International Trade

For all of human history, people have desired things that people in distant lands possessed in abundance. From Australian opals to Chinese silk, Greek olive oil to French wine, Peruvian textiles to Florida oranges, from South African diamonds to Cuban tobacco, we have always wanted access to the best things different places around the world have to offer. International trade allows us to have them, and to sell the things from our home countries to people in other countries that want them.
While some have been distrustful of dealing with foreigners, whose goods might corrupt the morals and loyalties of their own country, Americans have been from the first a trading country, unafraid of such corruption.
With the free exchange of goods also comes an exchange of ideas. When people from far-off places come together to trade products they also end up exposing each other to new philosophies, religions, works of art and literature, and other hallmarks of culture. The “marketplace” allows the best ideas to take hold in more places and improve the lives of more people. Another way that free trade between people of different nations improves lives is through peace. If trade were not mutually beneficial it wouldn't take place. Countries tend not to go to war when their citizens enjoy productive and profitable relationships. The best ideas of the marketplace turn out to be those that promote the marketplace, the commerce of goods and ideas.
Ch 45 how economic systems work option 2
With the free exchange of goods also comes an exchange of ideas. When people from far-off places come together to trade products they also end up exposing each other to new philosophies, religions, works of art and literature, and other hallmarks of culture.
Yet truly free trade across borders can be elusive. Governments frequently enact rules designed to provide advantages to favored business and consumer interests. Even calls for free trade can be controversial. Debates about international trade tend to be between those who favor no or few restrictions on trade and those who favor the use of restrictions. Those who support no or few restrictions believe that free trade among nations promotes peace and allows more people in more places to access a wider range of goods, enhancing quality of life. Those who support the use of restrictions believe that the increased competition resulting from international trade can hurt businesses and workers, and that there can be moral or national security reasons to restrict trade. For example, “blood” diamonds in parts of Africa are sold to finance the war efforts. Some nations, including the United States, have restricted the importation of these diamonds and restricted exportation of weapons to countries who trade in diamonds.

Free Trade

International trade means people have more choices about what to buy. More choice is good for consumers, but for businesses and their employees more consumer choice can be bad. This is because more choice for consumers means more competition for businesses. Competition induces businesses constantly to find ways to offer better services and lower prices. This means more work for them, when it would be easier and more certain to get a law passed protecting them from competition. Therefore it is common for businesses to want restrictions on free trade including tariffs and restrictions on competitors' imports as well as government subsidies for their own exports.

The Constitution gives Congress the power to regulate international trade in Article I, Section 8: “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises... all Duties, Imposts and Excises shall be uniform throughout the United States” (The United States Constitution, Article I, Section 8).
Throughout American history, it has used this power in an attempt to provide advantages to certain groups (such as manufacturers) at the expense of others (such as consumers). Using a basic rule of economics—that people respond to incentives—government has tried to change people’s behavior by making it less expensive for them to do the things government wants them to do (often, to buy American products), and more expensive to do the things it does not want them to do (to buy foreign products). Critics of free trade worry that if better or cheaper imported products are available to consumers in the United States, American manufacturers might be forced out of business. By imposing higher taxes on foreign imports, erecting expensive restrictions or other barriers to them, government can try to “protect” American businesses from the competition of foreign companies. In the case of young industries in a new country, some, like Alexander Hamilton, have argued that temporary protection from foreign competition is needed so that those in the field can learn and grow. In the case of older industries, some have argued that protection from foreign competition is needed so that these businesses can adjust and adapt to changing circumstances. But is protectionism in general a good idea? Who is being protected?

Protectionism

Protectionism is the approach of protecting American businesses and workers by restricting and regulating trade with other countries. Most economists agree that the costs of protectionism outweigh the benefits. Though some businesses may suffer as a result of competition, all American consumers benefit from access to a wider variety of lower-priced goods.

