Ch20-8e_micro - CHAPTER 20 Trading with the World After...

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Trading with the World CHAPTER 20
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After studying this chapter you will be able to Describe the trends and patterns in international trade Explain comparative advantage and explain why all countries can gain from international trade Explain why international trade restrictions reduce the volume of imports and exports and reduce our consumption possibilities Explain the arguments that are used to justify international trade restrictions and show how they are flawed Explain why we have international trade restrictions
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Silk Routes and Sucking Sounds Since ancient times, people have expanded trading as far as technology allowed—Marco Polo’s silk route between Europe and China is an example. Many people fear free trade and some predicted a “giant sucking sound” as jobs were transferred from high-wage Michigan and Ohio to low-wage Mexico under the NAFTA. Workers in China earn even less than those in Mexico. How can we compete with low-wage China? Would it be a good idea to limit imports from China and other countries by putting on a tariff or a quota imports?
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Patterns and Trends in International Trade Imports are the good and services that we buy from people in other countries. Exports are the goods and services we sell to people in other countries.
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Patterns and Trends in International Trade Trade in Goods Manufactured goods represent 55 percent of U.S. exports and 68 percent of U.S. imports. Raw materials and semi-manufactured materials represent 14 percent of U.S. exports and 15 percent of U.S. imports. Agricultural products account for only 8 percent of U.S. exports and 4 percent of U.S. imports. The largest U.S. export and import items are capital goods and automobiles.
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Patterns and Trends in International Trade Trade in Services International trade in services such as travel, transportation, and insurance is large and growing. Geographical Patterns of International Trade The United States trades with countries all over the world, but its biggest trading partner is Canada with 20 percent of exports going to Canada and 17 percent of imports coming from Canada. Other U.S. trading partners are Japan, the European Union, and Latin America.
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Patterns and Trends in International Trade Trends in the Volume of Trade In 1960, the United States exported 3.5 percent of its total output and imported 4 percent of the total amount that Americans spent on goods and services. In 2006, the United States exported 10 percent of its total output and imported 15 percent of the total amount that Americans spent on goods and services.
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Patterns and Trends in International Trade Net Exports and International Borrowing The value of exports minus imports is called net exports . In 2006, U.S. net exports were –$780 billion.
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Ch20-8e_micro - CHAPTER 20 Trading with the World After...

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