Would Americans be better off if we purchased

• Would Americans be better off if we purchased less from foreigners?

International Trade • In what ways do you engage in trade?

Specialization • What do you plan to specialize in?

Milton Friedman—The story of a pencil

The Basis for all Trade: Absolute and Comparative Advantage Karate. Economics

Absolute Advantage • When a country can produce a good more efficiently than another country Country A Country B Coffee Cashews 20 5 4 1

Comparative Advantage Before Trade • The ability to produce a product relatively more efficiently, aka, a lower opportunity cost Country A Country B Total Coffee Cashews 20 5 25 4 1 5 After Trade Country A Country B Total Coffee Cashews 40 0 6 6

History of American Trade • Smoot-Hawley Tariff Act— 1930 – Raised tariffs on 20, 000 imported goods – Result: huge decline in standard of living across all trading groups

History of American Trade • WWII and after— promotion of free trade • NE—Wheelan: why would we put sanctions on ourselves?

NAFTA

NAFTA • Signed in 1994 by Clinton—created a trade bloc between US, Canada, and Mexico

Protectionism • Tariffs • Quotas • Regulations

Why Protectionism? • Protect domestic industries and employment • Strategic/National interest goals • Political pressure • Protect culture

Neo-colonialism? Mexico Bribery Scandal

Fair Trade? • International trade with a focus on quality of life and a more equitable global economic trading system • Top 5 Worst Sweatshop Offenders

Alex Tabarrok--Economic Growth