Trade and Global Market Factors
Objectives • Examine global influences on domestic trade • Identify the role of currency markets in prices • Analyze the costs/benefits of various restrictions on trade • C 2 PO 1 d, C 3 PO 7, C 5 PO 6
Trade Techniques • Since people cannot produce everything they need themselves, people trade • Generally, trade leads to specialization, and a higher standard of living for both parties – Trade allows economies of scale (focused production) – Allows efficient use of marginality Countries import and export according to their needs
World Trade • The World Trade Organization helps countries coordinate global trade – Imports are things a country brings in by trade – Exports are things a country sends out in trade – For example, an American buying a Ferrari (import) employs an Italian autoworker, a Liberian sailor and a US car salesman • (Trade benefits producers, transporters, promoters, retailers, customers, government (via taxes)
Export Traders Top Export Traders 2009 • • • EU 27 (external) 1. 5 Trillion PR China 1. 2 Trillion Germany 1. 1 Trillion USA 1 Trillion #14 Mexico 230 Billion Lowest Trader 2009 • • • Nauru Niue Tuvalu Cook Islands Palau 64, 000 201, 000 1 million 5. 5 mil
Import Traders Top Traders 2009 • • • EU 27 external USA PR China Germany France #13 Mexico 1. 67 Trillion 1. 61 Trillion 931 Billion 551 Billion 306 Billion Lowest Traders • Niue 9 million • Tuvalu 12 million • Nauru 20 million • Kiribati 55 million • Marshall Is. 79 million • Most of these imports are funded by foreign aid donations of medicine, tools, ect.
Currency Markets • World Trade also operates based on differing values of currencies (types of money) • Currencies rise or drop in value based on supply and demand – Mexican Pesos vs US Dollars • The also by more or less in a given country, called Purchasing Power Parity (PPP) – For example, it is cheaper to build TV’s in Mexico than the US because • Workers expect less pay • The Mexican peso consistently drops in value vs US Dollar • One US Dollar will buy more material in Mexico than in USA
GDP-PPP Richest Per Capita • • Rank Country Intl. $ • • 1 Qatar 83, 841 • 2 Luxembourg 78, 395 3 • • Norway 52, 561 • • 4 Singapore 50, 523 • • 5 Brunei 49, 110 • • 6 United States 46, 381 7 • Switzerland 43, 007 • • 8 Netherlands 39, 938 9 • Ireland 39, 468 • • 10 Australia 38, 911 • • • Mexico #60 13, 628 Poorest Per Capita 169 Afghanistan 935 170 Mozambique 934 171 Madagascar 932 172 Malawi 885 173 Togo 826 174 Sierra Leone 759 175 Central African Republic 745 176 Niger 719 177 Eritrea 680 178 Liberia 424 179 Burundi 400 180 Zimbabwe 355 181 Congo, Democratic Republic of the 332
World GDP-PPP Map (2008)
Limiting Trade • Politics often interferes with trade • Tariffs place a special, high tax on imports – Japan places a high tax on rice imports – China places tariffs on imported cars • Embargo is a law against trading some or all goods and services – US embargo vs. Cuba since 1962 – Also embargoes against North Korea, Syria, Iran
German embargo Example • If the US stopped importing cars from Germany, who would be the most likely to benefit? • Suffer? • How might Germany react?
Taxes and Trade • Three kinds of taxes slow trade: – Progressive= tax% increases based on income • Example: US Income Tax – Proportional=tax percentage based on flat % • Example: Arizona Sales Tax – Regressive=tax amount based on flat $$ fees • Example: Drivers license fee
QT • QT 72 -80, 83
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