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I: Globalization: A: Technological advances: phone, computers, communications, World Wide Web

International Trade is trade among the nations of the world. The world is getting smaller due to technology and trade between nations is the catalyst to lifting humanity out of poverty. I: Globalization: A: Technological advances: phone, computers, communications, World Wide Web

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I: Globalization: A: Technological advances: phone, computers, communications, World Wide Web

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  1. International Trade is trade among the nations of the world.The world is getting smaller due to technology and trade between nations is the catalyst to lifting humanity out of poverty. I: Globalization: A: Technological advances: phone, computers, communications, World Wide Web B: Comparative Advantage: ability for one country to produce a good at a relatively lower cost than another country can.

  2. Look carefully at Figure 18.1 why do you think the World Wide Web spread more quickly than the three earlier inventions? Answer below • II: Governments and Trade • A: Policy: plan of action on an issue- economically it is a plan on international trade • Exports: something that is produced in the US and then shipped elsewhere. • Imports: Something produced elsewhere and shipped in the US • III: Barriers to Trade • A: Protectionist: the gov't policy seeks to limit imports • B: Tarriffs: a tax on a good that is imported • C: Quotas: Limit on the quantity of a particular good during a certain period of time. • Embargoes: A government order that restricts commerce or exchange with a specified country. An embargo is usually created as a result of unfavorable political or economic circumstances between nations. The restriction looks to isolate the country and create difficulties for its governing body, forcing it to act on the underlying issue.

  3. III: Free trade: Lifting of trade barriers • A: In 1944, United States and other nations agree to rebuild global economy on free trade. • B: IMF (International Monetary Fund) and the World Bank were created DEFINE EACH • C: IMF: they foster monetary policy and operations • D: World Bank: provides assistance to the third world developing countries to help reduce poverty and help standard of living. • E: GATT ( General Agreement on Tariffs and Trade) 117 countries: • F: In 1995, countries under GATT updated and became members of the WTO (World Trade Organization) What does the WTO do?

  4. IV: Regional Agreements • A: European Union: • 1. 2005 25 countries in Europe freely trade with one another • 2. build a single market in Europe • 3. own currency the Euro • 4. most important agreement in Europe • B: • NAFTA (North American Free Trade Agreement) • 1. free trade between US, Canada, and Mexico • 2. reduced barriers for trade • 3. Processed foods and beverages are exported • 4. 30% of exports go to Canada and Mexico

  5. C: CAFTA-DR ( Central American –Dominican Republic Free Trade Agreement) • 1. comprehensive trade agreement • 2. First step to Free Trade Area of the Americas • Click on the link below, read the article • be able to answer questions in class • tomorrow. • http://useconomy.about.com/od/tradepolicy/p/NAFTA_History.htm

  6. V: Financing Trade • A: A nation’s balance of trade can either be a surplus or deficit. • 1. Trade Surplus: When the value of goods leaving a nation is greater than those entering. • 2. Trade Deficit: When the value of goods coming in is greater than those leaving. • B: The US uses the dollar as a medium of exchange • C: Foreign Exchange rate: what the price of one nation’s currency is in term’s of another country’s currency. • D: Most nations’ use a flexible exchange rate or one that allows for the supply and demand of goods to set the price of various currencies. This means a currency’s price may change every day.

  7. Explain the effects a trade deficit and trade surplus has on an economy.How does the exchange rate effect a country’s balance of trade? • Answer below: When a country’s currency increase in value (increase in the exchange rate) the currency is considered strong. That means that people in other countries find the exports from that country are expensive and trade tends to decline. If the currency depreciates in value then the opposite occurs. Exports are less expensive and trade increases.

  8. Putting it all together: Class Activity

  9. The first diagram shows how supply and demand affect a nation’s currency exchange rate. Draw a second diagram that show s how the nation’s currency exchange rate affects balance of trade. Compare your diagram with those of your partner. Currency Exchange Rate (Price of Money) Currency Exchange Rate (Foreign Currency per US Dollars) S CURRENCY EXCHANGE RATE (Price of Money BALANCE OF TRADE D CURRENCY EXCHANGE RATE (foreign currency per US dollars) QUANITITY

  10. Developing Countries and Globalization • Of the 200 countries of the world, only 35 are considered developed. • These include the US, Japan, Great Britain, China, and Spain. • Dozens of countries are trying to move to a market based economy. These countries are DEVELOPING countries. The IMF, United Nations, and World Bank give them this classification. Their average per capita income is a fraction of what is found in the industrialized countries. • Many of the developing countries operate on the traditional economic model. Ex: if your parents were fishermen then you will be a fisherman. • What do developing countries want in order to raise their standard of living for citizens?

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