Trade Mini Peer Trade Mini Peer PresentationsPresentations

Group 1:Group 1: Definition & Why is trade Definition & Why is trade necessary? Trade balance, surplus necessary? Trade balance, surplus & deficit& deficit

Group 2:Group 2: Problems faced by LEDC Problems faced by LEDC countries & trade imbalancecountries & trade imbalance

Group 3:Group 3: Trade blocs, tariffs, quotas Trade blocs, tariffs, quotas Group 4:Group 4: Free trade & Arguments Free trade & Arguments

for and againstfor and againstActivity: Each group will present on their section – it is also really important to take notes throughout these presentations - this is all really crucial information or the semester examCome up with 5 questions to make sure everyone has understood your presentation – you will askthese at the end

Presentation points to Presentation points to remember:remember:

Engage the audienceEngage the audience

Try not to use notesTry not to use notes

Everyone in the group must participateEveryone in the group must participate

Think of an interactive and imaginative Think of an interactive and imaginative way to get the information acrossway to get the information across

Trade defined:Trade defined:

The exchange of goods The exchange of goods and services for moneyand services for money

Discuss with a partner, and write Discuss with a partner, and write a few sentences explaining why a few sentences explaining why trade is necessarytrade is necessary

Why trade is necessary ?Why trade is necessary ? No country is self sufficient in the full No country is self sufficient in the full

range of raw materials that are needed by range of raw materials that are needed by its inhabitants. To try to achieve this, its inhabitants. To try to achieve this, countries must trade with each othercountries must trade with each other

Trade is the flow of commodities from Trade is the flow of commodities from producers to consumers, and it is producers to consumers, and it is important in the development of a country.important in the development of a country.

Countries that trade with other countries Countries that trade with other countries are said to be interdependent are said to be interdependent

If the value of a countries exports is more than its imports it has a trade If the value of a countries exports is more than its imports it has a trade surplussurplus and if the value of the imports is more than the exports then it is a and if the value of the imports is more than the exports then it is a deficitdeficit

Trade balanceTrade balance is the difference in value between a countries is the difference in value between a countries imports and exportsimports and exports

Activity: Work out the trade balance for countries A, B, C & D, and state Activity: Work out the trade balance for countries A, B, C & D, and state whether they have a trade surplus or deficitwhether they have a trade surplus or deficit

1) Country A exports $560 billion worth of goods to its trading partners each 1) Country A exports $560 billion worth of goods to its trading partners each year. In return it imports $290 billion worth of goods each year. year. In return it imports $290 billion worth of goods each year.

Calculate the trade balance of this country. __________________________ Calculate the trade balance of this country. __________________________

What sort of balance of trade will this country have?____________________What sort of balance of trade will this country have?____________________2) Country B exports $200 billion worth of goods to its trading partners each 2) Country B exports $200 billion worth of goods to its trading partners each

year. In return it imports $290 billion worth of goods each year. year. In return it imports $290 billion worth of goods each year. Calculate the trade balance of this country. __________________________ Calculate the trade balance of this country. __________________________

What sort of balance of trade will this country have?____________________What sort of balance of trade will this country have?____________________3) Country C exports $720 billion worth of goods to its trading partners each 3) Country C exports $720 billion worth of goods to its trading partners each

year. In return it imports $400 billion worth of goods each year. year. In return it imports $400 billion worth of goods each year. Calculate the trade balance of this country. __________________________ Calculate the trade balance of this country. __________________________

What sort of balance of trade will this country have?____________________What sort of balance of trade will this country have?____________________

Trade Surplus & Deficit Trade Surplus & Deficit

Trade deficits & surplusesTrade deficits & surpluses Trade deficits – does it damage a countries Trade deficits – does it damage a countries

economy?economy?

