Trade, tariffs and quotas Flashcards
What is trade ?
The voluntary exchange of goods and services among people and countries.
When does trade happen ?
Trade and voluntary exchange occur when buyers & sellers freely and willingly engage in market transactions.
What happens when trade is voluntary and non-fraudulent ?
When trade is voluntary and non-fraudulent, both parties benefit and are better off after the trade than they were before the trade.
What involves international trade ?
exchange of goods ro services btwn countries
How can international trade can be described ?
Exports: the goods and services sold to other countries
Imports: the goods or services bought from other countries
Free trade def
Nothing or very little hinders or gets in the way from two nations trading with each other.
why countries complain about trade and put some trade barriers ?
They say that too much trade cause workers to lose jobs. ex : For example, some Canadian clothing workers have had to change jobs during the past 30 years because many clothes are now imported from other countries.
Def of protectionism
Many people argue that governments should regulate trade in order to protect industries and jobs from foreign competition
What is one of the advantages of trade ?
this trade allows people in Canada to buy quality clothing imports at good prices, which results in a higher standard of living for people in Canada and for our trading partners.
What are the different types of economic trade barriers ?
The most common types of trade barriers are tariffs and quotas.
A tariff is a tax on imports (imports are goods purchased from other countries and exports are goods sold to other countries).
A quota is a specific limit placed on the number of imports that may enter a country.
Another type of trade barrier is an embargo.
A complete trade block for a political purpose
What is the aim of a tariff ?
The effect of a tariff is to raise the price of the imported product.
It makes imported goods more expensive so that people are more likely to purchase domestic products.
EXAMPLES: The European Union removes tariffs between member nations, and imposes tariffs on nonmembers.
What is the effect of quota ?
Putting a quota on a good creates a shortage, which causes the price of the good to rise and makes the imported goods less attractive for buyers. This encourages people to buy domestic products, rather than foreign goods.
EXAMPLE: Brazil could put a quota on foreign made shoes to 10,000,000 pairs a year. If Brazilians buy 200,000,000 pairs of shoes each year, this would leave most of the market to Brazilian producers.
What is an Embargo ?
Embargos are government orders which completely prohibits trade with another country.
If necessary, the military actually sets up a blockade to prevent movement of merchant ships into and out of shipping ports.
Explain the example of the US-Cuba trade embargo
The embargo is the harshest type of trade barrier and is usually enacted for political purposes to hurt a country economically and thus undermine the political leaders in charge.
EXAMPLE: The United States placed an embargo on Cuba after the Cuban Missile Crisis. They do not trade with Cuba—this is still in effect today.
Breaking news »» the United States
and Cuba are beginning to
slowly trade again.
What is an export subsidy ? What are the different forms of it ?
A direct or indirect payment by a country’s government to one or more of its export industries.
Forms of export subsidies include:
Tax rebates
Subsidized loans to foreign purchasers
Insurance guarantees
Funding for research & development
Guarantees against losses
Direct grants
What are the effect of exprot subsidy ?
Subsidy leads to a greater output of exportables than would otherwise occur.
Resources are drawn away from import-competing sectors.
Internal prices of exportables rise.
Consumers lose as they pay more taxes to finance the export subsidy.
What are the benefits of trade barriers ?
Most barriers to trade are designed to prevent imports from entering a country.
Trade barriers provide many benefits:
protect homeland industries from competition
protect jobs
help provide extra income for the government.
What are the costs of trade barriers ?
Tariffs increase the price of imported goods.
Less competition from world markets means there is an increase in the price.
The tax on imported goods is passed along to the consumer so the price of imported goods is higher.
What are the effects of trade barriers ?
Increased prices for foreign goods
Trade Wars
When countries institute restrictions on each other
Usually leads to poor trade for both countries
What is the balance of Trade ?
Trade surplus…export more than you import
Trade deficit…import more than you export
Balance of trade »»relationship between exports and imports