Protectionism also diminishes the ability of the United States to compete globally, as industries will have less incentive to be efficient and effective.
Although there may be short-term job losses due to international competition, individuals and companies are forced to create value in new ways in the long term. Instead of wasting time and resources producing something no one wants or that others are better at producing, American businesses must innovate to find new markets or make new products. On the other hand, national security may also be at risk if goods produced in foreign countries will be used to defend the nation importing the goods or if such importations lead to dependence on other nations. Protectionism is not just excessive tariffs or bans on imports. Congress can also erect administrative barriers to imports, such as tight environmental standards or strict rules for product safety. When designed less to protect consumers and more to create barriers to the U.S. market, anticompetitive regulations raise costs for Americans by discouraging competition or adding burdens intended to make imported products more expensive.
Large corporations and labor unions will often lobby for these types of restrictions on trade (for both trade within the United States and beyond its borders). This is because big companies usually have enough money and resources to comply with them, while smaller start-ups often do not. With this fact in mind, the tendency of big companies to lobby for the regulation of their industry actually makes perfect sense: they know it will drive their smaller competitors out of business. For consumers, however, the results are higher prices, less innovation, and fewer choices. In some cases, the cost to consumers can be even greater.
International trade
Protectionism is the approach of protecting American businesses and workers by restricting and regulating trade with other countries.
One example of a disastrous restriction on trade was the Embargo Act of 1807. War was raging between Great Britain and France, and both countries—despite U.S. neutrality in the conflict—threatened to attack American merchant vessels sailing to enemy ports. To further its war efforts, Britain had even been taking over U.S. trade ships and forcing American crew members to serve in the British navy. Congress passed the Embargo Act and President Thomas Jefferson signed it into law. The Embargo banned all international trade. The law was intended to show Britain and France the importance of trade with the neutral United States. For years, however, the Embargo failed in this objective and Britain and France held firm. Worse, like all laws, the Embargo Act had unintended consequences. From commercial centers in New England to farms in the South, every state suffered devastating effects from the Embargo. Not only that, but the Embargo was difficult to enforce. British goods were smuggled into the United States anyway—adding insult to injury for many Americans who had been financially ruined. Jefferson signed a repeal of the Embargo Act during his last days in office. After France recognized America's neutral trading rights, in 1812 Congress declared war on Great Britain. Even today, the United States uses embargoes or “trade sanctions” as a means to force other countries to change. Sanctions can block assets and restrict trade to attempt to accomplish foreign policy and national security goals. Countries currently under sanctions include Burma, Iran, Libya, North Korea, Somalia, Sudan, and others. An embargo against Cuba enacted in 1960 and still in effect today is the longest trade embargo in modern history.

Beyond the Economic Debates

International trade may raise not only economic but also moral and ethical concerns. Opponents of free trade argue that Americans have a moral responsibility to use government trade barriers to end, or at least avoid sustaining, child labor or unsafe working conditions overseas that would not be tolerated within the United States.

Should the United States allow its citizens to import rugs assembled by foreign children chained to looms and suffering from respiratory diseases caused by the inhalation of wool fibers? What about clothing or shoes made in countries that pay workers much less than workers make in the United States? What if those foreign workers—poorly paid by American standards—are grateful for their jobs because they pay much better than most others in their country?
Opponents of free trade also sometimes raise national security concerns.
What happens when there is a high demand for products in countries with corrupt governments? Should the United States allow its citizens to import diamonds mined in war zones, when the money paid for them may finance armed conflict? Further, international trade can shift the balance of power among nations. Is it a national security concern that Americans buy $30 billion more goods from China than China buys from the United States?
Market
International trade may raise not only economic but also moral and ethical concerns. Opponents of free trade argue that Americans have a moral responsibility to use government trade barriers to end, or at least avoid sustaining, child labor or unsafe working conditions overseas that would not be tolerated within the United States.
When a country is only one of a few that can produce something—such as petroleum—that the whole world wants on a large scale, international trade can have serious implications for national security. Are ruthless dictators in oil-rich countries more tolerable than those in countries without oil? Should the United States go to war to advance economic interests?
From grave questions of war and peace to daily purchases at the corner store, understanding international trade is a responsibility of citizenship. As in every aspect of economics (and every aspect of life), choices involve trade-offs. It is important to consider not only who benefits from a decision, but also who may be hurt. It may be possible to protect American businesses from international competition, but this is likely to happen at the expense of consumers who must pay higher prices. It may be possible to protect American workers from short-term job losses, but this is likely to happen at the expense of long-term innovation. It seems good to import inexpensive products, but this may be at the expense of working conditions consistent with American standards and of jobs in America. Always remember the power you hold as a consumer. Unless protectionist policies are in place, as they often are, companies that do not serve their customers go out of business.
Video: Specialization and Trade- Because We Can't Be Good At Everything

