11) Types of Trade Restrictions - Senigaglia 28.11.

2017 07:17

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Welcome! 11) Types of Trade

#McBleezy
-Awesome Stuff! Restrictions
-Flip Your Classroom!
-How to: Cornell Notes This week we will look at all the different ways countries block trade.
-How to: Research
Some are more obvious than others, such as tariffs, quotas, and
-Scholarships
embargoes. However some ways, such as subsidies and
-Senigaglia's Amazing
Book Club standards, are more subtle. However they too block competition,
#Economics allowing Americans companies to flourish without lowering prices or
!! Homework !!
competing with foreign producers. Blocking trade is a tricky
!! Reflections !!
business, and governments use a variety of tactics to keep foreign
01) Thinking Like an
Economist: Scarcity and goods out of their countries.
Cost
02) Incentive, Factors of
Production, and Black
Markets
03) Supply and Demand
04) Money and Inflation
05) Bank Failures,
Loans, and Regulation
06) Types of Bank
Accounts and Credit
Cards
07) Investment and
Personal Finance
08) Types of Economies
09) Adam Smith and
Capitalism
10) Karl Marx and
Communism
11) Types of Trade
Restrictions
12) Protectionism vs.
Free Trade
13) Oil, Globalization,
and Terrorism
14) Less Developed
Countries

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#Government
!! Homework !!
!! Reflections !!
!!! The Constitution !!!
01) The Highest Court in
the Land
02) Legislative and
Executive
03) Origins of the Law
04) Roots of Democracy
05) The Founders and
their Intentions
06) The Media
07) Elections and
Campaigns
#U.S. History
!! Homework !!
!! Reflections !!
01) U.S. Geography
02) Pre-Columbian
America
03) The British Colonies
and Catalysts of Change
04) The American
Revolution
05) The Constitution
06) Our First Five
Presidents
07) Jacksonian
Democracy
08) Slavery
09) Manifest Destiny
and Antebellum
America
10) Civil War
11) Reconstruction
12) The Gilded Age
13) Spanish-American
War
14) Teddy, Taft, and Different Types of Trade
Woodrow
15) Causes of WWI
16) The Homefront
Restrictions
(WWI)
17) The Tragedy of As David Ricardo taught us, when nations specialize and
Woodrow Wilson
18) Harlem Renaissance trade total world output is increased. Companies
19) The Roaring
Twenties
produce for foreign markets as well as domestic markets
20) Causes of (markets in the home country). Exports are the goods
Depression

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21) The New Deal

and services sold in foreign markets. Imports are goods
22) Hitler, European
Fascism or services bought from foreign producers.
23) Pearl Harbor,
Isolationism, Neutrality
In spite of the benefits of international trade, many
31) WWII Timeline
32) The Homefront nations put limits on trade for various reasons. The main
(WWII)
types of trade restrictions are tariffs, quotas, embargoes,
33) The Atomic Bomb
34) Cold War Timeline licensing requirements, standards, and subsidies.
35) Korean War and
McCarthyism
A tariff is a tax put on goods imported from abroad. The
36) Vietnam
37) Reagan and the End effect of a tariff is to raise the price of the imported
of the Cold War
product. It helps domestic producers of similar products
Modern European
History to sell them at higher prices. The money received from
!!Homework!!
#Historical Themes#
the tariff is collected by the domestic government.
01) Ancient Greece
02) Ancient Rome There are two types of tariffs: protective and revenue
03) Dark Ages
tariffs. Protective tariffs are put in place specifically
04) Renaissance and
Reformation to make foreign good more expensive to protect
05) Age of Revolution
domestic industries from competition. Revenue
06) Industrial
Revolution and tariffs are put in place to raise money for the
Imperialism
07) World War 1 government. It all depends on the intention of the
08) Totalitarianism and
government that implements the tariff. Oftentimes any
Holocaust
09) World War II tariff will end up accomplishing both goals at once (at
10) Cold War
the expense of the domestic consumer and the foreign
Sitemap
business).

EXAMPLE: The Smoot-Hawley Tariff Act of June 1930 raised

U.S. tariffs to the second highest levels in our nation's history (the
highest was in 1828). The original intention of the tariff was to
protect American farmers from foreign competition after WWI.
When Europe began to recover after WWI and greatly expanded
agricultural production, an oversupply of food caused declining farm
prices in America. This tariff was meant to block trade with those
foreign food producers. However when the Depression hit in 1929,
the tariff was expanded to include most foreign imports. The new
tariff imposed an effective tax rate of 60% on more than 3,200
products and materials imported into the United States. U.S. imports

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from Europe declined from a 1929 high of $1.3 billion to just $390
million in 1932, while U.S. exports to Europe fell from $2.3 billion in
1929 to $784 million in 1932. Overall, world trade declined by some
66% between 1929 and 1934. This amounted to less goods being
bought or sold at a time when the world economy desperately needed
Start your
money to flow freely. More generally, Smoot-Hawley also did nothing
free trial to foster trust and cooperation among nations in either the political or
economic realm during a perilous era in international relations (the
years leading up to WWII).

A quota is a limit on the amount of goods that can be

imported. Putting a quota on a good creates a shortage,

Build which causes the price of the good to rise and allows
sophisticated, domestic producers to raise their prices and to expand
large scale
their production. A quota on shoes, for example, might
machine
limit foreign-made shoes to 10,000,000 pairs a year. If
learning
models that Americans buy 200,000,000 pairs of shoes each year,
deliver better this would leave most of the market to American
insights
producers.

