Contributor: Meghan Vestal. Lesson ID: 12543
Which would you rather do: pay tax on items you buy or not pay tax? That sounds simple, but world economics are more complicated than that. Study a major trade agreement and see if you agree with it!
Trade is an important part of any thriving nation.
Exporting goods, or shipping them to other countries, helps business and the country as a whole to generate a profit. When a country is making money, its people are able to spend more money and live a more comfortable lifestyle. Importing goods, or bringing in goods from other countries, is also important because it gives a country access to goods it has a limited supply of or does not have at all. For example, the United States relies on Middle Eastern countries for oil because they have a larger supply. If a country is unable to trade, it is unable to generate a profit and does not have access to important resources.
One obstacle to trade is having to pay tariffs. Tariffs are taxes a country is required to pay on imports and exports. Just like taxes paid by the citizens of a country, tariffs are used to help support the government.
Tariffs vary by country and the type of goods being shipped. Some countries charge significantly higher tariffs than other countries. Take a look at Which countries have the highest tariffs? (Investopedia, LLC.) to discover which countries have the highest and lowest tariffs. In the article, you will see the terms "bound tariff rate" and "weighted mean applied tariff."
As you read the article, answer the following questions on a separate piece of paper:
You may have noticed the article refers to tariffs as “trade barriers” because tariff costs can prevent some businesses and countries from participating in trade. Some countries may avoid paying higher tariffs by trading with countries that offer low tariffs. Poorer nations may be left out of trade altogether since they are unable to afford the costs associated with trade.
In the 1980s, the United States began looking for ways to stimulate economic growth throughout all of North America. The leaders of the United States, Canada, and Mexico began discussing an agreement that would void tariffs on products originating, or having been created, in one of these three countries. The leaders hoped that this would eliminate economic barriers and make North America the leading trade region in the world. In 1994, the North American Free Trade Agreement (NAFTA) went into effect. To learn more about the history and outcome of NAFTA, read the following article. As you read NAFTA's Purpose and Its History (Kimberly Amadeo, the balance), take notes. Then, use your notes to answer the following multiple choice questions:
As you can see, NAFTA has helped sustain economic growth in the United States. Write your responses to the following questions on a separate piece of paper:
When you are finished, discuss your responses with your teacher or parent.
Then, move on to the Got It? section to spend more time researching and weighing the pros and cons of the U.S. involvement in NAFTA (as of 2017).
Resources Referenced in the Lesson