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
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