Globalization & Protectionism

Today's Terms

• globalization
• comparative advantage
• absolute advantage
• specialization

Globalization

the increasing economic integration and interdependence of national, regional, and local economies across the world

Pre-Globalization

Self-sufficient

Video Points to Note

• How is "gunpowder" and "MS Works" discussed
• What happen to manufacturing in the US from 1950 to 2014
• What has happen to educated and uneducated people during globalization
• Which natural resources are in danger
• What is the last problem stated about globalization

Globalization

Can you think of some pros and cons of Globalization

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Comparative Advantage

the ability of a country to produce goods and services at a lower opportunity cost than other countries

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Absolute Advantage

The ability to produce something using fewer resources than other producers

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Question # 1
Should a country produce everything it wants?
Why or Why not?

No, a country should produce items for which it has a comparative advantage and trade for other items. If they follow this rule they can obtain more without working any harder

Specialization

Specialization

is a method of production where a business, area or economy focuses on the production of a limited scope of products or services

Question # 2
If Country A is better than Country B at producing everything, would Country A gain anything by trading with Country B?

Yes, just because a country has an absolute advantage does not mean it should produce the item. A country should specialize in whatever it has a comparative advantage in.

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Question #3
When a new home is built, why doesn't one contractor do everything: carpentry, electrical, plumbing and landscaping?

Because people specialize in what they are good at. For example, while the electrician may be able to do plumbing he has a comparative advantage in electrical work. Instead of trying to do plumbing he should do more electrical work and pay a plumber to do the plumbing. Both contractors are better off in this scenario

Question # 4
Brainstorm the "type" of goods and services in which the United States likely has a comparative advantage.

activities requiring more formal education

Top US Exports in 2015

• Machines, engines, pumps: US$205.8 billion (13.7% of total exports)
• Electronic equipment: $169.8 billion (11.3%)
• Aircraft, spacecraft: $131.1 billion (8.7%)
• Vehicles: $127.1 billion (8.4%)
• Oil: $106.1 billion (7.1%)
• Medical, technical equipment: $83.4 billion (5.5%)
• Plastics: $60.3 billion (4%)
• Gems, precious metals, coins: $58.7 billion (3.9%)
• Pharmaceuticals: $47.3 billion (3.1%)
• Organic chemicals: $38.8 billion (2.6%)

Which "type" of goods and services would the US likely have a comparative disadvantage in producing

Low skill High labor

list some goods and services the United States likely has a comparative disadvantage in producing.

Describe a nation that would have a comparative advantage in these goods or services?

Barriers to Free Trade

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Protectionism

government-imposed restraint(s) on the flow of international goods or services.

Tariff

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tax imposed on imported goods and services.

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Quota

trade restriction that limits the number, or in certain cases the value, of goods and services that can be imported or exported during a particular time period

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Embargo

an official ban on trade or other commercial activity with a particular country

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glob·al·ist
ˈɡlōbəlist/
noun
a person or organization advocating or practicing operations (such as trade) across national divisions.

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