AOF Business in a Global Economy Unit 3
AOF Business in a Global Economy Unit 3, Lesson 5 How and Why Countries Manage Trade Copyright © 2009– 2016 NAF. All rights reserved.
Trade is essential and universal • Trade means exchanging goods or services. • People have engaged in trade for most of human history. • Before money existed, people bartered for items, trading one good or service for another. • Today, businesses sell goods and services in a global marketplace. What are the benefits of face-to-face trades?
Governments regulate trade in different ways Trade pacts • Bilateral ‒ between two countries • Multilateral ‒ between three or more countries Protectionism • Import restrictions • Export subsidies • Import quotas In what ways does the United States regulate its industries’ trade?
Factors of production influence what firms trade Factors of Production Land Labor Capital
One major influence on trade is specialization • Firms don't produce everything they need. • Governments seek to influence firms to produce certain items and import others. • Countries gain trading advantages by having firms that are efficient at production. What are the types of business specialization in your region?
Exporting has many benefits Top US Exports of Goods in 2015 (in billions of US dollars) machines/engines 205. 8 electronics 169. 8 aircraft, spacecraft 131. 1 vehicles 127. 1 oil 106. 1 What other products do you think are good candidates for exporting?
Countries also need to import certain goods Top US Imports of Goods in 2015 (in billions of US dollars) electronic equipment 332. 9 machines/engines 314. 6 vehicles 283. 8 oil 201. 2 pharmaceuticals 86. 1 Why do you think the United States is both a major importer and exporter of the same products?
Trade balance measures imports and exports • Trade surplus: when a country exports more than it imports • Trade deficit: when a country imports more than it exports Do you think the US trade deficit is healthy or unhealthy for the economy?
Trade has advantages and disadvantages Top 10 US Trading Partners • • Trading is a major part of the modern global economy. Countries have to make choices about how to regulate and influence trade. 1 Canada 2 China 3 Mexico 4 Japan 5 Germany 6 United Kingdom 7 South Korea 8 Brazil 9 Saudi Arabia 10 France
- Slides: 9