The successful American business man and investor The successful American business man and investor Warren Buffett was quoted in the Associated Press was quoted in the Associated Press (January 20, 2006) as saying (January 20, 2006) as saying

"The U.S trade deficit is a bigger threat to the "The U.S trade deficit is a bigger threat to the domestic economy than either the federal budget domestic economy than either the federal budget deficit or consumer debt and could lead to political deficit or consumer debt and could lead to political turmoil... Right now, the rest of the world owns $3 turmoil... Right now, the rest of the world owns $3 trillion more of us than we own of them." trillion more of us than we own of them."

If a country has a deficit – then it is paying other If a country has a deficit – then it is paying other countries a lot of money- then those countries can countries a lot of money- then those countries can use that money to buy shares in companies from use that money to buy shares in companies from the country they have traded withthe country they have traded with

According to the economist, John According to the economist, John Maynard Keynes - Maynard Keynes - "If the economic "If the economic relationships between nations are relationships between nations are not, by one means or another, not, by one means or another, brought fairly close to balance, then brought fairly close to balance, then there is no set of financial there is no set of financial arrangements that can rescue the arrangements that can rescue the world from the impoverishing results world from the impoverishing results of chaos."of chaos."

Trading relationships should be balanced……

Difficulties faced by Difficulties faced by LEDCsLEDCs

What are the trade What are the trade problems for LEDCs?problems for LEDCs?

Countries that relay on one commodity can be a problem Countries that relay on one commodity can be a problem because:because:

Prices and demand for these products fluctuate annually – Prices and demand for these products fluctuate annually – and the price paid for these commodities is often fixed by and the price paid for these commodities is often fixed by MEDCs MEDCs

Overproduction or world recession can also impact prices of Overproduction or world recession can also impact prices of these goods, also stocks of that particular commodity (e.g. a these goods, also stocks of that particular commodity (e.g. a mineral) can also become exhaustedmineral) can also become exhausted

Most exports are bought by TNC’s (transnational Most exports are bought by TNC’s (transnational corporations) so the profits don’t go back to the producers corporations) so the profits don’t go back to the producers (its not (its not fair tradefair trade))

LEDCS are not selling high value goods – there is very little LEDCS are not selling high value goods – there is very little value added to the good through secondary sector industry value added to the good through secondary sector industry (manufacturing the goods)(manufacturing the goods)

Reasons for imbalance of trade Reasons for imbalance of trade between MEDC and LEDC countiesbetween MEDC and LEDC counties

MEDC’s process primary goods – and add value to them -MEDC’s process primary goods – and add value to them -MEDCs then export these manufactured goods – which are MEDCs then export these manufactured goods – which are high in value, whereas LEDCs only have limited primary high in value, whereas LEDCs only have limited primary goods to sellgoods to sell

MEDCs also have the high tech quaternary industries, and MEDCs also have the high tech quaternary industries, and possess the skills and technology to develop high value possess the skills and technology to develop high value products products

MEDCs retain profits within their countries and the profits MEDCs retain profits within their countries and the profits don’t go back to the LEDCsdon’t go back to the LEDCs

LEDCs often only relay on the export of two or three LEDCs often only relay on the export of two or three productsproducts

Trade is hindered by poor internal transport networksTrade is hindered by poor internal transport networks

Who has the largest share Who has the largest share of the worlds trade?of the worlds trade?

Examples of countries Examples of countries imports and exportsimports and exports

You can clearly see that Sierra Leone – an LEDC really relies on the export of minerals, whereas MEDCs exports and imports are more similar to each other

Trading BlocksTrading Blocks Nations belonging to a mutual trade pact and agree to give Nations belonging to a mutual trade pact and agree to give

each other reduced trade tariffs while imposing trade each other reduced trade tariffs while imposing trade barriers and restrictions to nonmember nations.barriers and restrictions to nonmember nations.

Some trade blocks such as the EU have also developed Some trade blocks such as the EU have also developed close political ties, as well as a common currency, the Euroclose political ties, as well as a common currency, the Euro

Within these trading blocks countries trade with each Within these trading blocks countries trade with each other freely. This makes for a large market, increasing the other freely. This makes for a large market, increasing the number of customers for businesses, and strengthen the number of customers for businesses, and strengthen the alliances between those nationsalliances between those nations

An An alliancealliance is an agreement between two or more parties, is an agreement between two or more parties, made in order to advance common goals and to secure made in order to advance common goals and to secure common interests common interests

Trading Blocks

Make sure you know some of these trading blocks!

