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