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 .

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

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

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

– Deficit= Loss of value for the dollar . or its money will lose value against other countries’.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.

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

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? .

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

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 .

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

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

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 .

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

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