Bài giảng Economics of Social Issues - Chapter 10 Competition in the Global Marketplace: Should We Protect Ourselves from International Trade?

Chapter 10Competition in the Global Marketplace: Should We Protect Ourselves from International Trade?Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin10-2The Controversy Over International TradeThe Protectionist ViewpointProtect from cheap foreign goodsBalance of Trade and Balance of Payments problemsProtection of Key and Infant IndustriesProtection of environment and human rightsThe Free Trade ViewpointFree trade promotes international specialization and division of laborSince trade is voluntary, it would not take place unless both parties benefited10-3The Economics of the Global MarketplaceHow Trade Takes PlaceDefine imports Define exportsBuying a good produced abroadWe must export in order to import/We must import in order to export10-4Alpha and Omega’s Production and Consumption PossibilitiesBread (million loaves per year)Milk (million gallons per year)Bread (million loaves per year)10010010020020015010050AMBNCA150P5025P1N1C1AlphaOmegaMilk (million gallons per year)10-5Limits to Terms of TradeAlphaOmegaBread12Milk2110-6The Principle of Comparative AdvantageComparative Advantage – good the country produces at the lowest opportunity costComparative DisadvantageSources of Comparative AdvantageResource endowmentsState of technologyBuying Goods and Services Produced Abroad$50,000£75,00010-710-8Exchange RatesExchange Rate – the rate at which a person can trade the currency of one country for the currency of another.Appreciation versus Depreciation10-9Foreign Exchange MarketPounds per monthDollars per poundDDSSqr10-10U.S. International TransactionsTransaction TypeDemand for Foreign CurrencySupply of Foreign CurrencyBalanceCurrent Account1. Goods exported1,148.482. Goods imported-1,967.853. Net Services119.124. Net Investments 233.865. Transfers-112.71Balance on Current Account-579.10Capital Account6. Change in U.S. assets abroad-1,289.857. Change in foreign assets in the U.S.2,057.70Balance on capital account767.85Totals-3,370.413,559.16-188.75Statistical Discrepancy-188.7510-11International Trade RestrictionsTariffsImport dutiesCars per yearDollars $DDSSS1S1$22,500$20,000$17,5008,00010,00010-12International Trade RestrictionsQuotasSugar (tons per year)Dollars $DDSS$35$30$257501,000S1S110-13International Trade RestrictionsVoluntary Restraint AgreementsEmbargoes10-14Analysis of the ControversyProtection from cheap foreign goodsPayments problemsBalance of payments deficitProtection of key and infant industriesProtection of environment and human rightsDollars per poundDDSS$1.75q1$1.50q2qPounds per month10-15Today’s International Trade EnvironmentWorld Trade Organization (WTO)Most-favored-nation Dispute Settlement BodyDumpingCommon MarketsEuropean Union Custom unionThe euroNorth American Free Trade Agreement (NAFTA)Free trade areaThe Spread of Common Markets10-16Dollar Exchange Rates for Selected Foreign Currencies, Spring 2009source: The Wall Street Journal, February 1, 2009, 87CurrencyDollarsForeign Currency UnitArgentina0.28691 pesoAustralia0.63541 dollarBritain1.4491 poundCanada0.81551 dollarChina0.14631 yuanDenmark0.17181 kronarEuropean Union1.29851 euroJapan0.01131 yenMexico0.07131 pesoRussia0.03041 rubleSaudi Arabia0.26661 riyalSouth Africa0.09791 randSouth Korea0.0071 wonSwitzerland0.86511 francTaiwan0.02971 dollar