Name



Name:____________________________________________________________________________________ Date: _________________ Period:_____

What are the Arguments for and Against Trade Barriers and Agreements?

• Supporters of trade barriers and agreements argue that they save _________, protect infant industries, and safeguard national security

• Critics of trade barriers and agreements argue that free trade is the best way to pursue comparative advantage, raise living standards, and further cooperative relationships among nations

Trade Barriers

• Trade barrier: a means of preventing a foreign product or service from freely entering a nation’s territory

• Common trade barriers include import quotas, voluntary export restraints, and tariffs

Import Quota

• Import quota: a set limit on the amount of a good that can be imported

• Example: the U.S. limits the annual amount of unprocessed _______________ coming into the country

Voluntary Export Restraints

• VER: self-imposed limitation on the number of products shipped to a particular country

• A country voluntarily decreases its exports in an attempt to ______ the chances the importing country will set up trade barriers

Tariff

• Customs duty: tax on certain items purchased abroad

• Duty __________

• Tariff: a tax on imported goods

• Tariffs today are much lower than in the past

Other Barriers to Trade

• Other barriers include:

• High licensing fees or slow licensing processes

• Customs duties, Health, safety, or _________________________________, Political sanctions

Increased Prices for Foreign Goods

• Increased prices for foreign goods—trade barriers can help domestic producers compete with foreign firms

• By limiting imports from those firms trade barriers help domestic companies

• _______________________may suffer, though, as import restrictions result in higher prices

Trade Wars

• Trade wars—when one country restricts imports, its trading partner may retaliate by placing its own restrictions on imports

• If the first country responds with further trade limits, the result is a trade war

• Trade war: a cycle of escalating trade barriers

• ______________________________ in 1930 raised the average tariff on all products to 50% deepened the Great Depression

• Other examples include the Beef War of 1999 and Steel Tariff of 2002

Protectionism

• Protectionism: the use of trade barriers to shield domestic industries from foreign competition

• These include protecting workers’ jobs, protecting infant industries, and safeguarding national security

Protecting Jobs

• Protectionism shelters workers in industries that would be hurt _____________________ competition

• If existing tariffs were reduced some industries wouldn’t be able to compete with the importing countries and could go out of business or lay of off workers

• Many workers don’t have the skills to work in other industries and obtaining new skills takes time and money

Protecting Infant Industries

• New industries need time and practice to become efficient producers

• Infant industry: an _____________________________________________________________

• Tariffs and other protectionist policies help new industries in the early stages of development

• Once the industry grows and is able to compete with more mature rivals, tariffs could be lessened or eliminated

Safeguarding National Security

• Certain industries may require protection from competition because their products are essential to defending the country

• The government wants to ensure that industries such as steel, technology, and energy are available and active in event of war

• Government doesn’t want to depend on other nations _____________________________

THINK ABOUT IT___________________________________________________________________________

Free Trade

• In opposition to protectionism is the principle of free trade

• Free trade: involves the lowering or elimination of protective tariffs and other trade barriers between two or more nations

• Free trade could help ___________________________, raise standards of living, and further international peace

• International free trade agreement: agreement that results from cooperation between at least two countries to reduce trade barriers and tariffs and to trade with each other

Reciprocal Trade Agreement Act

• Free trade movement began in the 1930s when the U.S. began to promote free trade after the decline of the depression

• Reciprocal Trade Agreement Acts of 1934: gave the President the power to reduce tariffs by as much as 50%

• The Act also allowed Congress to grant most-favored-nation (MFN) status to U.S. trading partners

• MFN is now called NTR (____________________________________)

• NTR countries pay the same tariffs NTR partners and the U.S. lowers the tariff on imports

World Trade Organization

• __________, General Agreement on Tariffs and Trade, was created in 1948 to reduce tariffs and expand world trade

• World Trade Organization (WTO)—founded in 1995 with the goal of making global trade more free, complying with GATT, and negotiating new trade agreements

• Today the WTO acts as a referee, enforcing the rules agreed upon by the member countries

European Union

• The European Union—28 nations, almost all of Europe, are members of the EU, which abolishes tariffs and trade restrictions among member nations

• Eliminated tariffs on one another’s exports

• Created a single market to coordinate economic and trade policies called the European Economic Community (EEC) and into the EU

• Own parliament, flag, and anthem, celebrates Europe Day on May 9

• Freely cross borders and work and _______________ use a single currency called the ______

NAFTA

• Free-trade zone: region where a group of countries agrees to reduce or eliminate trade barriers

• North American Free Trade Agreement: created as the largest free trade zone in 1994 linking the U.S., Canada, Mexico

• Opponents of NAFTA worried that American companies would move factories to Mexico where wages and lower and environmental regulations were less strict

• The agreement remains controversial today with critics continuing to charge that NAFTA has led to the loss of American jobs and __________________________________________

Other Trade Agreements

• The DR-CAFTA created a free trade agreement between the United States and six nations of Central America

• Other free trade agreements include:

• The Asia- Pacific Economic Cooperation (APEC)

• ________________________ (MERCOSUR)

• The Caribbean Community and Common Market (CARICOM)

• The Association of Southeast Asian Nations (ASEAN)

Role of Multinationals

• A multinational is a large corporation that sells goods and services throughout the world

• The decision to build production facilities in a foreign country benefits both the multinational and the host nation

• The corporation avoids some fees and tariffs

• The corporation may benefit from ______________

• The host nation benefits by gaining jobs and tax revenue

• Host nations, however, worry about MNCs gaining political power, driving out domestic industries and exploiting workers

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QUIZ WIZ

What is the definition of psychology?

What is the Nature VS Nurture debate?

When and where did modern psychology begin?

Who used introspection to develop Structuralism?

BellRinger:___________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Questions

Summary

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