AMERICA VS. THE WORLD

1. AMERICA VS. THE WORLD Ch. 26 Comparing Economic Systems

2. Why Nations Trade • International Trade is very important to all countries. • In recent years, about 10% of all good made in the U.S. were exported. • An even larger amount of goods (over 20%) were imported from other countries. • The problem of scarcity causes countries to trade.

7. Why Nations Trade • Nations trade for three main reasons • 1. To obtain goods they cannot produce • 2. To reflect comparative advantage • 3. To create jobs

8. Why Nations Trade #1 • To Obtain Goods the cannot produce • The U.S. buys good such as coffee, bananas, and diamonds from other countries • The U.S. imports these because it does not have the ability to create them on its own. • Other countries buy items from the U.S. that they cannot produce. • The U.S. exports coal, fuel oil, rice, natural gas, soybeans, wheat, aircraft, pharmaceuticals, automobile parts, and other technological accessories.

11. Top 10 US Imports from China China’s exports to America amounted to $337.8 billion or 16.1% of overall US imports.   1. Sporting goods and toys … $29.2 billion   2. Other household goods … $27.5 billion   3. Computer accessories … $27 billion   4. Computers … $25 billion   5. Non-cotton apparel … $15.3 billion   6. Video equipment (DVD) … $15.1 billion   7. Telecommunications … $14.5 billion   8. Cotton apparel … $13.4 billion   9. Furniture, household items … $13.3 billion 10. Footwear … $11.6 billion

12. Top 10 US Exports to China America’s exports to China amounted to $69.7 billion or 5.4% of overall US exports.   1. Soybeans … $7.3 billion  2. Semiconductors … $6.5 billion  3. Civilian aircraft … $3.9 billion  4. Plastic materials … $3.1 billion  5. Other industrial machines … $2.8 billion  6. Copper … $2.4 billion  7. Pulpwood … $2.2 billion  8. Aluminum … $1.94 billion  9. Steelmaking materials … $1.91 billion10. Organic chemicals … $1.8 billion

22. Why Nation Trade #2 • To Reflect Comparative Advantage • Comparative Advantage is the ability of a country to produce a good cheaper than another country • The U.S. could produce many of its own goods, but other countries can produce these same goods much cheaper. • Comparative Advantage allows nations to specialize. • Countries produce goods that they can produce better than other countries • The U.S. has a comparative advantage in production of high end products such as aircraft, automobile parts, computer parts, and weapons.

23. Why Nations Trade #3 • To create jobs • A country can only sell so many goods to its own citizens. • In order to expand their markets, countries trade with one another. • When markets expand, more goods are needed, and more people are needed to create those goods. • This raises the employment rate, and keeps people supplied with jobs and money.

27. Barriers to Trade • Problems may arise in countries without comparative advantage. • When a country does not have comparative advantage, there are two major policies instituted • Tariffs: Taxes levied on imports from other countries. This discourages other countries from importing good to countries with high tariffs. This is called a protective tariff. • Quotas: This is a limit on the amount of good one country can send into another.

29. Problems with Trade Barriers • There are ways of going around trade barriers. (Japanese car makers example) • These barriers force consumers to pay higher prices. • The lower the amount of free trade because of retribution. • Buyers suffer.

34. Regional Trade Agreements • These are agreements to encourage trade between the countries involved. • There are three major Regional Trade Agreement. • European Union • North America Free Trade Agreement • World Trade Organization

35. European Union • This is a collection of independent European countries that have combined to improve trade on the continent of Europe. • The have no barriers for trade • The use a common currency; the Euro • Combined, the population of these countries is a little larger than the U.S. at 380,000,000 people.

39. North American Free Trade Agreement • This is abbreviated NAFTA • Deal will eventually lower all barriers to trade between U.S., Canada, and Mexico. • Opponents complain that American workers will lose their jobs. • Supporters argue that it will fuel growth and put more low cost goods on the market.

42. World Trade Organization WTO • This is an international body that oversees trade on a global scale. • It organizes trade routes. • It helps countries develop their economy • It helps settle trade disputes. • Critics say that it favors large corporations and harms the environment, and possibly the workers.

45. Trade Surpluses and Deficits • A country has a trade deficit with another country when it buys more from that country than it sells. • The U.S. has a trade deficit with China. • A country has a trade surplus with another country when it sells more to that country than it buys. • A large trade deficit can cause the weakening of that country’s money.

48. Market Economies • Supply and Demand are the major motivators in a market economy. • A market economy is also referred to as a Capitalist Economy of Capitalism. • Private citizens, not the government, control how much is produced, where resources are sent, and what the prices are. • These economies are influenced by the government in a regulatory way. • There is no single example of a pure market economy in the world.

50. Command Economies • Individuals have very little say so in a command economy. • Major economic decisions are made by the government, • These economies are also called Communist. • These economies believe in an idea called socialism. • This idea was promoted by Karl Marx, and said eventually there would be no need for a government. • These economies grow very slowly and have many problems.