1.2 POSITIVE & NEGATIVE ARGUMENTS FOR FREE TRADE

WARMUP ASSIGNMENT

• Read the going global section on page 9.

• Japan began trading with the United States in the 1950’s• Trade has continued to grow to a point where we sell more Japanese cars

than American cars• Japan car companies are Honda, Nissan, & Toyota • 7 of top 10 most American Made Cars are Japanese based

• China is now a country we continue to import large amounts from.

• Why is a trade deficit a problem for the United States?

AGENDA• Going Global Warmup

• Grab a book and read pages 9-12

• Define the following terms• GDP, Silk Road, Free Trade, Mercantilism, & Fair Trade

• Answer the following questions / Notes:• What are two positive outcomes of International Trade?• Be able to define GDP & what it means for a country• Silk Road & International Trade Centers• 3 Pro’s & 3 Cons of Free Trade• Define Mercantilism • What is fair trade, one company that uses it, and why is it used?

INTERNATIONAL TRADE

•What are the advantages of international trade?

• Trading partners less likely to engage in war

• Trading partners have shared interests and economic ties

• Closing of international trade contributed toward great Depression

GROSS DOMESTIC PRODUCTGDP

• Gross Domestic Product is the total value of all goods and services produced in an economic region• Consumer Spending (2/3 of all spending)• Investment Spending• Government Spending• Net Exports

• http://www.youtube.com/watch?v=9m7BzvrPpgY

• 2 declining periods in a row is a recession

• Employment & inflation rates

UNITED STATES GDP 2008-2014

HIGHEST V.

LOWEST

HISTORY OF INTERNATIONAL MARKETING• The Original Silk Road

• One of the oldest continuous trading routes

• Series of trails and sea routes that allowed trade between China & the Middle East

• Over 4,000 miles in length

• The New Silk Road• Black Market Amazon• http://

www.youtube.com/watch?v=eLOSVAJH2ks

• Large Cities acted as trade centers

• Hudson Bay Company explored North America seeking new products & markets

MOVEMENT TOWARDS FREE TRADE

• Free trade allows for unhindered trade of legal goods & services between countries• Products can be sold in markets at whatever

price the seller is willing to accept

• Provides an incentive for a low-cost producer to enter new markets• Usually has a negative impact on local

producers• Example: Wal-Mart: http://

www.youtube.com/watch?v=1LuL2b-vLoc

http://www.youtube.com/watch?v=t9qtwTX-ix4 • Countries often limit free trade to protect local

producers

Ways a country can limit Free Trade?• Mercantilism approach: Promote exports but limits

imports

• Countries benefit when they have a positive trade balance with other countries• Concept is basically your country sells more than it buys

• Popularized approach when trade was done with gold & silver

• Problematic approach today because it can cause the exporting country’s currency to be overvalued• Value of currency isn’t sustainable on the market

UNITED STATES TRADE BALANCE

UNITED STATES NEGATIVE BALANCE

FREE TRADE

• Is Free Trade Good or Bad?

• Most believe it is positive for all economies

• Can have short term problems; it should lead to long-term development

• Countries tend to promote an open market while demonstrating concern for local producers

FIVE ARGUMENTS FOR FREE TRADE• Adam Smith Argument

• Famous Economist• 1776 published a book opposing mercantilism • Free trade allowed countries to specialize in areas where they have an economic advantage

• Increases total amount of goods & services produced• The more money a country brings in; the more likely they are to spend

• Lowers the chance of war• Countries that have trade ties work better together

• Increases the quality of life by bettering goods & services offered• Competition Increases: Lower Prices, New & Improved Items, More Efficient

Companies

• Lowers Poverty: Countries produce at cheaper rates, sell more, slowly increase standard of living

3 ARGUMENTS AGAINST FREE TRADE

1. Benefits more advanced countries

• Less advanced countries have limited resources to produce & sell multiple goods

2. Can be socially disruptive• Dominate countries like the United States can export their “culture”

3. There is no such thing as Pure Free Trade• Countries will always protect some aspect of their economy by

restricting trade

FAIR TRADE• Fair Trade: Commitment to buy products at a fair price and with labeling

that identifies the source

• Allows sellers in developing markets to be rewarded for their production

• Starbucks sells fair-trade coffee• Develops relationships with impoverished coffee growers instead of large wholesalers• Improves economic conditions for selected growers• Starbucks uses this practice to promote its socially responsible image

• http://www.youtube.com/watch?v=YlVICw_kydM

• Worst commercial ever: http://www.youtube.com/watch?v=lc11sdxZRAg

ASSIGNMENT

COUNTRY WISH LIST