Economics International Trade

International Trade Agreements

GATT, NAFTA, WTO

Imports

Good and services that a country buys from another country

Exports

Goods and services that a country produces and sells to other nations

Other Barriers of Trade

Health inspections and licenses

Aiding National Defense

If specialization and trade between nations become so dependent, during war countries would suffer without the goods or supplies from the country it imports from

Foreign Exchange

Is the difference of currencies used to facilitate international trade American companies usually have to pay foreign companies in their own currency and vise versa

Quota

Limit on the quantities of a product that. An bd imported

NAFTA

North American Free Trade Agreement was set to liberalize free trade by reducing tariffs among Canada, Mexico and the U.S, this has allowed trade between both nations to grow steadily and has benefit the three nations

FTAA

Free Trade Area of the Americas includes 34 countries established to set up regional free trade area on the America's without international barriers to trade

High Development

efforts to obtain food, shelter, and clothing are more than successful, services and is able to provide public goods

External Debt

money borrowed from foreign banks and governments, obstacle of economic growth

Effect of a Trade Deficit

A persistent trade imbalance can cause a chain reaction that affects income and employment

Fixed Exchange Rates

A system under which the price of one currency is fixed in terms of another currency so that the rate does not change Used during the time of the gold standard,kept money supply from growing too fast

Tariff

A tax placed on imports to increase their price in the domestic market

Trade weighted value of the dollar

An index displaying the strength of the dollar against a group of major foreign currencies When the index falls the dollar is weak When the index rises the dollar is strong

Protectionists

People who favor trade barriers to protect domestic industries

Free traders

Prefer fewer or even no trade restrictions

GATT

Signed by 23 countries in 1947, general agreement on tariffs and trade, it extended tariff concessions and worked to eliminate import quotas, by 1990s over 100 countries agreed to reduce the average level of tariffs

Revenue Tariff

Tariff high enough to generate revenue for the government without actually prohibiting imports

Protective Tariff

Tariff that is high enough to protect less efficient domestic industries

Infant Industries Argument

That new emerging industries should be protected by foreign competition

Comparative Advantage

The ability to produce a product relatively more efficiently or at a lower opportunity cost

Gains of Trade

The concept of comparative advantage is based on the assumption that everyone will be better off specializing in the products they produce best. Specialization and trade increases the total world output

Balance of Payments

The difference between the money a country pays out to, and receives from, other nations when it engages in international trade

Flexible/Floating Exchange Rates

The forces of supply and demand establish the value of ones country's currency in terms of another country's currency When the gold standard was no longer being used, the world monetary system shifted to a floating or flexible rate system

Protecting Domestic Jobs

Third argument of domestic economic protection, tariffs and quotas are justifiable because they protect against cheap foreign labor

Fixed exchange rate types

Two major kinds of exchange rates exist, fixed and flexible

Strong Dollars and Weak Dollars

Value of the dollar constantly fluctuates,neither a strong dollar or a weak dollar is better

Absolute Advantage

When a country produces more of a product than another country

Trade surplus

Whenever the value of its exports exceeds the value of its imports

Trade deficit

Whenever the value of the products it imports exceeds the value of the products it exports

WTO

World Trade Organization replaced GATT in recent years, it is an international trade agency that administers trade agreements signed under GATT, it also settles disputes between nations and provides technical assistance and training for developing nations

Transition

breaking away from primitive equilibrium in society that is moving towards economic and cultural changes

Pollution

contamination of air, water and or soil by discharging a poisonous pr noxious substance

Outsourcing

controversial topic, means to hire outside firms for non-core operations to lower operating cost

Characteristics of Globalization

global products and markets, global production, and global instituions

Global Products and Markets

include multinationals, globalization allows for stores world wide to be stocked with a wide variety of products from other countries

Global Production

multinationals may move there production plants to other countries, like honda factories in the US, this is considered outsourcing

Renewable Resources

natural resources that can be replenished for future use EX: hydro power, biomass, and gasohol

Global Institutions

international organizations that promote trade between nations in a region EX: FTAA regional groups have the ability to merge into large global markets and can lead to more political cooperation and stability among countries

Capital Flight

legal or illegal export of a nations currency and foreign exchange

Semi Development

make up of a country's economy change, income is growing more than the population

Multinationals

many products we use are made my these because they produce and sell without regard to national boundaries EX: Japanese cars, McDonalds

Takeoff

not reached until all barriers of primitive equilibrium are overcome, a country will then save and invest more of its national income

Default

not repaying borrowed money

Obstacles to Development

population growth, natural resources and geography, disease and substance abuse, education and technology, external debt, corruption, war and its aftermath, and capital flight

Stages of Economic Development

primitive equilibrium, transition, takeoff, semi development, and high development

Nonrenewable Resources

resources that cannot be replenished once they are used EX: fossil fuels, oil, and nuclear energy

Primitive Equilibrium

society has no formal economic organization, an area may not have a monetary system and may not be motivated to move towards economic growth

Globalization

the movement toward more integrated and interdependent world economy

Economic Development

the sustained actions of communities and policymakers that improve the standard of living and economic health of a country

National Pride

when a country has products it wants to protect for nationalistic reason Ex: France's wines and cheeses

Specialization

when countries produce the things they do best in exchange for the things that other people do best