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A modern term used to describe the changes in societies and the world economy that result from dramatically increased international trade and cultural exchange. “Countries engage in international trade for two basic reasons, each of which contributes to their gain from trade. First, countries trade because they are different from each other. Nations, like individuals, can benefit from their differences by reaching an arrangement in which each does the things it does relatively well. Second, countries trade to achieve economies of scale in production. That is, if each country produces only a limited range of goods, it can produce each of these goods at a larger scale and hence more efficiently than if it tried to produce everything. In the real world, patterns of international trade reflect the interaction of both these motives.” ~Paul Krugman, International Economics Definition~ Preventing a foreign product from freely entering into a nation’s territory. 1. 2. 3. 4. Import Quota Voluntary Export Restraint Tariff Informal Barriers • Government Licensing Restrictions • Government Health and Safety Requirements The overall impact of trade barriers is that they limit supply. This results in two common consequences: 1. Increased price of foreign goods 2. Trade wars Definition~ The use of trade barriers to protect industries from foreign competition. Positives Protect jobs Protect infant industries Enhance national security Negatives Limits LDC’s ability to compete on a global scale Reduces global living standard Limits attempts for international peace World Trade Organization (1995)~ The only international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. European Union (1951/1999)~ A regional economic agreement among 27 countries across the European continent. NAFTA (1994)~ This agreement removed most barriers to trade and investment among the United States, Canada, and Mexico. Under the NAFTA, all non-tariff barriers to agricultural trade between the United States and Mexico were eliminated. The agreement was phased in from 1994-2008 and has increased trade by over 200% since it was enacted. Development- Process by Indicators of Development which a nation improves the economic, political and social 1. Per capita GDP 2. Energy Consumption well being of its people. 3. Labor Force Developed-High level of 4. Literacy material well being (US) Less Developed- Low level of 5. Infant Mortality 6. Life Expectancy material well being 7. Consumer Goods (Ethiopia) Newly Industrializing- Better performing LDC’s (Mexico) Levels of Development Northern Europe Western Europe Canada Eastern Europe Western Asia Southern Europe United States Northern Africa Tropic of Cancer Central America Caribbean South Central Asia East Asia Western Africa Eastern Africa Equator Southeast Asia Middle Africa South America Tropic of Capricorn Southern Africa Oceania Three Levels of Development Developed Countries Less Developed Countries Newly Industrialized Countries 1. 2. 3. 4. Rapid population growth Resource distribution Lack of physical capital Lack of human capital • • • 5. Political Factors • • • 6. Health/Nutrition Education/Training “Brain Drain” Colonial Dependency to Independent Planning Government Corruption Political Instability (civil wars, social unrest, lack of government infrastructure) Debt World Bank International Monetary Fund World Trade Organization