What is Trade?

Trade:The action of buying and selling goods and

services.

A basic economic concept that involves multiple parties participating in the voluntary negotiation and then the exchange of one's goods and services for desired goods and services that someone else possesses.

Specialization • A method of production where a business or area focuses on the production of a limited scope of products or services in order to gain greater degrees of productive efficiency within the entire system of businesses or areas.

United States

North Carolina

Specialization and Interdependence

One country depends on another country for something and that country may depend on another country, which eventually creates global interdependence.

Why does Importing and exporting of goods and services highly contribute to global interdependence?

Import + Export

Import – bring (goods or services) into a country from abroad for sale.

Export – send (goods or services) to another country for sale.

Government policies on International TradeTariff – Tax on Imported Goods; quota – limit on # of goods imported

Embargo – an official ban on trade or other commercial activity with a particular country.

Sanctions – any actions taken by one nation or group of nations to harm the economy of another nation or group, often to force a political change

Comparative AdvantageThe ability of a country to produce goods and/or services at a lower opportunity cost than other firms or individuals.

A comparative advantage gives a country the ability to sell goods and services at a lower price than its competitors and have stronger sales margins.

Absolute Advantage

The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost at which any other entity produces that good or service.

Specialization

Problems of Specialization?

A method of production where a business or area/country focuses on the production of a limited scope of products or services in order to gain greater degrees of productive efficiency.

Many countries specialize in producing the goods and services that are native to their part of the world.Examples of this?

Interdependence and Globalization

Interdependence is a relationship in which each member is mutually dependent on the others.

Globalization is the tendency of businesses and technologies to spread throughout the world.

US in World EconomyTop exports

1. Petroleum Refining2. Organic Chemical

Manufacturing3. Car and Automobile

Manufacturing4. Plastic and Resin

Manufacturing5. Brand Name

Pharmaceutical Manufacturing

Top imports1. Oil Drilling and Gas Extraction2. Petroleum Refining3. Car and Automobile Manufacturing4. Brand Name Pharmaceutical Manufacturing5. SUV and Light Truck Manufacturing

NC in World EconomyNorth Carolina’s largest market in 2012 was Canada ($6.9 billion) followed by China ($2.5 billion), Mexico ($2.3 billion), Japan ($1.7 billion), and Germany ($1 billion).

Gross State Product

• The sum of all value added by industries within the state and serves as a counterpart to the gross domestic product (GDP). In other words, a GDP for the state.

• NC’s is $424.9 Billion• 9th wealthiest state

Largest Outputs (Agriculture)

• Poultry• Eggs• Tobacco• Swine• Milk• Cattle • Sweet Potatoes• Soybeans

Agriculture and Manufacturing

• NC is a national leader in Agricultural Outputs• Ranked 8th in the nation in manufacturing• Manufacturing and agricultural sectors are

losing jobs to places like Asia overseas.

Charlotte

• Experiencing growth due to the banking and finance industry

• 2nd largest banking center in the US, just behind New York

• Home to 8 fortune 500 companies

Other Important Industries

Information Biotechnology Furniture Banking Film Arts (Notice, like in Forsyth County, there are many service-

related industries that are essential for North Carolina’s economy.) Wells Fargo, GMAC, Forsyth + Baptist Hospitals.

Protecting Domestic Industry

Tariff, Embargo, and SanctionsTariff – a tax on imports or exportsQuota – limit on # of items imported

Embargo – an official ban on trade or other commercial activity with a particular country. Sanction – a threatened

penalty for disobeying a law or rule.

Trade Organizations

WTO The World Trade Organization deals with the global rules of trade between nations.

EU The European Union is an economic and political union of 28 member states that are located primarily in Europe.

Trade Organizations NAFTA North American Free Trade Agreement –

A regulation implemented on Jan. 1, 1994, that decreased and eventually eliminated tariffs to encourage economic activity between the United States, Mexico and Canada.

CAFTAThe CAFTA-DR is the first free trade agreement between the United States and a group of smaller developing economies. This agreement is creating new economic opportunities by eliminating tariffs, opening markets,reducing barriers to services, and promoting transparency

Trade Organizations SEATO In September of 1954, the United States, France,

Great Britain, New Zealand, Australia, the Philippines, Thailand and Pakistan formed the Southeast Asia Treaty Organization. The purpose of the organization was to prevent communism from gaining ground in the region

Trade Organizations International Monetary FundAn international organization created for the purpose of: 1. Promoting global monetary and exchange stability.2. Facilitating the expansion and balanced growth of international trade.3. Assisting in the establishment of a multilateral system of payments for currency transactions.

IMF

Trade Organizations

World Bank World Bank Group – Five international organizations dedicated to providing financial assistance and advice to countries struggling with poverty and economic development.