agreement (NAFTA)
3. European Union (EU)
1. World Trade Organization
The World Trade Organization (WTO) X A global
coalition formed in 1995 of more than 140
governments that make rules governing international
trade
Benefits:
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Open markets and promote global free trade
Reduces tariffs
Standardizes trade rules
Study important trade issues
Evaluate the health of the world economy
2. NAFTA
The North American Free Trade Agreement
(NAFTA) X is an international trade agreement
among the United States, Canada, and Mexico
• Founded on January 1, 1994
• Goal was to get rid all trade barriers between the
countries by 2009
• Tariffs were eliminated immediately
3. European Union
The European Union (EU) X is Europe’s trading bloc.
established free trade among its member nations
• Creates a single European
currency (euro) and central bank
• Maintains competitive practices
• Maintains environmental and
safety standards
• Provides security
Section 4.1
International Trade
Key Concepts Related to International Trade
SECTION 4.1 REVIEW