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Law of Demand
As prices decrease, the quantity demanded increases or as prices increase, the quantity demanded decreases.
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Rights which belong to us by nature and can only be justly taken away through due process.
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Except where authorized by people through the Constitution, government does not have the authority to limit freedom.
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The power of government flows from the people.
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A system of distinct powers built into the constitution, to prevent an accumulation of power in one branch.
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Federalism
The people delegate certain powers to the national government, while the states retain other powers; and the people, who authorize the states and national government, retain all freedoms not delegated to the governing bodies.
Justice
Fairness or reasonableness in the way people are treated or decisions are made.
private property
The natural right of all individuals to create, obtain, and control their possessions, beliefs, faculties, and opinions, as well as the fruits of their labor.
limited government
Citizens are best able to pursue happiness when government is confined to those powers which protect their life, liberty, and property.
representative government
(or republican government) Form of government in which the people are sovereign (ultimate source of power) and authorize representatives to make and carry out laws.
republican government
(or representative government)Form of government in which the people are sovereign (ultimate source of power) and authorize representatives to make and carry out laws.
civil discourse
Reasoned and respectful sharing of ideas between individuals is the primary way people influence change in society/government, and is essential to maintain self-government.
Constitution
The fundamental principles by which a state or nation is governed. The United States Constitution, written in 1787, lays out the roles and powers of each of the three branches of government (legislative, executive, and judicial), the protections of due process and rule of law in the states, a republican form of government, and the manner in which to amend the document.
Thomas Jefferson
Jefferson was a Virginia plantation owner who was the principle author of the Declaration of Independence. Jefferson served as a legislator and governor in Virginia, as well as an ambassador to France, Secretary of State under George Washington, Vice President under John Adams, and the third President of the United States. During his political career, Jefferson founded the Democratic-Republican Party with James Madison, and he bought the Louisiana Purchase from France. After his presidency, Jefferson started the University of Virginia near his home, Monticello.
Bill of Rights
The first ten amendments to the Constitution, ratified in 1791, which limit government power and protect individual liberties, including the freedoms of speech, press, religion, petition, and assembly, as well as protections against cruel and unusual punishment, unreasonable search and seizure, and other due process rights.
Second Amendment
Ratified in 1791, it protects citizens’ rights to create a militia and to bear arms. “A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.”
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Declaration of Independence
The document written in 1776 by the Founders to send to Britain’s King George III in which independence from Britain was declared and the reasons for the separation were explained.
Articles of Confederation
The first national government document developed in 1781 by the Founders. The Articles created a federal legislative branch, but there was no executive or judiciary. The states retained most of the governmental powers.
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The group of people who wrote and influenced the Declaration of Independence, the Articles of Confederation, the United States Constitution, and the United States Bill of Rights. These men were instrumental in establishing the nation and its governmental documents and practices.
Federalist Papers
A series of 85 essays written to convince the people of New York to ratify the Constitution. The authors were James Madison, Alexander Hamilton, and John Jay. These documents are considered to be the most authoritative explanation of the political theory of the Constitution.
First Amendment
Ratified in 1791, it protects the freedom of speech, the freedom of religion, freedom of the press, freedom to assemble, and freedom to petition the government. “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.”
Law of Supply
As the price drops, the quantity supplied also drops.
Fourth Amendment
Ratified in 1791, it protects citizens’ rights against unreasonable searches and seizures of property and explains that warrants must be issued with probable cause. “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”
Fifth Amendment
Ratified in 1791, it protects the right indictment by a jury, against double jeopardy, self-incrimination, loss of life, liberty, or property without due process, and just compensation for private property taken for public use. “No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”
Tenth Amendment
