Marketing Essentials
n Chapter 6 International Trade
Section 6.1 The Global
Marketplace
Chapter 6 n International Trade
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SECTION 6.1
The Global Marketplace
What You'll Learn
 The interdependence of nations
 The benefits of international trade
 Government involvement in international
trade
 Balance of trade
 Trade barriers
 Trade agreements and alliances
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SECTION 6.1
The Global Marketplace
Why It's Important
The global marketplace makes all the people
and businesses in the world potential customers,
as well as potential employees or employers.
Many familiar products are produced by foreignowned companies that have operations in the
United States. In this chapter you will explore the
key concepts that govern international trade and
help create the global marketplace.
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SECTION 6.1
The Global Marketplace
Key Terms
 international trade
 quota
 imports
 embargo
 exports
 World Trade
Organization (WTO)
 absolute advantage
 balance of trade
 North American Free
Trade Agreement
(NAFTA)
 tariff
 European Union (EU)
 comparative advantage
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SECTION 6.1
The Global Marketplace
Defining International Trade
International trade involves the exchange of
goods and services between nations. Imports
are goods and services purchased from other
countries. Conversely, exports are goods and
services sold to other countries. These
exchanges occur between businesses but are
controlled by the governments of the countries
involved.
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SECTION 6.1
The Global Marketplace
Interdependence of Nations
Most countries need to get some of their
goods and services from other nations. This is
called economic interdependence. There are
two types of advantages in international trade:
 absolute
 comparative
Chapter 6 n International Trade
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SECTION 6.1
The Global Marketplace
Absolute Advantage
Absolute advantage occurs when a country
has special natural resources or talents that
allow it to produce an item at the lowest cost
possible.
 Example: China produces close to
80 percent of all the silk in the world,
which gives them absolute advantage.
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SECTION 6.1
The Global Marketplace
Comparative Advantage
Comparative advantage is the value that a
nation gains by selling the goods that it produces
most efficiently.
 Example: U.S. businesses have a comparative
advantage in producing technology related
goods and services.
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SECTION 6.1
The Global Marketplace
Benefits of International Trade
 Consumers benefit from foreign
competition that encourages the
production of high-quality goods with
lower prices.
 Producers can expand their businesses by
conducting operations in other countries.
 Workers benefit from higher employment
rates both at home and abroad.
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SECTION 6.1
The Global Marketplace
Government Involvement in
International Trade
All nations control and monitor their trade with
foreign businesses. The U.S. government
monitors imports through the customs division
of the U.S. Treasury Department.
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SECTION 6.1
The Global Marketplace
Balance of Trade
Balance of trade is the difference in value
between a nation's exports and imports.
A trade surplus occurs when a nation exports
more than it imports.
A trade deficit occurs when a nation imports more
than it exports.
Chapter 6 n International Trade
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SECTION 6.1
The Global Marketplace
Trade Deficit
The U.S. trade gap in
August 2000 was $29
billion. One effect of a trade
deficit is a weaker dollar.
Should that help or hurt U.S.
exporters? Why?
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SECTION 6.1
The Global Marketplace
Trade Barriers
A nation's government may impose trade
barriers or restrictions when it wants to limit
trade. There are three main types of trade
barriers:
 tariffs
 quotas
 embargoes
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SECTION 6.1
The Global Marketplace
Tariffs
A tariff (sometimes called a duty) is a tax
on imports. Tariffs may be used to produce
revenue for a country.
Another type of tariff is a protective tariff, which
is generally high. Its purpose is to increase the
price of imported goods so that domestic
products can compete
with them.
Chapter 6 n International Trade
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SECTION 6.1
The Global Marketplace
Quotas
An import quota limits either the quantity or
monetary value of a product that may be imported.
 Example: Japan placed a quota on its auto
exports to the U.S. to improve trade relations.
Chapter 6 n International Trade
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SECTION 6.1
The Global Marketplace
Embargoes
An embargo is a total ban on specific goods
coming into and leaving a country. Embargoes
are usually used for political reasons.
 Example: The United Nations imposed an
embargo on Iraq during the Persian Gulf War.
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SECTION 6.1
The Global Marketplace
Trade Agreements and Alliances
Governments make agreements with each
other to set up trade alliances that establish
guidelines for international trade. Some
alliances in the interest of worldwide
free trade are:
 World Trade Organization
 North American Free Trade Agreement
 European Union
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SECTION 6.1
The Global Marketplace
World Trade Organization (WTO)
The WTO is a global coalition of 135
governments that makes the rules governing
international trade.
The WTO was formed in 1995 as the
successor to the General Agreement on Tariffs
and Trade (GATT).
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SECTION 6.1
The Global Marketplace
North American Free Trade Agreement
(NAFTA)
NAFTA is an international trade agreement
among the United States, Canada, and
Mexico. It went into effect on January 1, 1994.
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SECTION 6.1
The Global Marketplace
European Union (EU)
The EU is Europe's trading bloc. It was
established by the Maastricht Treaty, which
called not only for free trade among member
nations, but also for a single European
currency and a central European bank.
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SECTION 6.1
The Global Marketplace
International Trade Agreements
and Alliances
Depicted on this map are two major trading blocks or markets—
NAFTA and the EU. How do these trade alliances foster free trade?
Chapter 6 n International Trade
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6.1
ASSESSMENT
Reviewing Key Terms and Concepts
1. Explain the concept of economic
interdependence of nations.
2. Provide an example of comparative
advantage and absolute advantage for
two different countries.
3. What benefits do consumers and nations
derive from international trade?
Slide 1 of 2
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6.1
ASSESSMENT
Reviewing Key Terms and Concepts
4. Name three types of trade barriers.
5. What is the common goal or purpose of
the WTO, NAFTA, and the EU?
Slide 2 of 2
Chapter 6 n International Trade
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6.1
ASSESSMENT
Thinking Critically
What problems occur when trade between
nations is not equal, as in the case of the
United States and Japan? What measures
could the United States take in order to
reduce its trade deficit with Japan?
Chapter 6 n International Trade
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6.1
Graphic Organizer
How Exchange Rates Affect the Balance of Trade
Weak
Currency
More
Exports
Favorable
Balance
of Trade
Strong
Currency
Fewer
Exports
Negative
Balance
of Trade
Chapter 6 n International Trade
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Marketing Essentials
End of Section 6.1
Chapter 6 n International Trade
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