Voluntary Trade in Voluntary Trade in the Middle Eastthe Middle EastSS7E6 The student will explain how SS7E6 The student will explain how voluntary trade benefits buyers and voluntary trade benefits buyers and sellers in Southwest Asia (Middle East).sellers in Southwest Asia (Middle East).

SS7E6 SS7E6 a. Explain how specialization a. Explain how specialization

encourages trade between countriesencourages trade between countries

Not every country can produce all the Not every country can produce all the goods and services it needsgoods and services it needs Because of this, countries specialize in Because of this, countries specialize in

producing those goods and services that they producing those goods and services that they CAN provide most efficiently.CAN provide most efficiently.

They then look for others who may need They then look for others who may need those goods and services so they can sell those goods and services so they can sell their products to those who need them.their products to those who need them.

SS7E6 SS7E6 a. Explain how specialization a. Explain how specialization

encourages trade between countriesencourages trade between countries

So What Does That Mean?So What Does That Mean? Countries trade with one another to get Countries trade with one another to get

everything they need for their country. In everything they need for their country. In order to do that, each country produces what order to do that, each country produces what they can make the best. Then they trade they can make the best. Then they trade with one another.with one another.

SS7E6 SS7E6 a. Explain how specialization a. Explain how specialization

encourages trade between countriesencourages trade between countries

In international trade, no country can be In international trade, no country can be completely self-sufficient.completely self-sufficient. Which means….no country can produce all the Which means….no country can produce all the

goods and services it needsgoods and services it needs Specialization: the products a country makes Specialization: the products a country makes

best and that are in demand on the world best and that are in demand on the world marketmarket This is a way to build a profitable economy and to This is a way to build a profitable economy and to

earn money to buy items that cannot be made earn money to buy items that cannot be made locally locally

SS7E6 SS7E6 a. Explain how specialization a. Explain how specialization

encourages trade between countriesencourages trade between countries

Some countries in the Middle East are Some countries in the Middle East are very rich in oil and natural gasvery rich in oil and natural gas HOWEVER…they lack farmland and the HOWEVER…they lack farmland and the

ability to produce enough foodability to produce enough food SO…they money earned on the world SO…they money earned on the world

market with oil is used to purchase food market with oil is used to purchase food

SS7E6 SS7E6 b. Compare and contrast different types of b. Compare and contrast different types of trade barriers such as tariffs, quotas, and trade barriers such as tariffs, quotas, and

embargos.embargos.

EXAMPLES of SPECIALIZATION:EXAMPLES of SPECIALIZATION:

***Saudi Arabia: produces oil and natural gas to sell at ***Saudi Arabia: produces oil and natural gas to sell at great profit on the world market. Then they turn around great profit on the world market. Then they turn around to and use the money made to purchase food AND the to and use the money made to purchase food AND the technology needed to make their agriculture system technology needed to make their agriculture system more efficient.more efficient.

***Israel: has become leader in agricultural technology ***Israel: has become leader in agricultural technology even though they have a limited supply of land suitable even though they have a limited supply of land suitable for farming. They can sell this technology to earn for farming. They can sell this technology to earn money to buy food they are unable to produce. money to buy food they are unable to produce.

IT”S ALL A TRADE OFF…IT”S ALL A TRADE OFF…

SS7E6 SS7E6 b. Compare and contrast different types of b. Compare and contrast different types of trade barriers such as tariffs, quotas, and trade barriers such as tariffs, quotas, and

embargos.embargos.Let’s Review The Three Types of Trade Barriers!!Let’s Review The Three Types of Trade Barriers!!

1.1. TariffTariff

2.2. QuotaQuota

3.3. EmbargoEmbargo

All three of these are considered to be trade All three of these are considered to be trade barriers. They slow down or prevent one barriers. They slow down or prevent one country from exchanging goods with another.country from exchanging goods with another.

SS7E6 SS7E6 b. Compare and contrast different types of b. Compare and contrast different types of trade barriers such as tariffs, quotas, and trade barriers such as tariffs, quotas, and

embargos.embargos.

Why have trade barriers?Why have trade barriers? To protect local industries from lower priced To protect local industries from lower priced

goods made in other countriesgoods made in other countries Political problems between countries (trade Political problems between countries (trade

would be stopped until the political issues would be stopped until the political issues are settled)are settled)

SS7E6 SS7E6 b. Compare and contrast different types of b. Compare and contrast different types of trade barriers such as tariffs, quotas, and trade barriers such as tariffs, quotas, and

embargos.embargos. Tariff: a tax placed on goods when they Tariff: a tax placed on goods when they

are brought (imported) into one country are brought (imported) into one country from another country.from another country. Purpose: Make the imported good more Purpose: Make the imported good more

expensive than a similar item made locally.expensive than a similar item made locally. Called a “protective tariff” because it PROTECTS Called a “protective tariff” because it PROTECTS

local manufacturers from competition coming from local manufacturers from competition coming from cheaper goods made in other countriescheaper goods made in other countries

SS7E6 SS7E6 b. Compare and contrast different types of b. Compare and contrast different types of trade barriers such as tariffs, quotas, and trade barriers such as tariffs, quotas, and

embargos.embargos. Quota: sets a specific amount or number of a Quota: sets a specific amount or number of a

particular product that can be imported or particular product that can be imported or acquired in a given periodacquired in a given period Purpose: a different way of limiting the amount of Purpose: a different way of limiting the amount of

foreign goods that can come in to a country.foreign goods that can come in to a country.

EX: Israel could decide that only 1500 cars could EX: Israel could decide that only 1500 cars could be brought into the country from Japan in a given be brought into the country from Japan in a given year. That would make it more likely that people year. That would make it more likely that people buying cars would have to buy Israeli made cars, if buying cars would have to buy Israeli made cars, if Japanese cars were not available.Japanese cars were not available.

SS7E6 SS7E6 b. Compare and contrast different types of b. Compare and contrast different types of trade barriers such as tariffs, quotas, and trade barriers such as tariffs, quotas, and

embargos.embargos. Embargo: when one country announces that it Embargo: when one country announces that it

will no longer trade with another country in will no longer trade with another country in order to isolate a country and cause problems order to isolate a country and cause problems with that country’s economy.with that country’s economy. Purpose: to punish OR persuade a countryPurpose: to punish OR persuade a country

Example: Member countries of OPEC decided to Example: Member countries of OPEC decided to stop all sales of oil and gas to the countries stop all sales of oil and gas to the countries supporting Israel in the 1973 Arab-Israeli war.supporting Israel in the 1973 Arab-Israeli war.

SS7E6SS7E6d. Explain why international trade d. Explain why international trade requires a system for exchanging requires a system for exchanging

currencies between nations.currencies between nations. Most countries in Southwest Asia have their own Most countries in Southwest Asia have their own

type of currency.type of currency. In order to pay for goods as they trade with each In order to pay for goods as they trade with each

other, they had to establish a system of changing one other, they had to establish a system of changing one type of currency to another.type of currency to another. Exchange RateExchange Rate

In order for them to trade with each other, they have to be able In order for them to trade with each other, they have to be able to figure out what goods cost in each currency.to figure out what goods cost in each currency.

To sum it all up…This makes it possible to buy To sum it all up…This makes it possible to buy and sell goods between nations with different and sell goods between nations with different types of money.types of money.

The Iraqi Dinar

The Saudi Riyal

Israeli Lira Iranian (Persian) Rial