Ratified in 1791, it states that the powers not enumerated or delegated in the Constitution are reserved for the states and the people. “The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.”
Eighth Amendment
Ratified in 1791, it protects against excessive bail and fines and cruel and unusual punishments. “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.”
Ninth Amendment
Ratified in 1791, the listing of certain rights protected by the Constitution cannot be used to deny rights not enumerated in the document. “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.”
Alexander Hamilton
One of the Founding Fathers of the United States, Alexander Hamilton served as General Washington’s chief of staff, promoted the ratification of the Constitution in the Federalist Papers, and founded the nation’s financial system and first political party.
James Madison
Madison was a Framer who was instrumental in writing the Constitution and Bill of Rights. He is known as the “Father of the Constitution.” Madison partnered with Alexander Hamilton and John Jay to write the Federalist Papers in support of the ratification of the Constitution. He also served as a member of the Virginia House of Delegates, the United States House of Representatives, Secretary of State under Thomas Jefferson, and the fourth president of the United States.
George Washington
First President of the United States, George Washington served as commander-in-chief of the Continental Army during the American Revolution and was one of the Founding Fathers of the United States.
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Spanning ten years from 1929 to 1939, the Great Depression was one of the longest-lasting economic downturns in the history of the United States affecting the U.S. and most of the world.
Preamble
An introductory statement, preface, or introduction.
Tyranny
Cruel and unfair treatment by people with power over others.
Tyrannical
Using power over people in a way that is cruel and unfair.
John Adams
Before becoming the second President of the United States, John Adams served as the country’s first Vice President under George Washington. Adams was an advocate of American independence from Britain and a Federalist.
John Jay
Founding Father John Jay was one of the signers of the Treaty of Paris and served as the first Chief Justice of the United States. He was also one of the authors of the Federalist Papers.
Third Amendment
Ratified in 1791, it protects citizens against the quartering of soldiers in private homes without their approval. “No soldier shall, in time of peace be quartered in any house, without the consent of the owner, nor in time of war, but in a manner to be prescribed by law.”
Sixth Amendment
Ratified in 1791, it protects the rights of impartial jury trials, the right to be informed of the accusations against you, the right to be confronted by witness, and the right to be assisted by counsel. “In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the state and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the assistance of counsel for his defense.”
Seventh Amendment
Ratified in 1791, it protects the right of jury trials in law suits dealing with more than twenty dollars and protects against reexamination of the trial in any court if decided by a jury. “In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any court of the United States, than according to the rules of the common law.”
Alexis de Tocqueville
French political thinker and historian, Alexis de Tocqueville is best known for his works Democracy in America and The Old Regime and the Revolution. He visited the U.S. in the 1830s and wrote admiringly about many aspects of American law and society.
Democracy in America
Written by Alexis de Tocqueville after visiting the United States, Democracy in America contains de Tocqueville’s analysis of and reflections on the United States’ democratic system and society. The first volume was published in 1835 and the second in 1840.
Magna Carta
Written in 1215, it is the oldest document in the British and American heritage of rights. Contributed to the adoption of the First, Third, Fourth, Fifth, Sixth, and Eighth Amendments of the Bill of Rights, and speaks of these rights as ancient.
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Written by John Locke in 1690, the Two Treatises of Civil Government criticize absolute power for kings and outline Locke’s suggestions for a more civilized society based on natural rights and the social contract.
Thirteenth Amendment
The Thirteenth Amendment to the Constitution abolished slavery and involuntary servitude, except as punishment for a crime. “Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction. Section 2. Congress shall have power to enforce this article by appropriate legislation.”
Framers
The group of people who actually attended the Constitutional Convention and participated in writing the Constitution.
Fourteenth Amendment
Ratified in 1868, it states that all people born or naturalized in the United States are citizens and ensures that “No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”
Sixteenth Amendment
Ratified in 1913, the Sixteenth Amendment gave Congress the ability to collect income taxes. “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census of enumeration.”
Eighteenth Amendment
