The objectives of this chapter are to introduce the international trade. Learning objectives of this chapter include: Specialization and trade, domestic exchange equations, absolute advantage and comparative advantage, tariffs or quotas. | Chapter 32 International Trade 32-1 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives Specialization and trade Domestic exchange equations Absolute advantage and comparative advantage Tariffs or quotas 32-2 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives The causes of our trade imbalance What can we do to restore our balance of trade? Our trade deficits with Japan and China . Trade policy: A historical view 32-3 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. . Trade before 1975 We ran trade surpluses before 1975 and have run trade deficits since We faced increasing trade competition in the 1960s We have been running large and growing trade surpluses on services and growing trade deficits on goods 32-4 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. . Tariffs, 1820-2000 32-5 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. A Century of High Protective Tariffs Initially the tariff was purely a revenue-raising device After the War of 1812 the tariff took on a protective tinge During the great depression, virtually every industrial power raised its tariffs to keep out foreign goods This caused world trade to dwindle to a fraction of what it had been and probably made the depression a lot worse 32-6 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. International Trade Recent years have seen a growing consensus in the United States that we need more import protection Economic reasoning, however, argues strongly for free trade 32-7 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Specialization and Trade Specialization is the basis for international trade Country A specializes in making the products that it can make most cheaply; Country B does the same When they trade, each country will be better off than they would if they didn’t specialize and trade 32-8 . | Chapter 32 International Trade 32-1 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives Specialization and trade Domestic exchange equations Absolute advantage and comparative advantage Tariffs or quotas 32-2 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives The causes of our trade imbalance What can we do to restore our balance of trade? Our trade deficits with Japan and China . Trade policy: A historical view 32-3 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. . Trade before 1975 We ran trade surpluses before 1975 and have run trade deficits since We faced increasing trade competition in the 1960s We have been running large and growing trade surpluses on services and growing trade deficits on goods 32-4 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. . Tariffs, 1820-2000 32-5 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
