ch 26 Flashcards
Export
goods/services produced in nation sold to buyers in other nations
Import
goods/services produced in other nations bought in this nation
Globalization
the integration of industry, commerce, communication, travel and culture among the world’s nations – is one of the major trends of our time.
Trade Balance
- Exports of a nations goods minus its imports
Trade Deficit
Amount by which nation’s imports of goods exceed its exports of goods
Trade Surplus
Amount by which nation’s exports of goods exceed its import of goods
Ø Most trade (over half) occurs with other industrially advanced nations.
Ø Major global trade participants are the U.S., nations of the European Union, Japan and China
Ø Canada is the largest trading partner for the U.S. (19% of U.S. exports and 13% of U.S. imports)
reasons that support global trade
- Military Self-Sufficiency – Protective tariffs are needed to preserve or strengthen industries that produce materials essential for national defense.
- Diversification for Stability – Some countries are highly dependent upon international markets for their national income need tariff and quota protection to diversify their production
- Infant Industry – Protective tariffs are needed to allow new domestic industries to establish themselves.
reasons that support protectionism
Tariffs
Excise taxes on dollar values or physical quantities of imported goods imposed to obtain revenue or protect domestic firms.
Revenue Tariff
Imposed to obtain revenue from a product that is not being produced domestically (bananas, coffee, or tin)
Protective Tariff
Imposed to shield domestic producers from foreign competition
Import Quotas
Limits imposed by a nation on the quantity (or total value) of a good that may be imported during some period of time. All imports for the product are prohibited once the quota is filled.
Voluntary Export Restriction (VER)
Foreign firms voluntarily limit amount of exports to a particular country (usually to avoid more stringent tariffs or quotas)
Export Subsidy
Government payments to domestic producers of export goods enable them to reduce the price of good or service to foreign buyers and sell more products in world markets.
Non-Tariff Barriers
Barriers used to impede international trade, include onerous licensing requirements, unreasonable product quality standards, bureaucratic red tape, or customs procedure delays for a product.
Smoot Hawley Tariff Act of 1930
U.S. legislation that established very high tariffs. Its objective was to reduce imports and stimulate the domestic economy. It resulted in retaliatory tariffs (Trade Wars) by other nations, U.S. output fell and worldwide trade was reduced.
Reciprocal Trade Agreement of 1934
It authorized the President to negotiate up to 50% lower tariffs with foreign nations that agreed to reduce their tariffs on U.S. goods.
General Agreement on Tariffs and Trade (GATT) of 1947
was initially signed by 23 nations, including the U.S.
GATT is based on three principles:
n Equal, non-discriminatory trade treatment for all member nations
n Decrease tariffs through multilateral negotiation
n Eliminate import quotas
World Trade Organization (WTO)
oversees provisions of trade agreements, rules on trade disputes and meet regarding trade policies.
European Union
Association of 27 European nations
a. First agreement establishing European Economic Community signed in 1957 (Belgium, Germany, France, Italy, Luxembourg & the Netherlands).
USMCA
is a free trade zone established in 2018 among the United States, Canada and Mexico.
NAFTA
is a free trade zone established in 1993 among the United States, Canada and Mexico.
This agreement eliminated tariffs and other trade barriers among the nations for most goods and services.
Trade Adjustment Assistance Act
2002 provides support to qualified workers displaced by imports or plant relocations from international trade. To qualify workers must participate in job searches, training programs, or remedial education.
Offshoring
shifts American work done in the U.S. to workers located in other nations.
