Pedal Power Goes Global
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Transcript of Pedal Power Goes Global
Pedal Power Goes Global Issues Affecting International Trade Why
do Nations Export Sell excess production
Obtain prices higherthen prices they can obtain domestically.
Developing countries export so they can import The Benefits of
World Trade
Imports supply many goods and natural resources American workers
are employed in industries that export products abroad. United
States Imports on a International Scale Absolute vs. Comparative
Advantage
Absolute advantage ability of country to produce product more
efficiently than another country. Comparative advantage ability of
country to produce product at a lower opportunity cost than another
country. Specialization Nation finds it profitable to produce &
export a limited assortment of goods for which it is particularly
suited. US Bike Imports Dropped 15% USA 2008: Bike Market Not
Immune to Recession Fixed Exchange Rate 1945 -1970 Devaluation
Fixed
National governments valued their currency in relation to a single
standard Easy to compare different currencies Devaluation lower a
currencys value in relation to other currencies by government order
Fixed Difficult to hold exchange rates constant in an international
economy Flexible Exchange Rate
Supply & demand set price of various currencies Depreciation
when a currencys price falls due to supply and demand Political or
economic instability can affect currency value Balance of Trade
Positive Negative Exports > Imports
Imports > Exports A trade deficit is not always harmful because
it encourages foreigners to invest in the U.S. economy US Trade
Deficit Increases by Most Since The trade deficit in the U.S.
widened in September by the most in a decade, reflecting rising
demand for imported oil and automobiles as the economy rebounded
from the worst recession since the 1930s. Exports Machinery and
equipment, industrial supplies, non-auto consumer goods, motor
vehicles and parts, aircraft and parts, food, feed and beverages.
Imports Non-auto consumer goods, fuels, production machinery and
equipment, non-fuel industrial supplies, motor vehicles and parts,
food, feed and beverages. Gross Domestic Product
Indicator of economys health Three major components C = Household
purchases of final consumer goods and services G = government
purchases of goods and services I = purchases of businesses of
capital goods, X = Net exports = exports - imports GDP = C + G + I
+X Final v. Intermediate Goods
Final Goods and Services Manicures Bread Cruise missile New factory
Dresses Increase in automobile inventory Intermediate Goods Window
glass in new automobiles Lumber in a new house Screws used in a
cruise missile Flour for making bread Cloth for making dresses A
Final Good is one that is ready to be purchased by the consumer An
intermediate good is a product that goes with other products to
make the final product GDP Goods & Services at Final
Destination
Who buys haircuts, bread & dresses? Who buys cruise missiles?
Who buys a new factory or builds up an inventory of unsold products
such as automobiles? Households, families, individuals Government
Businesses Economic Forecasting Measurements of Income
National Income (NI) - total earned by everyone in the economy.
wages and salaries, income of self-employed people, rental income,
corporate profits, interest on savings and other investments. U.S.
GDP / Total Population = U.S. GDP Per Capita United States GDP by
Sector United States Top Trading Partners Ways to Restrict
Imports
Tariff or taxes on imports. Revenue tariffs raise income without
restricting imports Protective tariffs raise the cost of imported
goods to discourage people from buying imports Imports quotas limit
the number of units of a particular good that can be imported
Embargoes are complete restrictions on importing or exporting
certain goods. Applied to certain countries Arguments For or
Against Free Trade
Improved products Foreign competition Export industries
Restrictions may jeopardize jobs Specialization & Comparative
Advantage Provides improved goods at lower prices Against
Protectionists Job security Loss of jobs National Economic Security
Protect oil industry from foreign competition Infant, new
industries Tariffs & quotas to allow to compete in world market
Trade Agreements The General Agreement on Tariffs and Trade
(GATT)
U.S. & 22 countries in 1947 Promoted liberalization of trade
Nations agree on tariff reductions that benefit all members The
World Trade Organization (WTO) was established in 1993 to replace
GATT Farthest-reaching global trade agreement in history 140
nations Encourages trade Administers global trade agreements
Resolves disputes when they arise Transatlantic Trade and
Investment Partnership (TTIP)
EU United States - Pros Increased GDP Potential to boost the GDP of
each economy by 0.5 percent Ease of Doing Business Easier for trade
to occur US car manufacturers will not need to make modifications
before selling to EU countries, reducing costs and time to market.
New Trade Opportunities Products typically restricted by
protectionist trade barriers will be free to be sold in completely
new markets which could enable businesses to grow significantly.
Global Standards US and EU = 60% of Global GDP Unified standards
would encourage other nations to raise their standards
Transatlantic Trade and Investment Partnership (TTIP)
EU United States Cons Lowering standards Perception that Europe is
ahead of the US in terms of many of its standards Harmonization
could remove these. EU has pushed to remove checks at ports for
imports and exports, which has the potential to harm food safety
standards. Lack of transparency Negotiations in private between
government officials and business leaders Cornish pasties from
Colorado Producers of regionally-based foods have voiced concerns
that their products will be undermined by cheap foreign
competitors; potential to dilute the cultural heritage of regions
famous for their food. Regional Trade Agreements
1993 North America Free Trade Agreement 1993 United States Canada
Mexico Links 439 million people Eliminate tariff barriers Mexican
exports have doubled - $115 billion Potentially led to loss of
879,000 U.S. jobs Traffic delays along border World Trade Bridge
10,000 trucks a day European Union 28 current members Economic
integration as single market Common currency - Euro Barrier free
market for goods & services 370 million European consumers