global interdependence obj. 9.05-.06 chapter 26, sect. 1 and chapter 27, sect.1
TRANSCRIPT
Global Interdependence
Obj. 9.05-.06Chapter 26, Sect. 1 and Chapter 27, Sect.1
International TradeSolves the problem of scarcityNations trade to obtain goods &
services they cannot produce efficiently◦Eat fruit in the winter (U.S.)◦Buy a computer with an operating system &
components developed in the U.S. (South Africa, Vietnam, etc.)
Exports◦Goods sold in another country
Imports◦Goods purchased from other countries
Four Reasons Nations Trade
1. Comparative Advantage: The ability of a country to produce a good at a relatively lower cost than another country can
2. Specialization◦Using scarce resources to produce those
things that they produce better than other countries
◦Can lead to over-production; producing more goods than can be consumed by all the people of a country Surplus exported to other nations
3. Create Jobs◦By exporting goods, companies can take
larger orders for a good than just producing for their nation alone
4. Factors of production◦Based on natural resources that are needed
where they cannot be accessed or do not exist Saudi Arabia (oil)
◦Can be based on sources of capital or labor U.S. (Airplanes, weapons or educated
workers)
Restrictions on Trade
Tariff◦Tax on imported goods◦Goal is to make imports more
expensive than similar goods produced domestically (cars)
Quotas◦Limits on the amount of foreign
goods imported◦Used when higher prices on imports
do little to stop individuals from purchasing them
Free Trade Zones-Agreement b/w multiple nations
to eliminate tariffs on goods & restrictions on number imports & exports
NAFTA (North American Free Trade Agreement) 1994
◦ Canada, U.S. And Mexico◦ Eliminate barriers over
timeEuropean Union (EU) 2002◦ 27 member nations◦No trade barriers,16 EU nations
use one currency “the Euro”
Globalization (interdependence)We live in an era where nations are
dependent upon one another for: goods & services (products)natural resources and labor (factors of
production)Trade b/w nations is a process of
competition and cooperation
Trade Agreements
The cost of most trade barriers are higher than their benefits Fiscally and politically
Most countries aim to achieve free trade◦ Countries join together with a few key trading
partners to increase trade◦ WTO (World Trade Organization)
Oversees trade among many nations of the world
Negotiates trade rules Helps developing nations Settles trade disputes Critics say it favors corporations over nations
Balance of TradeExchange rate: the price of a nation’s currency
in terms of another nation’s currencyBalance of trade: the difference b/w the value
of a nation’s imports and it exportsTrade surplus: positive balance of tradeTrade deficit: negative balance of trade
◦Can devalue a nation’s currency in terms of exchange rate
◦Leads to surplus of money in the exporting nation
◦Devalued currency can lead to decrease in incomes and employment in the importing nation
Benefits of Global TradePositive:
◦Businesses can make more profit◦Greater competition b/w businesses
can lead to lower prices and more choices
Negative: ◦Competition may force out weak
companies which can impact national economies (U.S. car industry)
◦May lead to protectionism: countries place tariffs on imported goods
Global IssuesGrowing economic inequality b/w rich and
poor nationsWarfare and famine often leads to refugees:
people who leave their nation unwillinglyDue to a lack of economic opportunity in
developing nations, there is increased immigration: people leaving their nation willingly to live in an industrialized one
United Nations (UN): since 1947 has promoted internationalism to help support economic development & foster parity b/w industrialized and developing world
Industrialized nations◦US, UK, Germany, Japan, Canada, France
◦Have natural resources such as coal or iron (or access to it)
◦Large industries◦Consume much of the world’s
natural resources
Developing Nations◦Chad, Belize, Albania
◦Often have few natural resources
◦Cannot feed their population
◦Manufacture few products
◦Low life expectancy (40 yrs.) and literacy
Saudi Arabia, Venezuela, India
Possess great wealth of natural resources
Many were once colonies of industrialized nations
May be developing industry and human capital
Use your notes to answer1. Why do nations trade with each other?2. What is the difference between an import and
an export?3. How does comparative advantage influence
trade?4. How do tariffs and quotas restrict trade?5. What is NAFTA? Why do countries engage in
free trade?6. Describe one positive and one negative
aspect of global trade.7. Name 2 industrialized and 2 developing
nations. What are the characteristics of these nations?