Rakin Nasar Outline 10/8/13 1. Dependence a. US is entirely dependent on other countries for certain goods b.

Baseball requires foreign gloves. c. US ag also exports 2. Trade Patterns a. Trade deficits i. When imports exceed exports ii. In 2005 US import of goods exceeded exports by 283 bullion b. Trade surplus i. When exports exceed imports 1. US exports of services exceeded imports of services c. Imports some of the same categories it exports d. Canada is the most important trading partner e. Sizable deficits with china and japan 3. Comparative advantage a. The products must stay at a constant rate and not increase in price i. Assumes labor force is the same size as well b. Specialization i. It ahs to be mutually profitable between two nations c. Comparative advantage i. A domestic comparative advantage in producing a certain good. 4. Terms of trade a. The US can shift between products at different rates.

b. The terms are mutually beneficial to both countries and do better through trade than through domestic production alone. 5. Gains from specialization a. The comparative advantage over normal output shows the gain in specialization and trade b. Improves global resource allocations i. Total inputs of the world results in a larger global output c. Allows countries to overcome production constraints 6. Foreign exchange market a. A market where national currencies are exchanged for one another b. The prices are called exchange rates 7. Changing rates a. Demand for another countries goods increases the demand for that currency. When the dollar price of the other currency increases thats depreciation of the dollar relative to the dollar. Increase of a dollar price o another currency is appreciation. The international value fo the dollar increased as a result. 8. Trade impediments a. Protective tariffs i. Excise taxes or duties placed on imported goods. Protective tarrifs shield domestic producers they impede free trade and rise prices ii. Import quotas 1. Limits on the total value of specific items that may be imported 2. More effective than tariffs in slowing down international commerce iii. Non tariff barriers 1. Onerous licensing requirements and unreasonable standards 2. These other methods limit trade

iv. Export subsidies 1. Payments to the domestic producer of export goods reduce production costs and they can charge lower prices 9. Poitical considerations a. Trade can har particular domestic industries and affect certain groups b. These companies that benefit from import protection are few in number but have much at stake so they swing political activity 10.Reciprocal trade agreements act a. Negotiating authority i. It authorized the prez to negotiate with foreign nations on agreements that would reduce US tariffs b. Generalized reduction i. Specific tariff reduction between the US and another country c. MFN i. Reduce US tariffs a lot the lowest cost of imports 11.WTO a. WTO oversees trade agreements by the member nations and rules on trade disputes among them. The negotiations are aimed at further reducing tariffs and quotas and agricultural subsidies that distort trade 12.NAFTA a. Response to EU b. Employment increased as a result c. Combine output of US Canada and Mexico d.