atified in 1919, the Eighteenth Amendment introduced Prohibition, the period of United States history when the manufacture, sale, and transportation of alcohol was made illegal throughout the country. “Section 1. After one year from the ratification of this article the manufacture, sale, or transportation of intoxicating liquors within, the importation thereof into, or the exportation thereof from the United States and all territory subject to the jurisdiction thereof for beverage purposes is hereby prohibited. Section 2. The Congress and the several states shall have concurrent power to enforce this article by appropriate legislation. Section 3. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by the legislatures of the several states, as provided in the Constitution, within seven years from the date of the submission hereof to the states by the Congress.”
Twentieth Amendment
The Twentieth Amendment was ratified in 1933, and it establishes procedures for presidential succession and the start and end of federal officials’ terms of office. “Section 1. The terms of the President and Vice President shall end at noon on the 20th day of January, and the terms of Senators and Representatives at noon on the 3rd day of January, of the years in which such terms would have ended if this article had not been ratified; and the terms of their successors shall then begin.
Twenty-First Amendment
In 1933, the Twenty-First Amendment repealed the Eighteenth Amendment, ending Prohibition. “Section 1. The eighteenth article of amendment to the Constitution of the United States is hereby repealed. Section 2. The transportation or importation into any state, territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited. Section 3. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by conventions in the several states, as provided in the Constitution, within seven years from the date of the submission hereof to the states by the Congress.”
English Bill of Rights
Passed by the British Parliament in 1689, the English Bill of Rights limited the power of the British monarch, outlined the rights of the Parliament, and guaranteed Protestants the right to bear arms.
Parliament
The legislative body of the United Kingdom (known as Great Britain or England during the Founding era).
Benjamin Franklin
One of the Founding Fathers of the United States, Benjamin Franklin was a statesman, author, publisher, scientist, inventor and diplomat. He served in the Second Continental Congress during the American Revolution and helped draft the Declaration of Independence. In addition, Franklin helped negotiated the Treaty of Paris which ended the Revolutionary War and later served as a delegate to the convention that produced the U.S. Constitution.
Suffrage
The right to vote.
Republic
A government in which the power belongs to citizens through the right to vote.
Fifteenth Amendment
Ratified in 1870, it states that the right could not be restricted based on “race, color, or previous condition of servitude.” “Section 1. The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any state on account of race, color, or previous condition of servitude. Section 2. The Congress shall have power to enforce this article by appropriate legislation.”
Seventeenth Amendment
Ratified in 1913, the Seventeenth Amendment introduced direct election of Senators. “The Senate of the United States shall be composed of two Senators from each state, elected by the people thereof, for six years; and each Senator shall have one vote. The electors in each state shall have the qualifications requisite for electors of the most numerous branch of the state legislatures. When vacancies happen in the representation of any state in the Senate, the executive authority of such state shall issue writs of election to fill such vacancies: Provided, that the legislature of any state may empower the executive thereof to make temporary appointments until the people fill the vacancies by election as the legislature may direct. This amendment shall not be so construed as to affect the election or term of any Senator chosen before it becomes valid as part of the Constitution.”
Nineteenth Amendment
Ratified in 1920, the amendment stated that a citizen’s right to vote must not be restricted based on gender. “The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any state on account of sex. Congress shall have power to enforce this article by appropriate legislation.”
Direct Democracy
Direct democracy is a political system in which the people vote directly on policies or laws, as opposed to voting for representatives who enact laws on their behalf.
Arbitrary
Not planned or chosen for a particular reason; done without concern for what is fair or right.
Judicial Review
The process by which courts analyze the constitutionality of an act of government.
Majority rule/minority rights
laws may be made with the consent of the majority, but only to the point where they do not infringe on the inalienable rights of the minority.
Fiat
An arbitrary order or decree.
Property
Something that is owned by a person, business, etc. This includes possessions, beliefs, faculties, and opinions, and the fruits of one's labor.
Democracy
A government in which the power is held by the people.
Electoral College
A body of electors chosen by each state to vote for the president and vice president of the United States.
Virtue
Conduct that reflects universal principles of moral and ethical excellence essential to leading a worthwhile life and to effective self-government. For many leading Founders, attributes of character such as justice, responsibility, perseverance, etc., were thought to flow from an understanding of the rights and obligations of men. Virtue is compatible with, but does not require, religious belief.