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The Dynamic Environment of International Trade

The Dynamic Environment of International Trade. Chapter 2. History of World Trade. Early Twentieth Century Great Depression World War II Late Twentieth Century Marshall Plan Decolonization Lowering of trade restrictions. History of World Trade.

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The Dynamic Environment of International Trade

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  1. The Dynamic Environment of International Trade Chapter 2

  2. History of World Trade • Early Twentieth Century • Great Depression • World War II • Late Twentieth Century • Marshall Plan • Decolonization • Lowering of trade restrictions

  3. History of World Trade • Problems with internationalization in 1960’s • Resistance to U.S. investment • Increasing competition • U.S. Balance of Trade • 1888-1971= Trade surplus • Since 1971= Trade deficit • Free trade • NAFTA • Asian markets

  4. History of World Trade • Recent Trends • Rise of other economies • Smaller companies going global

  5. Balance of Payments • What is it? • Receipts from other countries (plus side): • Export sales • Money spent by foreign tourists • Foreign investments into the U.S. • Foreign government payments • Payments to other countries (negative side): • Imports • Spending by American tourists overseas • New overseas investments • Cost of economic and military aid

  6. Balance of Payments • Three types of accounts • Current account • Capital account • Reserves account • If a country’s expenditures > income, its citizens must reduce standard of living, or its money will lose value against other countries’. • Deficit= Loss of value for the dollar

  7. Protectionism • Acts to “protect” a country’s markets from foreign competitors • Why? • Infant industry • National defense • Industrialization of underdeveloped countries

  8. Protectionism • Tariffs • A tax on imported goods • Quotas • A unit or dollar limit placed on a good • Sometimes paired with tariffs • Voluntary Export Restraints • Boycotts and Embargoes • What’s the difference?

  9. Protectionism • Monetary Barriers • Blocked currency • Differential exchange rate • Government approval to secure foreign exchange • Standards • Antidumping Penalties

  10. Easing Trade Restrictions • Market access • Allows US to retaliate against protectionism • Export expansion • Easier to gain an export license • Government responsible for exporter needs • Import relief • Offers assistance to companies impacted by imports

  11. Easing Trade Restrictions • General Agreement on Tariffs and Trade • U.S. and 22 other countries • Reduces tariffs • Set up an organization to monitor trade • Resulted in deep cuts of tariffs

  12. Easing Trade Restrictions • World Trade Organization • Began in 1995 • Governs trade • Settles disputes and issues penalties against countries practicing protectionism

  13. Easing Trade Restrictions • International Monetary Fund • Stabilize exchange rates • Lends money to member countries • Special drawing rights • Average base of value to counter fluctuations in world gold values

  14. Easing Trade Restrictions • World Bank Group • Lend money and provide assistance to developing countries • Mediate between investors and foreign governments

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