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The Dynamic Environment of

International Trade

Chapter 2

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History of World Trade

Early Twentieth Century Great Depression

World War II

Late Twentieth Century Marshall Plan

Decolonization Lowering of trade restrictions

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History of World Trade

Problems with internationalization in1960s

Resistance to U.S. investment Increasing competition

U.S. Balance of Trade 1888-1971= Trade surplus

Since 1971= Trade deficit

Free trade NAFTA

Asian markets

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History of World Trade

Recent Trends Rise of other economies

Smaller companies going global

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Balance of Payments

What is it? Receipts from other countries (plus side):

Export sales

Money spent by foreign tourists Foreign investments into the U.S. Foreign government payments

Payments to other countries (negative side):

Imports Spending by American tourists overseas New overseas investments Cost of economic and military aid

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Protectionism

Acts to protect a countrys markets fromforeign competitors

Why? Infant industry National defense Industrialization of underdeveloped countries

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Protectionism

TariffsA tax on imported goods

QuotasA unit or dollar limit placed on a good

Sometimes paired with tariffs

Voluntary Export Restraints Boycotts and Embargoes

Whats the difference?

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Protectionism

Monetary Barriers Blocked currency

Differential exchange rate Government approval to secure foreign

exchange

StandardsAntidumping Penalties

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Easing Trade Restrictions

General Agreement on Tariffs and Trade U.S. and 22 other countries

Reduces tariffs Set up an organization to monitor trade

Resulted in deep cuts of tariffs

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Easing Trade Restrictions

World Trade Organization Began in 1995

Governs trade Settles disputes and issues penalties against

countries practicing protectionism

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Easing Trade Restrictions

International Monetary Fund Stabilize exchange rates

Lends money to member countries Special drawing rights

Average base of value to counter fluctuations inworld gold values

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Easing Trade Restrictions

World Bank Group Lend money and provide assistance to

developing countries Mediate between investors and foreign

governments