Would Americans be better off if we purchased less from foreigners?
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Transcript of Would Americans be better off if we purchased less from foreigners?
• Would Americans be better off if we purchased less from foreigners?
International Trade
• In what ways do you engage in trade?
Specialization
• What do you plan to specialize in?
Milton Friedman—The story of a pencil
The Basis for all Trade:Absolute and Comparative Advantage
KarateEconomics
Absolute Advantage
• When a country can produce a good more efficiently than another country
Coffee Cashews
Country A 20 4Country B 5 1
Comparative Advantage• The ability to
produce a product relatively more efficiently, aka, a lower opportunity cost
Coffee Cashews
Country A 40 0Country B 0 6Total 40 6
Coffee Cashews
Country A 20 4Country B 5 1Total 25 5
Before Trade
After Trade
History of American Trade
• Smoot-Hawley Tariff Act—1930– Raised tariffs on
20,000 imported goods
– Result: huge decline in standard of living across all trading groups
History of American Trade
• WWII and after—promotion of free trade
• NE—Wheelan: why would we put sanctions on ourselves?
NAFTA
NAFTA
• Signed in 1994 by Clinton—created a trade bloc between US, Canada, and Mexico
Protectionism• Tariffs• Quotas• Regulations
Why Protectionism?
• Protect domestic industries and employment
• Strategic/National interest goals
• Political pressure• Protect culture
Neo-colonialism?Mexico Bribery Scandal
Fair Trade?
• International trade with a focus on quality of life and a more equitable global economic trading system
• Top 5 Worst Sweatshop Offenders