Tariffs & QuotasTariffs & Quotas Tariffs Tariffs are taxes or custom duties paid on imports. The are taxes or custom duties paid on imports. The

exporter has to pay a percentage of the value of the goods to exporter has to pay a percentage of the value of the goods to the importer. the importer.

Tariffs can be used to raise money, and they increase the Tariffs can be used to raise money, and they increase the price of imported goods in order to make them more price of imported goods in order to make them more expensive, and less competitiveexpensive, and less competitive

Tariffs increase the costs of imports (they may be imposed to Tariffs increase the costs of imports (they may be imposed to by countries to encourage a trade balance) or protect home by countries to encourage a trade balance) or protect home made productsmade products

QuotasQuotas limit the amount of goods that can be imported. limit the amount of goods that can be imported. Quotas tend to restricted to primary goods to they work Quotas tend to restricted to primary goods to they work against LEDCsagainst LEDCs

These both go against These both go against free tradefree trade

Free TradeFree Trade

Free trade: Trade between Free trade: Trade between nations without protective nations without protective customs tariffs and quotas.customs tariffs and quotas.

Discuss the arguments for and Discuss the arguments for and against free tradeagainst free tradeArguments for free trade Arguments against free trade

Free Trade: Arguments for and Free Trade: Arguments for and againstagainst

Arguments for free trade Arguments against free trade

Free trade: Trade between nations Free trade: Trade between nations without without protective customs tariffs and quotas.protective customs tariffs and quotas.

1) It's important to protect the 1) It's important to protect the economy of your country – free trade economy of your country – free trade can mean that products will be can mean that products will be bought from overseas rather than bought from overseas rather than made at homemade at home2) Other nations might treat their 2) Other nations might treat their workers who make products they workers who make products they export unfairly – their rights cannot export unfairly – their rights cannot be guaranteed. be guaranteed. 3) Foreign companies can buy up 3) Foreign companies can buy up companies within ones own country- companies within ones own country- this could be seen as a threat to this could be seen as a threat to national security national security 4) Free trade does not mean 4) Free trade does not mean fair fair trade-trade- and countries producing and countries producing primary products don’t benefit as primary products don’t benefit as much as the countries much as the countries manufacturing themmanufacturing them

1)1) It will deliver the greatestIt will deliver the greatestGood to the greatest amountGood to the greatest amountOf people (the utilitarian Of people (the utilitarian

argument)argument)2) Countries that depend on 2) Countries that depend on each other for trade, rarely go each other for trade, rarely go to war ( this is called the Dell to war ( this is called the Dell

TheoryTheoryof Conflict Prevention)of Conflict Prevention)3) Countries can develop 3) Countries can develop

throughthroughTrading- exporting what they Trading- exporting what they

have, have, And importing what they don’t And importing what they don’t

havehave

The world is spiky!The world is spiky! Check out the distribution of indicators Check out the distribution of indicators

throughout the world:throughout the world:

E:\CURRENT\IB Psych\IB Psy G 12 08_09\comparitive

http://creativeclass.com/rfcgdb/articles/other-2005-The%20World%20is%20Spiky.pdf

Quick QuizQuick Quiz

1) Why can trade deficits be a big problem for 1) Why can trade deficits be a big problem for nations?nations?

2) What did John Maynard Keynes say about the 2) What did John Maynard Keynes say about the importance trade balance?importance trade balance?

3) Who has the largest share of the worlds 3) Who has the largest share of the worlds trade?trade?

4) What are tariffs?4) What are tariffs?5) What are quotas?5) What are quotas?6) What are trading blocks?6) What are trading blocks?7) Identify three trade blocks7) Identify three trade blocks8) Identify two arguments in support of free 8) Identify two arguments in support of free

trade and three arguments against free trade trade and three arguments against free trade