An embargo stops exports or imports of a product or

group of products to or from another country.
Sometimes all trade with a country is stopped, usually
for political reasons.

Some countries require import or export licenses.

When domestic importers of foreign goods are required
to get licenses, imports can be restricted by not issuing
many licenses. Export licenses have been used to restrict
trade with certain countries or to keep domestic prices
on agricultural products from rising.

Standards are laws or regulations that nations use to

restrict imports. Sometimes nations establish health and
safety standards for imported goods that are higher than
those for goods produced domestically. These have

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become a major form of trade restriction and are used in

different amounts by many countries.

Subsidies can be thought of as tariffs in reverse.

Instead of taxing the foreign import, the government
gives grants of money to domestic producers to
encourage exports. Those who receive such subsidies
can use them to pay production costs and can charge
less for their goods than foreign producers. A tariff is
paid for by the buyers of the foreign goods and the
buyers of domestic goods who pay higher prices. But
subsidies are paid for by taxpayers who may or may not
use the good.

Here is an article from The Economist criticizing our current subsidy

system: http://www.economist.com/node/7887994

Agricultural subsidies also lead to the overproduction of corn, and

therefore the widespread use of cheap corn syrup in most of the foods
we eat. As Michael Pollan points out, this is not healthy:
http://michaelpollan.com/articles-archive/you-are-what-you-grow/

So why do we block trade?

Well there are many reasons, namely:
1) To halt unemployment in America. American businesses must lay
off workers if their goods can't compete with cheaper foreign goods.
2) To protect "crucial" domestic industries. Protectionists (people
against free trade) argue that entire industries, such as oil, steel, cars,
etc. are vital to the economy of the USA, and therefore must be
protected from foreign competition.
3) To protect new "infant" industries in America. If these companies
are shielded from competition for a while, they can grow strong
enough to compete in the world market.

However, all three of these reasons are simply about giving America
an advantage in industries where America should not have one. In
other words, blocking free trade is the same as blocking the free

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market, and Adam Smith would not approve! Instead of improving

lower-quality American goods, protectionists try to shield them from
competition. Instead of allowing American consumers to purchase
reasonably priced foreign cars, protectionists want to make them
more expensive (so you'll buy American). Instead of drilling oil,
mining precious metals, or building snowmobiles in countries that
have a comparative advantage for doing all those things,
protectionists want to keep all those industries in America, even if
that means higher prices for American consumers. Here is an article
that discusses what it would be like if America was embargoed by
another country:
http://www.hoover.org/publications/hoover-digest/article/7311
Often times people blame our education system for why companies
are moving their jobs overseas, however it has a lot more to do with
wages and costs than it does with training. Just as David Ricardo
explained two centuries ago, if a country can make a good cheaper
than us, they will get the business and we won't. Here's an article that
explains this concept in modern times:

http://www.salon.com/2012/01/30/the_education_crisis_myth/

However, there is a fourth reason to block free trade that has nothing
to do with competition or prices:
4) To isolate and punish totalitarian governments and regimes that
support terrorism, genocide, nuclear weapons programs, or (in some
cases) Communism. America purposefully cuts off trade with certain
nations (e.g. Cuba, Iran, North Korea) in an effort to force those
nations' governments to change their ways. Here is a list of nations
with whom America is currently restricting trade:
http://en.wikipedia.org/wiki/United_States_embargoes

However even this type of embargo rarely accomplishes the intended

goal. Cuba is still Communist almost 50 years after we began
blocking trade with them. North Korea and Iran ignore our
embargoes and continue on with their nuclear weapons programs. In
fact, trade embargoes generally hurt the exact people we are trying to
help, by cutting off the citizens of these nations from much-needed
food, medicine, and goods necessary for survival. Only free trade can
help prevent starvation in North Korea; an embargo will only make
things worse.

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Speaking of North Korea, here is a mind-blowing look inside the real

North Korea, created by undercover journalist Lisa Ling:
http://www.youtube.com/watch?v=mxLBywKrTf4

1) Do you believe North Korea is a

3rd world country? Why or why not?

2) What can we do to improve

relations with North Korea?

(In-class assignment)

Free Trade Essay:

Please write a two-three paragraph essay - After
analyzing the arguments for and against free
trade, are you in favor of free trade, protectionism,
or a mixture of both? Explain your answer.

Though we will continue to discuss trade this week in class, you will
be reading about third world countries for homework (which we will
discuss next week in detail).

QW
1) What are all the different types of trade restrictions?
How does each one work? Any examples?

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2) After participating in the free trade debate, what is your

conclusion about free trade and protectionism? How much
(or how little) should our government regulate trade?
Why?

3) Logic puzzle: How could Adam Smith's division of labor

theory be used as another argument for free trade? Hint:
this theory doesn't only apply to factories.

4) What are your thoughts on our food production system

in America today (subsidies, health, treatment of animals,
environmental concerns, etc.)? Are you alarmed by any
part of it? What could be done to improve this system?

Below are some fascinating articles about globalization and trade.

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ASUPERPOWERJonathan Seniga v.1

Globalimbalance Jonathan Seniga v.1
TheFacesOfGlob Jonathan Seniga v.1
TheFirstLawofPe Jonathan Seniga v.1
VotersinIndiasay Jonathan Seniga v.1

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