1. Why Nations Trade
• In a recent year, about 8 percent of all the
goods produced in the United States were
exported, or sold to other countries.
• A slightly larger amount of goods were
imported, or purchased from abroad.
• Trade is one way that nations solve the
problem of scarcity.
• Nations trade for some goods and
services because they could not have
them otherwise.

2. Barriers to International Trade
• Foreign countries with a comparative
advantage can sell their product more
cheaply than can companies making the
product in their own country.
• Consumers will likely buy the cheaper
foreign product.
• Workers who make the product in their
own country may lose their jobs as sales
drop.
• When this happens, the government may
impose trade barriers to protect the
affected workers and industries.
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3. Barriers to International Trade (cont.)
• A tariff is a tax on an imported good.
• The goal is to make the price of imported
goods higher than the price of the same
good produced domestically.
• As a result, consumers would be more
likely to buy the domestic product.
• When people want the product so badly
that higher prices have little effect,
countries may set quotas, or limits on
the amount of foreign goods imported.
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4. • Trade barriers force consumers to pay
higher prices for the sake of protecting
inefficient industries.
• In general, trade barriers cost more than
the benefits gained.
• For this reason, most countries now aim
to achieve free trade.
• They try to convince countries not to
pass laws that block or limit trade.
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Barriers to International Trade (cont.)

5. • A recent trend is for countries to join with
a few key trading partners to form free
trade zones.
• The European Union (EU) is an
organization of 15 European countries,
which forms a huge market.
• Goods flow freely among these nations
because the EU has no trade barriers.
• Most member countries also adopted a
common currency, the euro.
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Barriers to International Trade (cont.)

6. • In the 1990s, the United States, Canada,
and Mexico signed the North American
Free Trade Agreement (NAFTA).
• This deal eliminated all trade barriers
among these countries.
• Opponents of NAFTA contended that
American workers would lose their jobs
because U.S. plants would move to
Mexico.
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Barriers to International Trade (cont.)

7. • The World Trade Organization (WTO)
oversees trade among nations.
• It organizes negotiations about trade
rules and helps countries trying to
develop their economies.
• Critics say that WTO policies favor
corporations at the expense of workers,
the environment, and poor countries.
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Barriers to International Trade (cont.)

8. Exchange Rates
• Most nations use a flexible exchange rate
system, which allows supply and demand to set
the price of various currencies.
• If a nation’s currency depreciates, or becomes
weak, the nation will likely export more goods
because its products will become cheaper for
other nations to buy.
• A country has a trade deficit whenever the
value of the products it imports exceeds the
value of the products it exports.
• It has a trade surplus whenever the value of its
exports exceeds the value of its imports.