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Chapter 10
Business in aGlobal Economy
Section 10.2
Global Competition
Read to Learn
Describe free trade.
Indicate who benefits and who does not benefit
from free trade.
The Main Idea
Protectionism is the practice of putting limits on
foreign trade to protect businesses at home.
However, protectionism decreases competition
and generally increases the prices that
consumers pay for goods and services. More
nations are moving toward free trade.
Key Concept
Protectionism and Free Trade
Key Term
protectionism
tariff
the practice of the government
putting limits on foreign trade to
protect businesses at home
a tax placed on imports to
increase their price in the
domestic market
Key Term
quota
embargo
a limit placed on the quantities of a
product that can be imported
a ban on the import or export of a
product
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Key Term
free
trade
when there are few or no limits on trade
between countries
Protectionism and Free Trade
Global competition often leads to trade
disputes.
Protectionism and free trade are two opposing
points of view involved in trade disputes.
Protectionism
Japan practices
protectionism in the
areas of rice farming
and auto production.
protectionismthe practice of the government putting limits on foreign trade to protect businesses at home
Protectionism
Reasons to Restrict Trade
Foreign competition can lower the demand for
products made at home.
Companies at home need to be protected from
unfair competition.
Industries that make products related to national
defense need to be protected.
Protectionism
Reasons to Restrict Trade
The use of cheap labor in other countries can
lower wages or threaten jobs at home.
A country can become too dependent on another
country for important products.
Other countries might not have the same
environmental or human rights standards.
Protectionism
A tariff is an example
of a trade barrier. tariffa tax placed on imports to increase their price in the domestic market
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Trade Sanctions
A government can impose a trade sanction, or penalty, on other countries, usually by adding
tariffs.
Protectionism
A quota is another
example of a trade
barrier.
quotaa limit placed on the quantities of a product that can be imported
Protectionism
An embargo is a
trade barrier that is
usually used for
political or military
reasons.
embargoa ban on the import or export of a product
Free Trade
Supporters of free
trade think all
countries should be
free to compete
anywhere in the world
without restrictions.
free tradewhen there are few or no limits on trade between countries
Free Trade
Benefits of Free Trade
Free trade opens up new markets in other
countries.
Free trade creates new jobs.
Competition forces businesses to be more efficient
and productive.
Free Trade
Benefits of Free Trade
Consumers have more choices in the variety,
prices, and quality of products.
Free trade promotes cultural understanding and
encourages countries to cooperate with each other.
Free trade helps countries raise their standard of
living.
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Free Trade
To reduce limits on trade, nations form trade
alliances.
NAFTA (North American Free Trade
Agreement) combined the economies of the
United States, Canada, and Mexico.
Free Trade
Some people opposed NAFTA because they
feared some workers would be displaced when
trade barriers were lowered.
Graphic Organizer
North AmericanFree Trade Agreement
(NAFTA)
European Union(EU)
Association of Southeast Asian
Nations (ASEAN)
United States, Canada, Mexico
Austria, Belgium, Cyprus, Czech
Republic, Denmark, Estonia, Italy, Latvia,
Lithuania, Luxembourg, Malta, the Netherlands,
Poland, Portugal, Slovakia, Slovenia,
Spain, Sweden, United Kingdom
Brunei, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, Philippines, Singapore,
Thailand, Vietnam
1. Give three reasons for protectionism.
protects businesses from unfair competition, from countries that violate U.S. human rights or environmental standards, and from overdependence on another country’s products
2. Give three reasons for free trade.
encourages competition, gives consumers more choices for products, promotes cultural understanding
3. What are some of the major trade alliances in the world today?
NAFTA, the EU, and ASEAN
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Chapter 10
Business in aGlobal Economy
Section 10.2
Global Competition
End of
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