International Trade

“International trade is the exchange of capital, goods, and services across international borders or
territories (Dictionary.com, 2010).”   It consists of foreign goods such as wine, fruit, furniture,
vegetables, and any other products and services that are foreign to a particular area.   “In most
countries, it represents a significant share of gross domestic product (GDP)” (Dictionary.com,
2010).   It has been around throughout history so most people are aware of it, but they may not
understand the depth and magnitude of international trade like how it affects foreign exchange
rates.   It is very important in Economics, the United States and the survival of most countries.  
Because of the significance of international trade, The World Trade Organization (WTO) is in
place to manage trade agreements.   Furthermore, with the increase of industrialization and
globalization, international trade is growing and it is becoming a major political topic.  

However, there are advantages and restrictions

to international trade which Team D will illustrate.   In addition, we will discuss issues
surrounding international trade, influences affecting foreign exchange rates, talk about how to
decide who to trade with, converse free trade and trade restrictions, and define absolute and
comparative advantage which are key points from Hubbard’s Economics that were shown in the
University of Phoenix’s Applying International Trade Concepts Simulation.   Lastly, Team D
will briefly explain what the World Trade Organization is and a topic discussed on its website.  
To begin, countries around the globe depend on international trading.   Unfortunately, there are
advantages and limitations.   To be economically tied to other countries and acquiring the
opportunity to trade goods or services is an advantage. Some countries depend on one another to
receive their goods because their country may not produce that particular product, and if so,
production may not be adequate.  

International Trade Concepts

International Trade Concepts

Shelly Hall
ECO/372
March 12, 2010
Robert Chase

The Simulation on International trade concepts is a study of the country of Rodamia and the
decisions the leaders made regarding imports and exports for the country.   While Rodamia is a
fictitious country, the concepts of international trade, tariffs, quotas, and imports and exports are
all applicable to the effects on the U.S. economy.   This paper will discuss in detail the meaning
and effect each of these concepts have on the economy.

Advantages and Limitations of International Trade

Trade is important because different countries have various quantities and types of resources,
such as land, capital, labor, and businesses.   Each country wants to use their resources as a
source of income as much as possible.   For example, a country with a great climate for
agriculture would use their natural resources to grow and sell fruits, vegetables, etc.   Rodamia is
a large country where the largest percent
of GDP comes from services.   The country has roughly 4 % of its GDP in agriculture, with
crops such as corn, rice, tobacco, etc.  

Overall, free trade is better than imposing trade restrictions; there are situations in
which trade restrictions are preferred.   Protecting a developing domestic industry from
competition from abroad or preventing dumping are two such situations.   However, as will be
discussed in later sections, trade restrictions on other countries can have negative effects on the
economy.   Trade restrictions on imports reduces the demand for products and services from
other countries.

Effects on International Trade on the U.S. Economy

According to The Trade Resource Center, “The World Trade Organization (WTO) stimulates
U.S. economic growth creates good jobs and improves living standards for Americans by
reducing barriers to trade, the multilateral trading system benefits American businesses, farmers
and workers.”