Trade Policies, International Relations and Your Wallet

COLLAGE BY CAROL PORTER FOR THE WASHINGTON POST

Lesson

Trade is a two-way transaction in a community and in a global setting. Economic principles of supply and demand, cost and benefits, trade agreements and tariffs, transnational labor outsourcing and immigrant skills balance against government policies, technological developments and human wants and needs.

Primary Disciplines

Additional Disciplines

Download Classroom Worksheets (PDF)

INcomeAndOUTlook.pdf

DoWeHaveAnAgreement.pdf

Nine-year-old Kenny eyes his friend’s latest video game. Juan can’t get enough of the paint job Kenny did on his old bicycle. Before their parents know it the two have traded possessions, both quite content with the result.

Trade on a global scale involves much more oversight, regulations and complexity. Establishing prices involves cost of raw materials and parts, wages and benefits, transportation, taxes — and maybe even tariffs and embargoes. Add to that the political perspective that different leaders and parties bring, changing currency values and technological advancements.

Looking at consumer preferences (what’s out and in) can be a beginning point to understand how buying decisions influence the success of providers of goods and services. The textile industry and cigar manufacture illustrate concepts upon which discussion, student activities and a case study can be built.

Even as this guide is written, The Post Business section and front page provides more stories on trade and tariffs, visits from trade agreement partners, and establishment of different policies. Use these articles and commentary to update your economics textbooks and give real-world examples to explain economic laws, principles and philosophies.

February 2017

Trade

Barriers to Trade (video and quiz)

Hey, Mom! What’s for Breakfast?

Supply and Demand: Crash Course

Specializations and Trade

Trans-Pacific Partnership Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors

Resource Graphic

CAROL PORTER FOR THE WASHINGTON POST

Expand Vocabulary
Business, Economics, English, Journalism
The jargon of business and economics communicates very specialized activities and concepts. Also, certain phrases have become part of our everyday experience; these include Habitat for Humanity requiring “sweat equity,” working a “9-to-5” job and seeking “bang for your buck.” In the Know includes many of the concepts and economics terms used in the articles reprinted in this month’s curriculum guide.

Locate Trade Partners
Business, Economics, Geography, Social Studies
In 2014, the United States was the second largest exporter in the world at $1.45 trillion. The top export destinations of products made in the U.S. in 2014 were Canada, Mexico, China, Japan and Germany. In 2015 the United Kingdom moved to fifth and Germany to sixth place. In 2016, the order of goods exported was: Canada, Mexico, China, Japan, United Kingdom, Germany and South Korea.

Ask students to locate each of the above countries on a map. Discuss how goods might be transported between and among these nations. In addition to being suppliers of raw material such as textiles, tobacco and minerals, what additional businesses are influenced by trade policies?

If teachers wish to expand this geography/map reading activity into an informational graphics-reading activity, ask students to explore the United States Census Bureau Foreign Trade Data and statistics (Top Trading Partners).

What’s Out and In?
Business, Economics, Personal Finance, Social Studies
Usually a new year’s feature, a list of the new year’s OUTs and INs has been modified to get students thinking about the fads, changes in style and tastes and influences on their spending. This activity could be used to introduce a personal finance lesson in saving and budgeting.

We suggest teachers use “The List: What’s OUT and IN?” to introduce students (consumers) to how their wants and needs impact the financial stability of the producers of goods and services. What must manufacturers do to sell products and entertainers to maintain fans?

For the third question, teachers might introduce the following: When Pantone [https://www.pantone.com] announces the color of the year, clothing companies and those that supply them with fabric, rugs and household goods appear in the green of 2017 quickly before the next year’s color is announced. Movies and musicians win awards; their concerts sell out and recordings hit new highs. Which athlete still sells a high volume of shoes after his career has ended? Which shirts, hoodies and shoes of younger athletes are selling?

With older students, teachers could use this chart as a springboard to discuss the impact of product contamination, official or grassroots boycotts and perception of company’s products. Does the “Made in …” label influence purchases? Does the brand/style/fit carry more import than the place of manufacture?

American Capitalism

“Disney brings its Magic Kingdom to China”

“A Girl Scout calls her cookies ‘as flavorless as dirt’ … and then sells 7,000 boxes”

“Trump’s Carrier deal could damage American capitalism forever”

“Or the deal could actually make American capitalism better”

“Trump puts the wolves of Wall Street in charge of America’s economy”

“New U.S. gold coin features Liberty as an African American woman”

“Under Armour debuts ‘made in the U.S.’ gear

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THE WASHINGTON POST

Dye and Weave With a Price to Pay
Business, Economics, Environmental Science, Geography, Social Studies

Teachers could begin this suggested activity by asking students to think about their favorite colors to wear. Then discuss the fabrics used for their clothing and how these fabrics are dyed. This will lead into considering the environmental impact of the dyes that are used and the influence of material and price on the lives of those who produce the fabric as well as those who purchase the finished clothing.

