Did you eat breakfast this morning? Let’s say you had cereal with sliced bananas

and coffee.

The bananas may have come from Honduras

The coffee may have come from Brazil

The sugar may be from the Phillipines

Without foreign trade, you may have just eaten cereal & milk!

TEKS:Students will understand the difference between Domestic and Foreign Business.

Domestic BusinessThe making, buying, and selling of goods and services within a country

What we buy and sell is based on:Consumers Needs & WantsNeeds—What we must have to survive

(water, shelter)

Wants—What we desire to have, but don’t necessary need for survival (jewelry, ipod)

Three economic questions:What are we going to produce? How? For

Whom?

International BusinessOften referred to as Foreign World Trade

Creating, shipping, and selling goods and services across national borders.

The US conducts trade with over 180 countries

Why trade?

We cannot provide for ourselves all of the things we want, so we have to go outside of our borders.

Because of trade…Countries can specialize in the kinds of production they do best.

ImportingThe things we buy from other countries are

called imports.

Cocoa, spices, tea, silk, crude oil, rubber, fish, carpet, dishes, tin, chrome, magnesium, nickel, copper, zinc

Without foreign trade, some of these items would not be available.

Imports.. Swiss watches, French perfumes, Norwegian sweaters

Exports…Goods and services we sell to other countries

Exports…One of every 6 jobs depends on

international trade!

We export…

Agricultural products, plastics, movies, books, chemicals, and medicines to name a few

International Currency

The Rate of exchange is different as is the kind of money

Russia-Ruble, Europe-Euro, Brazil-Real, India-Rupee, Saudia Arabia-Riyal

Large Banks provideCurrency services for businesses and

consumers

The value of a currency in one country compared with the value in another is called the exchange rate.

Barriers to International TradeQuotas—limit on the quantity of a product

that may be imported or exported within a given time

Protect your own supply of goodsTo show disapproval of what another country

is doingTo protect industry from too much

competition

Tariffs…A tax that a government places

on certain imported products.

You buy a bike for $140, but the government puts a 20% tariff ($28) on the imported bike. You will pay $168 plus shipping charges for the bike. Perhaps it would be better to buy a US bicycle.

Tariffs may be set by the item, by the pound, by the gallon

EmbargoesWhen a government stops the export or

import of a product, this is called an embargo.

Protect their own industries

Prevent destructive products from entering their shores such as weapons that may fall into the wrong hands…

Balance of Trade…The difference between a country’s exports

and imports

If a country exports (sells) more than it imports (buys), it has a trade surplus.

If a country imports (buys) more than it exports (sells), it has a trade deficit.

Balancing…A country can have a trade deficit with one

country and a surplus with another.

The United States has a huge trade deficit…

2010…U.S. International Transactions: Second Quarter 2010The deficit on goods and services increased to $131.6 billion

in the second quarter from $114.5 billion in the first. Goods The deficit on goods increased to $169.6 billion in the second quarter from $151.3 billion in the first. Goods exports increased to $316.1 billion from $305.6 billion.. Industrial supplies and materials and capital goods more than accounted for the increase in exports. Within the industrial supplies and materials category, petroleum and products accounted for much of the increase, with metals and nonmetallic products also contributing to the gain. A decrease in foods, feeds, and beverages, primarily soybeans, offset some of the other gains in exports. Goods imports increased to $485.7 billion from $457.0 billion. Most of the increase was accounted for by capital goods, automotive products, and consumer goods. Within capital goods, computers were particularly strong. The increase in automotive products was mostly accounted for by passenger cars.

Multinational companiesThose that do business in several countries

Coca Cola is a multinational company. Coke is sold all over the world.

Advantages of International Trade

Creates jobs, increase in sales

Promotes communication with others

Respect for different nations

Disadvantages of International Trade Competition may drive your own country’s

businesses out of business

People have lost jobs

The electronic, automotive, and textile industries have taken a huge hit due to these products being produced more cheaply outside of the United States

What happens when…The deficit becomes too high?

We no longer have enough jobs for our workers?

We keep importing more than we export?

The American dollar goes down in value?

Review your reading….Page 140

Questions 1-11