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International Trade

Benefits and Issues of. International Trade. Specialization & Economic Interdependence. Specialization is a situation that occurs when an individual or a nation produce a narrow range of products.

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International Trade

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  1. Benefits and Issues of International Trade

  2. Specialization & Economic Interdependence • Specialization is a situation that occurs when an individual or a nation produce a narrow range of products. • Economic Interdependence is a situation where producers in one nation depend on others to provide goods and services they do not produce.

  3. Why Specialize? • Countries specialize in particular trade products because there is an unequal distribution of resources.

  4. Absolute and Comparative Advantage • Absolute Advantage is the ability of one nation to produce products more efficiently than another nation. • Comparative Advantage is the ability of one nation to produce a product at a lower opportunity cost than another nation.

  5. Tariffs, Trade Barriers, and Embargos • Trade Barrier- any law that limits free trade between nations. • Embargo- a law that cuts off trade with a specific country. Ex: United States and Cuba during the Cold War. • Tariffs- a fee charged to goods brought into one country from another.

  6. Tariff question • Canada has a 15% tariff on hockey gear imports from Russia. If hockey gear costs $80,000.00 in Russia: • How much would it cost in Canada? • Would the tariff increase or decrease Russian exports to Canada?

  7. Protectionism and Infant Industries • Protectionism- the use of trade barriers between nations to protect domestic industries. • Infant Industries- new industries that are often unable to compete against larger, more established competitors.

  8. Opponents of Free Trade… • People against free trade agreements argue that these agreements adversely affect workers.

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