Voluntary Trade in the Middle East

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

2. SS7E6 a. Explain how specialization encourages trade between countries • Not every country can produce all the goods and services it needs • Because of this, countries specialize in producing those goods and services that they CAN provide most efficiently. • They then look for others who may need those goods and services so they can sell their products to those who need them.

3. SS7E6 a. Explain how specialization encourages trade between countries • So What Does That Mean? • Countries trade with one another to get everything they need for their country. In order to do that, each country produces what they can make the best. Then they trade with one another.

4. SS7E6 a. Explain how specialization encourages trade between countries • In international trade, no country can be completely self-sufficient. • Which means….no country can produce all the goods and services it needs • Specialization: a country makes the products it can produce best and that are in demand on the world market • This is a way to build a profitable economy and to earn money to buy items that cannot be made locally

5. SS7E6 a. Explain how specialization encourages trade between countries • Some countries in the Middle East are very rich in oil and natural gas • HOWEVER…they lack farmland and the ability to produce enough food • SO…they money earned on the world market with oil is used to purchase food

6. SS7E6 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos. EXAMPLES of SPECIALIZATION: ***Saudi Arabia: produces oil and natural gas to sell at great profit on the world market. Then they turn around to and use the money made to purchase food AND the technology needed to make their agriculture system more efficient. ***Israel: has become leader in agricultural technology even though they have a limited supply of land suitable for farming. They can sell this technology to earn money to buy food they are unable to produce. IT”S ALL A TRADE OFF…

7. Activity Think back to the country you created designing a new government. What resources does your country have and given this what do they specialize in? What resources does your country lack and given this, what do they need to import?

8. SS7E6 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos. Let’s Review The Three Types of Trade Barriers!! • Tariff • Quota • Embargo All three of these are considered to be trade barriers. They slow down or prevent one country from exchanging goods with another.

9. SS7E6 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos. • Why have trade barriers? • To protect local industries from lower priced goods made in other countries • Political problems between countries (trade would be stopped until the political issues are settled)

10. SS7E6 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos. • Tariff: a tax placed on goods when they are brought (imported) into one country from another country. • Purpose: Make the imported good more expensive than a similar item made locally. • Called a “protective tariff” because it PROTECTS local manufacturers from competition coming from cheaper goods made in other countries

11. SS7E6 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos. • Quota: sets a specific amount or number of a particular product that can be imported or acquired in a given period • Purpose: a different way of limiting the amount of foreign goods that can come in to a country. • EX: Israel could decide that only 1500 cars could be brought into the country from Japan in a given year. That would make it more likely that people buying cars would have to buy Israeli made cars, if Japanese cars were not available.

12. SS7E6 b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos. • Embargo: when one country announces that it will no longer trade with another country in order to isolate a country and cause problems with that country’s economy. • Purpose: to punish OR persuade a country • Example: Member countries of OPEC decided to stop all sales of oil and gas to the countries supporting Israel in the 1973 Arab-Israeli war.

13. Activity Match the term/definition/example then Fill in your sheet

14. SS7E6d. Explain why international trade requires a system for exchanging currencies between nations. • Most countries in Southwest Asia have their own type of currency. • In order to pay for goods as they trade with each other, they had to establish a system of changing one type of currency to another. • Exchange Rate • In order for them to trade with each other, they have to be able to figure out what goods cost in each currency. • To sum it all up…This makes it possible to buy and sell goods between nations with different types of money.

15. The Iraqi Dinar The Saudi Riyal

16. Iranian (Persian) Rial Israeli Lira

17. Activity • Use the exchange rates in the table to solve the word problems. • Answer: ₤34.65 • Work: 100 x 1.83 = 183 • 183 −120 = 63 • 63 x .55 = 34.65 • Answer: $34.80 CAD • Work: 20 x 1.74 = 34.80

18. Activity Read your trade barrier scenario then discuss with your table and fill in your sheet