[00:00.00] Why Nations Trade
[00:04.49]International trade is the exchange of goods
[00:10.24]and services produced in one country for goods
[00:16.90]and services produced in another country.
[00:22.15]In most cases,countries do not trade the actual goods and services.
[00:29.49]Rather,they use the income,or money,
[00:34.56]from the sale of their products to buy the products of another country.
[00:41.20]Trade among countries allows people in each country
[00:47.05]to use their energies in doing what they do best.
[00:52.72]That is,it lets them specialize.
[00:57.16]Trade and specialization go hand in hand and enable each of us
[01:04.42]to have more products to use and more different kinds of products
[01:10.37]at the lowest possible cost.Nations that for many reasons.
[01:18.21]First,they trade because there are difference in natural resources
[01:25.37]in different parts of the world.
[01:29.13]The plants that can be grown are different.
[01:33.68]The mineral resources are also different.
[01:38.93]For example,Canada has nickel mines but is too cold to grow oranges.
[01:46.37]The United States has only a few small nickel mines
[01:51.91]but produces large crops of oranges.
[01:56.77]So the United States buys nickel from Canada,
[02:02.12]and Canada buys oranges from the United States.
[02:07.66](We say that the United States exports oranges and imports nickel.
[02:14.53]Canada exports nickel and imports oranges.)
[02:20.28]The senond reason nations trade with one another
[02:25.32]is that it pays to specialize.
[02:29.97]Specialization makes the best use of country's productive resources
[02:37.73]-its natural resources,the skill of workers,and its factories.
[02:44.88]When a country specializes,
[02:48.62]it can make some goods that are of better quality
[02:53.87]than goods make elsewhere.
[02:58.10]Carpets woven in lranand wine produced in France
[03:03.88]are examples of these special goods.
[03:08.71]Specilaization also enables one country
[03:14.48]to produce some goods more cheaply than another country.
[03:20.83]For example,the United States has factories,machine,
[03:27.07]and tools for manufacturing jet planes.
[03:32.32]Belgium has artisans who are skilled at making lace.
[03:38.28]So the United States sells jet planes to Belgium.
[03:44.24]Belgium sells lace to the United States.
[03:49.49]If the Belgians built factories
[03:53.93]and trained engineers for the few jets they need,
[03:59.46]those jets would be very expensive.
[04:03.91]If the United States began to train people to make lace,
[04:10.15]that,too,would be expensive.
[04:14.69]By trading,both countries get a good product from abroad
[04:20.86]for less than it would cost if made at home.
[04:26.19]It pays a country to specialize
[04:30.84]even if it can produce everything cheaply.
[04:35.67]Within each country there are some things
[04:40.74]that are produced more efficiently than other things.
[04:46.28]This is called comparative advantage.
[04:51.24]Suppose there is a person in town
[04:55.68]who is an excellent teacher and who also is a skilled carpenter.
[05:01.95]Suppose,too,that there is another person in town
[05:07.80]who is a skilled carpenter and who is a below-average teacher.
[05:14.44]If the senond person could devote ful attention to carpentry
[05:21.67]and the first person full attention to teaching,
[05:27.03]then the twon would be making the best use
[05:32.07]of the skills and talents it possesses.
[05:37.63]If,instead,both persons taught for half the week
[05:43.17]and did carpentry the other half,
[05:47.82]the twon might not suffer from the quality of the carpentry.
[05:53.75]But the twon would lose some of the benefits of better education,
[06:00.78]because the carpenter is a person of lesser teaching skills.
[06:07.02]In teacher,the carpenter does not have
[06:11.67]an advantage compared to the teacher.
[06:16.32]Twons,countries,and people
[06:20.68]are better off when they specialize in producing
[06:26.53]those things in which they have a comparative advantage.
[06:33.38]Many countries get a large part of their income
[06:38.42]from selling one or two primary products.
[06:44.09]Primary products are the raw materials
[06:49.03]from which manufactured goods are made.
[06:54.28]They may be farm products,such as wool,cotton,beef,or wheat.
[07:01.30]They may come from beneath the surface fo the earth,
[07:06.34]as do copper,iron,coal,and crude oil.
[07:12.09]Or they may come from forests,as do wood and natural rubber.
[07:18.44]For example,the majority of Colombia's trade comes from selling coffee.
[07:25.31]Ghana depends heavily on cocoa exports.
[07:30.85]Malaysia depends on tin and rubber.
[07:35.50]These countries have"all their eggs in one basket."
[07:41.17]If anything happens to the sales of their primary products,
[07:47.30]they are in trouble.
[07:50.65]Such countries will not be able to count on stable economies
[07:57.07]until they have more products to trade.
