International Trade

ObjectivesO Display understanding of how

comparative advantage influences the structure of global trade

O Compare and contrast the advantages and disadvantages of protectionist policies on businesses and national economies

O Develop a business strategy based on an understanding of concepts of international trade

Key VocabularyO Absolute advantageO AutarkyO Comparative

advantageO Country of OriginO Customs dutyO EmbargoO Free tradeO Infant industry

O MaquiladorasO NAFTAO Non-tariff barriersO ProtectionismO QuotasO SpecializationO SweatshopO TariffO Trade

Globalization in ActionO Check the labels on your clothes,

electronics, and belongingsO Make generalizations about where

certain items are madeO Take the role of businesses and

countries in an activity that introduces the fact that many businesses now operate globally and that international trade of goods and services is growing ever more important

GlobalizationO Over the past few decades, business has

been becoming rapidly globalized, which means that companies are not only selling their products and services all over the world, but also expanding where they manufacture things and where they find investors

O One interesting example of globalization is that customer service call centers for US companies are often in India

GlobalizationO 3 cards with the name of a different

country and a description of some characteristics of that country. These include:O Climate and availability of fertile soilO Education level of its workforceO Labor costsO Accessibility to transportation

GlobalizationO 3 groups are each given a card representing a

company that is looking to expand its productionO Each card contains a description of what the

company is looking for in a new production location. These include:O Coffee company: looking for a tropical climate, low

labor costs, and access to ports for shippingO Cell phone manufacturing company: looking for

relatively low labor costs for skilled labor (they have very little need for unskilled workers), mid- to high-level education, high levels of technical skills and access to ports for shipping

O Customer service call center company: looking for mid- to high-level education and low labor costs

GlobalizationO Each company will have to choose a

country into which they will expand production

O The company teams should meet with each of the country teams, taking notes on their characteristics

O After all of the groups have met each other, ask each business group to choose one country to expand into, and to explain why they made that decision.

Introduction to Strategy Recommendations

O Download: Instructions- Trading Avocados MemoO In the memo, you are asked to help

the CEO of Awesome Avocados come up with a strategy to compete against growing imports by coming up with a written set of recommendations

Recommendations for Awesome Avocados

O How can we, as business economics consultants, best advise Awesome Avocados to meet the challenges of increasing competition from overseas producers?

Recommendations for Awesome Avocado

O What do we already know that will help us answer the guiding question?

O What do we still need to learn in order to answer the guiding question?

Advantage of TradeO Download: Anticipation Guide-

International Trade

International TradeO Presentation 1

International TradeO Complete the rest of the Anticipation

GuideO Given what you learned, what are some

possible opportunity costs to producers in California in producing avocados?O Growing other products that might bring

higher profitsO Using the land for something else: housing,

retail, manufacturingO Using the land for something with a lower

environmental impact

Avocado ProductionO Download: Reading- Avocado

ProductionO Answer questions in your consultant

groupO The cost of producing avocados

varies widely, especially the price of irrigation and harvesting

O In fact, in Mexico most avocados are grown simply with available rainwater

Avocado ProductionO Chile, being in the Southern

Hemisphere, exports avocados only during the time when US avocados are not in production, while Mexico’s climate allows it to export year-round, thus making Mexico a much more serious competitor than Chile to American producers

Tariffs and Protectionism

O Why do you think the United States abolished its previous ban on the import of avocados (originally enacted in 1914)—with a temporary exception for imports into California, Florida, and Hawaii—in 2005? (The restrictions on imports into California, Florida, and Hawaii were abolished in 2007.)

O Why do you think the United States kept the restriction on avocado imports in force for two years longer in the case of California, Florida, and Hawaii?

O Why do you think the United States strongly supports trade agreements with Mexico and Canada?

Trade Barriers and Trade Agreements

O Presentation 2

Tariffs and Protectionism

O The United States, by temporarily restricting avocado imports to certain states during 2005–2007, was protecting producers in those states from foreign competition (although the reason given was the risk of insect pests coming in with imported avocados)

O At the same time, the United States was opening markets in an effort to promote free trade, and the eventual opening up of the US market to avocado imports from Mexico in 2007 was based on the North American Free Trade Area (NAFTA) trade agreement between the United States, Canada, and Mexico.

Tariffs and Protectionism

O Leaders and lawmakers often try to balance the arguments for protecting certain industries at home from international competition against the arguments for free trade, so their own industries have access to foreign markets

O Complex trade agreements, such as NAFTA, often contain a mix of protectionist and free trade components.

Free Trade vs. Protectionism

O Download: Reading- The Debate on Free TradeO Write down (in at least 50 words)

which side you are most in favor of, and put the argument you agree with into their own words

Draft Strategy Recommendations

O Download: Writing Assignment- Strategy Recommendations Letter

Edit Strategy Recommendations

O Each student should take 10 minutes to review her partner’s work and provide feedback in these two areas:O Are the recommendations clear?O Does the reasoning behind each

recommendation make sense?

Creating Final Drafts of Recommendations

O Finalize your letter of recommendations and drop in drop box

Cross- Curricular Integration

O Ecology/Biology: Explain that international cargo and shipping is the lifeblood of trade between countries. However, the huge cargo ships are heavy polluters and often carry unfriendly species in their bilge water or on their hull from one corner of the globe to another

O Conduct research into the biological or ecological impacts of increased trade among nations over our oceans and how some of these problems might be addressed or mitigated