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Understanding Trade Dynamics in Southwest Asia

Learn how specialization drives trade in Southwest Asia, explore trade barriers, and understand OPEC's role in the region's oil market.

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Understanding Trade Dynamics in Southwest Asia

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  1. SS7E6 The student will explain how voluntary trade benefits buyers and sellers in Southwest Asia (Middle East)

  2. A. Explain how specialization encourages trade between countries • Every country cannot produce all the goods and services it needs. • Therefore they specialize in producing those goods and services that they can provide most efficiently.

  3. Then they sell their goods and services to other countries that need them. • They use the profits from the sales to buy the things that they need. • Specialization is that production of the things a country makes best that would be in demand in a world market. • Saudi Arabia specializes in oil while Israel specializes in agricultural technology.

  4. B. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos. • Trade barriers are anything that slows down or prevent one country from exchanging goods with another country. • Some barriers protect local industries while others are created due to political problems.

  5. Tariff- a tax placed on goods when they are imported into one country from another to make the imported item more expensive that a similar item made locally. • Protects local manufacturers from competition coming from cheaper goods made in other countries.

  6. Quota- limits the amounts of foreign goods that can come into a country. • Sets a specific number or amount of a particular product that can be imported or acquired in a given period of time. • A protective measure that makes it more likely that people will buy locally made products.

  7. Embargo- One country announces that it will no longer trade with another country in order to isolate the country and cause problems with that country’s economy. • Used as a political tool. • Usually as a result of political disputes between two countries. • Can hurt both countries.

  8. C. Explain the primary function of the Organization of Petroleum Exporting Countries (OPEC) • Formed in 1960 by Iraq, Iran, Saudi Arabia, Kuwait, and Venezuela. • They decide how much oil to produce and sell and they decide the price of a barrel of oil. • When they produce less, the price goes up. When they produce more, the price goes down.

  9. Can you answer these questions? • 1. What is economic specialization? • 2. In what 2 products does Saudi Arabia specialize? • 3. In what does Israel specialize?

  10. Can you answer these questions? • 4. What does a trade barrier do? • 5. What is a tariff? • 6. What is a quota?

  11. Can you answer these questions? • 7. What is an embargo? • 8. Which 2 are protective measures? • 9. Why is an embargo used?

  12. Can you answer these questions? • 10. Why was OPEC created? • 11. What happens to the price of oil when OPEC decides to limit oil production? • 12. Where are most of the OPEC countries located?

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