Teachers should help students locate India on a map. Discuss how the location and raw materials (coal, copper, iron, tea) of India influenced its participation in Silk Road and Indian Ocean trade (in the 100s BC), with the British East India Company and while a British Crown colony, and in today’s global economy. What are the advantages of trading with India?

Give students the Sunday, January 1, 2017, Business section featured article “The Dirty Secret About Your Clothes” to read. “Changing Fabric of India’s Textile Industry” is provided to guide discussion.

Prepare for a Career
Career Education, Economics, Journalism, Personal Finance

Reporters occasionally write on topics that they “eyewitness” from personal experience. “College’s Hidden Costs” includes examples from the Horovitz family. Read and discuss the Business section article. Discussion could include:
• Which family member provides the example? What did the family learn from her experience?
• Explain and discuss the basic costs of tuition (in-state vs. out-of-state), board and room, and transportation.
• What are the “hidden costs” of college attendance?

An activity is provided to use with this article. Give students “College Planning with Hidden Costs.” Form six groups, each selecting a different college to research. When students have completed the first chart, the expenses involved in attending college, groups should share the data. Discussion could include:
• Which are the most economical to attend if transportation to and from is not considered?
• What advantages and disadvantages are there to living at home and commuting to college?
• How important is it to visit family during college breaks?

Question 2.C refers to scholarships. Below is a sampling of scholarships and grants at the six colleges, especially those for students from the District. When your students visit the websites, review the kinds of scholarships available and check out links to financial aid information.
• D.C. Tuition Assistance Grant (DCTAG)
• District Scholars Program, George Washington University
• Howard University
• James Madison University, Virginia
• President’s Scholars, Georgetown University
• Princeton University
• UDC Scholarships
• University of Maryland, Maryland
• University of Virginia, Virginia

Think Like a Reporter
Economics, Government, Journalism, Media Arts, Personal Finance

Introduce students to The Post’s Sunday BUSINESS section and BUSINESS pages (in the A section and washingtonpost.com/business). Review the topics that are covered. In addition to reporters, the section has columnists (Michelle Singletary, Warren Brown, Barry Ritholtz and Thomas Heath).

Give students “Cover the Business Beat.” This activity will carry them through the kinds of sources; industry news, regulations and standards; and economic principles and actions that a business beat reporter needs to develop and understand. This activity is designed to work in conjunction with the textile industry business article “The Dirty Secret About Your Clothes.”

After doing this activity, teachers could assign students to work in groups to work on covering other businesses that influence their school lives. For example, class ring companies, yearbook publishers, food service providers, cleaning products contract, athletic equipment and grounds products. Questions would include:
• What companies and, therefore, competition for your school’s business exist?
• Who are the company leaders and representatives in your region?
• What influence do school superintendents and procurement officers have on what is purchased, from whom and for one or more schools?
• Do locally grown or produced products have any advantage?
• What federal, state and local regulations apply to purchasing decisions?
• Which are the best online sources for data and related, reliable information?

Who Pays?
Economics, Government, Social Studies
The Trump administration suggested one way to make Mexico pay for a wall it wants built on the border between the U.S. and Mexico would be to place a 20 percent tax on all imports from Mexico. The economic reality is that producers of those exports would pass the cost onto the consumers (U.S. citizens and companies).

To introduce this concept, give students “America might need to buy 25 billion avocados so Mexico could pay for the wall.” Teachers might apply mathematics by suggesting other products imported from Mexico and having students determine the cost after the tax and the time it would take to reach the cost of constructing the wall.

Beyond the taxes, what other costs are likely to be encountered? To answer this question, teachers might give students the informational graphics and article, “Trump wants to ding imports from Mexico. What happens to stuff we send the other way?” [See the following suggested activity.]

Read About Products and Trade

Lemons and Lemonade: A Book About Supply and Demand

Prices! Prices! Prices!

The Travels of a T-Shirt in the Global Economy

The True History of Chocolate

Uncommon Grounds

Talk About Trade Partners
Business, Economics, Geography, Government, Social Studies
Canada, Mexico and China have been the U.S.’s top import and export trade partners in the billions of dollars for years. NAFTA is just one of several trade agreements of the North American neighbors that influence employment and trade.

A headline is to be a summary of the article. The same article has different headlines depending on the edition; online requires additional consideration of search engines and key words:
• Online: “Trump wants to ding imports from Mexico. What happens to stuff we send the other way?”
• Print: “Economists point to the value of a wide variety of U.S. exports to Mexico”

Discuss with students what idea(s) the two headlines communicate. Which is friendlier to the reader? Which might be considered more authoritative?

After reading the Business section article, give students the activity sheet: “Mexico and U.S. — Trade Partners.” Students may work alone (especially AP Economics students), in pairs or in a small group.

What economic principles are introduced, illustrated and explained in the article and informational graphics?

