Global Trade

An Overview

What is Global Trade?

• Movement/Exchange of Goods, Resources, Services…

• By Individuals and/or Companies …

• In Different Countries• Governments only

involved in regulating or encouraging trade

Trade Terms & Facts:

• Import = items coming INTO a country

• Export = items sold FROM a country

• Balance of Trade = equal value in import & export

• Trade Surplus = more exports than imports

• Trade Deficit = more imports than exports

Why Trade?

• Comparative Advantage– Each nation cannot make all it

needs/wants– So specialize in what it does well– Sells those and buys what it needs

Table Talk

• How would YOUR life look differently without Global Trade?

History of Trade• Long History of Trade

– Humans have always been trading– Silk Road, Explorers fueled by trade

• Pre-WWII Global Trade– What was general attitude about trade?– During Depression - Countries limited trade– Led to Slower economic growth– Led to rise in Fascism (ex. Nazi’s) in Europe and

to WWII

History of Trade• US Role - Post WWII World

– US came out as major economic power– Tried to avoid failures of past– Helped rebuild nations torn apart by war– Encouraged more global trade and agreements– Much of Third World emerging from

Colonialism, wanting to form new economic and political systems

– Int’l Trade seen as crucial to health of US & World economy and political stability

Globalization

• Refers to economic, political, cultural and social transformation throughout world

• Increased Interdependence

• Migration of people, ideas, cultures, etc.

Globalization & Trade• Increased opportunities for Trade

– 1948 = $53 Billion in global Trade– Mid 1970’s = $1.5 Trillion– Today = $13.8 Trillion

• Africa, Latin America, Asia = 2/3 of increase in world imports

• 2007 - Industrialized nations = 71% of global production

• People anywhere in the world can access just about anything they want, if they have enough $

Globalization & Trade

• Economic Globalization mixed/unequal effects– Industrialized v. Developing nations– More markets & More competition

• Employment Security Gone• “Americanization”• “Outsourcing”

Effects of Trade?

• Gains:– Economic - new markets

to sell products– Political - help build

relations between countries

• Costs:– Disrupt local economies– Not everyone benefits

equally

Table Talk

• What impact does Global Trade have in YOUR life – Positively?

• What impact does Global Trade have in YOUR life – Negatively?

Beliefs of Free Trade

• “Trade should be open and without barriers”

• Allow countries to buy & sell best goods at cheapest prices

• More trade = Stronger economies within a country & around world

Why Restrict Trade:

• Protectionism = econ strategy limit trade to protect goods, workers, economy

• Can also be used to protect people (bad products), workers & environment

Barriers Used to “Protect” Domestic Economy:

• Tariff - Tax on Imports• Subsidy - Govt Aid to Business/Industry• Standards - Rules for Product• Quotas - Limits on numbers of imports• **Embargos - Stop to Trade for Political

Reasons (pressure)

Why “Fair Trade”?

• Not everyone benefits fairly from Free Trade

• Need ways to regulate trade to protect:– Workers (fair wages/conditions)– Consumers (harmful products)– Developing Nations (limited resources)– Environment (being polluted/overused)

Trade Challenges/Issues

• More trade may be good for all in general but… – Uneven benefits/costs between countries

(industrialized v. developing)– Uneven benefits/costs between wealthy v poor

individuals– Immediate Profits/Gains vs. Long-Term Costs (ex.

environment)– What benefits one/few can lead to huge costs for

many (low wages for workers)

Elbow Partner

• What is a good argument in favor of Free Trade?

• What is one argument and element of Fair Trade?

• What is one thing you are thinking about right now, based on this lecture?

Free Trade v. Fair Trade

• In your Quads have a mini-debate on the pros and cons of free trade

• You and your table partner will face off against your quads.

• Use the Chart provided as a jumping off point and feel free to expand/add to the arguments presented there.