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Global Interdependence

Overview

Essential Purpose

No nation can be totally self-sufficient. A need exists for trade among nations for the goods and services as well as the resources needed to survive and grow in the global economy. Sometimes, trade is restricted and free trade can be controversial. People and nations would not voluntarily trade with another nation unless they both gained from this exchange. As a result of this decision to trade, more goods and services can be produced efficiently and resources can be used more effectively.

This module will provide students with the opportunity to analyze the costs and benefits of global trade. They will examine the workings of global trade as well as the consequences and benefits from pursuing trading with other countries. They will examine how countries work either to promote or limit trade amongst each other.

Finally, students will analyze a situation in the United States where we might want to encourage trade barriers to restrict international trade. They will decide if these barriers are warranted in this specific situation.

National Economics Standards

Standard 6

Students will understand that when individual, regions, and nations specialize in what they can produce at the lowest cost and then trade with others, both production and consumption increase.

  • Students will be able to use this knowledge to explain how they can benefit themselves and others by developing special skills and strengths.

Standard 7

Students will understand that markets exist when buyers and sellers interact. This interaction determines market prices and thereby allocates scarce goods and services.

  • Students will be able to use this knowledge to identify markets in which they have participated as a buyer and as a seller and describe how the interaction of all buyers and sellers influence prices.
  • Students will be able to use this knowledge to predict how prices change when there is either a shortage or surplus of the product available.

State/Local Standards

States should align these modules to their own standards as appropriate.

Essential Questions

  • How does international trade influence the lives of American citizens within an increasingly global economy?
  • Why is international trade important to a nation’s economy?
  • What factors sometimes lead nations to restrict and limit free international trade?

Essential Content

Reasons for the Development of International Trade

  • People exchange goods and services because they expect to be better off after the exchange.
  • Free trade increases global material standards of living.
  • Imports are foreign goods and services purchased from sellers in other countries.
  • Exports are homemade goods and services sold to buyers in other countries.
  • A nation’s imports are paid for with its exports.
  • Absolute advantage is when a nation can produce a specific good with greater efficiency than its partner in trade.
  • Comparative advantage is found by finding where the greatest absolute advantage occurs for each country.
  • Specialization offers a country the chance to become efficient in making specific goods and services and trading them to other countries for goods and services that that country cannot supply as easily to it citizens.

International Trade is Voluntary and Creates Wealth

  • Countries choose which resources, goods, or services to trade and with whom to trade them.
  • Voluntary exchange or trade occurs only when all participating nations expect to gain.
  • The expected gain may take the form of goods and services; resources; financial growth; or increased social, economic, and political contacts and exchanges.

Barriers and Friction Limiting Free Trade

  • May be used to protect domestic industries and jobs from foreign competition in the marketplace.
  • May take the form of embargoes, import quotas, and voluntary restrictions and tariffs.
  • Free trade is international trade not limited by or subject to governmental regulations.
  • Protectionism is the use by a country of protective measures to limit foreign trade and favor domestic industries and businesses.
    • Key Concepts:
    • National Security
    • Fairness
    • Infant Industries
    • Job Protection
    • Specialization

Essential Skills

Compare and Contrast

  • Application: Compare and contrast the costs and benefits of international trade.
  • Application: Compare and contrast the costs and benefits of policies and actions that create trade barriers between nations.

Analysis

  • Application: Analyze the benefits and costs associated with specialization and absolute and comparative advantage.

Summative Assessment

This summative assessment and scoring guide should be reviewed with students prior to using the activities in the module. Students should do the assessment after the activities have been completed.

Essential Questions Addressed by the Summative Assessment:

  1. How does international trade influence the lives of American citizens within an increasingly global economy?
  2. Why is international trade important to a nation’s economy?
  3. What factors sometimes lead nations to restrict and limit free international trade?

Printable Student View

Connection to Prior Knowledge
Problem
Role/
Perspective
Product/ Performance
Criteria for an Exemplary Response
Now that you have learned that countries sometimes use and encourage trade barriers to restrict international trade, you are ready to decide if these barriers are warranted in a specific situation.

Chinese import of Ipods and MP3 players are selling better then domestic versions in the United States market. Companies producing these products in the United States are complaining to Congress that something needs to be done to remedy the situation or they may go out of business. They would like Congress to take action to protect American made products.

You serve on the President’s Trade Council and have been asked by the president to meet with these companies to get more information on the problem. You also understand that there are both positive and negative consequences involved in a decision to implement trade barriers.

Do some additional research on the Web to assess the negative consequences of trying to help these companies survive. Be prepared to present these consequences to the company representative when you meet with them. As you prepare for the meeting, be sure to:

  • Make a list of the consequences to a country of initiating trade barriers
  • Develop supporting reasons for each consequence for use in your presentation to the company representatives
  • Your own personal decision about whether trade barriers should be imposed on China
  • Supporting reasons for your decision

Scoring Guide