Business in a Global Economy

Transcription

1 Chapter 10 Business in a Global Economy Section 10.2 Global Competition Read to Learn Describe free trade. Indicate who benefits and who does not benefit from free trade. The Main Idea is the practice of putting limits on foreign trade to protect businesses at home. However, protectionism decreases competition and generally increases the prices that consumers pay for goods and services. More nations are moving toward free trade. Key Concept and protectionism the practice of the government putting limits on foreign trade to protect businesses at home quota a limit placed on the quantities of a product that can be imported tariff a tax placed on imports to increase their price in the domestic market embargo a ban on the import or export of a product 1

2 and free trade when there are few or no limits on trade between countries Global competition often leads to trade disputes. and free trade are two opposing points of view involved in trade disputes. Japan practices protectionism in the areas of rice farming and auto production. protectionism the practice of the government putting limits on foreign trade to protect businesses at home Reasons to Restrict Trade Foreign competition can lower the demand for products made at home. Companies at home need to be protected from unfair competition. Industries that make products related to national defense need to be protected. Reasons to Restrict Trade The use of cheap labor in other countries can lower wages or threaten jobs at home. A country can become too dependent on another country for important products. Other countries might not have the same environmental or human rights standards. A tariff is an example of a trade barrier. tariff a tax placed on imports to increase their price in the domestic market 2

3 Trade Sanctions A government can impose a trade sanction, or penalty, on other countries, usually by adding tariffs. A quota is another example of a trade barrier. quota a limit placed on the quantities of a product that can be imported An embargo is a trade barrier that is usually used for political or military reasons. embargo a ban on the import or export of a product Supporters of free trade think all countries should be free to compete anywhere in the world without restrictions. free trade when there are few or no limits on trade between countries Benefits of Free trade opens up new markets in other countries. Free trade creates new jobs. Competition forces businesses to be more efficient and productive. Benefits of Consumers have more choices in the variety, prices, and quality of products. Free trade promotes cultural understanding and encourages countries to cooperate with each other. Free trade helps countries raise their standard of living. 3

4 To reduce limits on trade, nations form trade alliances. NAFTA (North American Agreement) combined the economies of the United States, Canada, and Mexico. Some people opposed NAFTA because they feared some workers would be displaced when trade barriers were lowered. Graphic Organizer North American Agreement (NAFTA) United States, Canada, Mexico European Union (EU) Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, United Kingdom Association of Southeast Asian Nations (ASEAN) Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam 1. Give three reasons for protectionism. protects businesses from unfair competition, from countries that violate U.S. human rights or environmental standards, and from overdependence on another country s products 2. Give three reasons for free trade. encourages competition, gives consumers more choices for products, promotes cultural understanding 3. What are some of the major trade alliances in the world today? NAFTA, the EU, and ASEAN 4

5 End of Chapter 10 Business in a Global Economy Section 10.2 Global Competition 5