• International trade occurs when producers engage in cross-border exchanges of goods or services.
• A trade deficit occurs when the value of a nation's imports is greater than its exports, and a trade surplus occurs when the value of a nation's exports is greater than its imports.
• The balance of payments is a broad measure of one country's transactions with the rest of the world.
• Producing and trading products in which a nation has a comparative advantage promotes economic efficiency and regional specialization.
• The foreign exchange market has evolved significantly since the adoption of the flexible exchange rate system.
• A tariff is a customs duty that raises the price of certain imports.
• An import quota limits the quantity of certain imports.
• Other trade restrictions have been used to correct trade imbalances.
• An embargo limits some or all trade with a targeted country.
• The General Agreement on Tariffs and Trade (GATT) promoted free trade in the global economy from 1947 to 1994.
• The World Trade Organization has expanded on GATT's free trade mission since its founding in 1995.
• The four main types of regional trade agreements have achieved different levels of economic integration for member nations.
Challenges to Trade Liberalization
• Dumping and certain government subsidies are viewed as unfair trade practices.
• Shifts in global market conditions affect a country's terms of trade.
• Fair trade addresses equity concerns in the global trading system.
• Localization opposes most aspects of economic globalization.