INTERNATIONAL TRADE VOCABULARY

1. INTERNATIONAL TRADE VOCABULARY • Import – a product purchased from another country. • Export – a product sold to another country. • Global interdependence – idea that countries of the world are growing increasingly dependent on one another. • Comparative advantage – ability of one country to produce a product at a lower opportunity cost than another country. • Absolute Advantage- ability of one country to be more productive and produce at a lower cost per unit. • Favorable balance of trade – a country exports more than they import. Foreign trade is profitable to the nation. • Unfavorable balance of trade – a country imports more than they export. Foreign trade loses money for the nation.

2. FREE TRADE Arguments For Free Trade • Increased competition = improved products. • Trade restrictions damage export industries. • Specialization and comparative advantage lowers prices. • Greater political cooperation.

3. TRADE BARRIERS • Protectionism – idea that country should impose barriers to international trade in order to protect domestic industries. Arguments Against Free Trade • Job security is threatened. • Protection of nation’s economic security is needed. • Protection of infant industries is needed. Trade Barriers • Tariff (protective, revenue) • Quota – a limit on the value or number of products to be brought in from another country • Embargo – a refusal to trade with another country. • Trade Cartel – a group of nations band together to control the supply & price of a product. (OPEC) OPEC COUNTRIES

4. TRADE AGREEMENTS • NAFTA – North American Free Trade Agreement (US, Canada, Mexico) • CAFTA – Central American Free Trade Agreement (US, Central American Countries • WTO – World trade Organization – app. 150 nations seeking to increase trade and limit trade barriers. • EU – European Union – 27 European countries have created a single economic entity.