Understand FTAs
Business, Economics, Government, Journalism
A more demanding selection to read is the guest commentary: “The art of the deal for free trade.” Review the short writer bio information. Why would Zoellick be considered a reliable source? He is currently a Senior Fellow at the Belfer Center for Science and International Affairs at Harvard University.

The layout provides wider margins that can be used for teachers and students to record annotation while they read through the document. Ask students to summarize the commentary.

Question #3 of “FTAs?” addresses this commentary. Teachers may wish to complete the first part of the student activity, then give students the commentary to read and questions to answer.

Students may be asked also to read “How Trump’s immigration and trade policies could hurt border town economies” for additional considerations and impact of trade policies on communities.

Trade for Goods and Policy?
Business, Economics, Government
The student worksheet “FTAs?” is provided to use with the guest commentary “The art of the deal for free trade.”

After you select the year and month, review with your teacher how to read the charts: Total Trade, Exports, Imports, Surpluses and Deficits.

Further study can be done using the U.S. Trade Online and the MIT Observatory of Economic Complexity (OEC).

Students can select a country to learn about the products it imports and exports and whom this trade occurs.

Conduct a Case Study
Business, Economics, Geography, Government

What would make a bustling district of factories dwindle to one? What part do imports, trade, regulations and changing consumer habits play? Tampa, Florida, and its Ybor City district present a viable case study to examine the complexity and interplay of economic factors.

Before beginning this activity, teachers may wish to discuss the American tobacco industry, the Surgeon General’s Reports and FDA regulations on tobacco use for context. Vocabulary is found on page 20 that teachers could review before reading the article and case study. Read “Is this the final burn for ‘Cigar City’?” Give students “Case Study: Ybor City and the Last Standing Cigar Factory.”

Read an Editorial Cartoon
Economics, Government, Journalism
Tom Toles editorial cartoon was published January 23, 2017. Online, Toles titles the visual commentary: “The Trump era will be about smart trade, not fair trade.” Questions are provided to aid reading the editorial cartoon.

Post NIE Guide Editor & Writer | Carol Lange
Post NIE Guide Art Editor | Carol Porter

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OFFICE OF U.S. TRADE REPRESENTATIVE

In The Know

Capitalism	Economic system based (to a varying degree) on private ownership of the factors of production (capital, land, and labor) employed in generation of profits. Pure capitalism is a system of economics with little governmental interference.
Consumers	People who use goods and services to satisfy their personal needs and not for resale or in the production of other goods and services
Currency devaluation	When a government adjusts the value of the nation’s currency so that it buys less of foreign currencies than before
Economic growth	An increase in an economy’s ability to produce goods and services, which brings about a rise in standards of living.
Economic wants	Desires that can be satisfied by consuming a good or service. Economists do not differentiate between wants and needs.
Exports	Goods and services produced in one nation and sold in other nations
Export subsidy	Government help to exporters, generally in two forms (1) service subsidy: trade information, trade shows, feasibility studies, foreign representation; cash subsidy: (a) rebate on imported raw materials and duty-free import of manufacturing equipment, or (b) drawback as a percentage of the value of exports
Goods	Tangible objects that satisfy economic wants
Human capital	The knowledge and skills that enable workers to be productive
Import license	Document issued by a national government authorizing the importation of certain goods into its territory
Imports	Goods and services bought from sellers in another nation
Labor	The quantity and quality of human effort available to produce goods and services
Market economy	A system in which most resources are owned by individuals and the interaction between buyers and sellers determines what is made, how it is made, and how much of it is made
Market price	The price at which the quantity of goods and services demanded by consumers and the quantity supplied by producers are the same. This is sometimes called the equilibrium price.
Monetary policies	Management of the money supply and interest rates to influence economic activity
Quotas	In international trade, the limit on the quantity of a product that may be imported or exported, established by government laws or regulations
Supply	The amount of a good or service that producers are willing and able to offer for sale at each possible price during a given period of time. Normally, as the price of a good or service rises (or falls), the quantity supplied of the good or service rises (or falls).
Supply chain	Network between a company and its suppliers to produce and distribute a specific product, and the supply chain represents the steps it takes to get the product or service to the customer. Supply chain management is a crucial process, because an optimized supply chain results in lower costs and a faster production cycle.
Tariff	A tax on an imported good or service
Trade services	The exchange of goods and services for money or other goods and services
World Trade Organization (WTO)	A trade agreement among more than 100 nations that specifies the level of tariffs among the signatories and attempts to resolve trade disputes
	SOURCE: Council of Economic Education Economic Glossary; Investopedia Financial Dictionary; DCPS Glossary of Selected Social Studies Terms

ANSWERS. Case Study: Ybor City and the Lasting Standing Cigar Factory.

1. Tampa is in southwest Florida on the Gulf of Mexico. Fishing, seafood processing and tourism would seem logical. It has developed a service- and business-oriented financial base as well as agribusiness.

2. Answers will vary for cuisine and music, but cigars and tobacco, sugar and rum would lead products.

3. From the late 1880s until the 1930s, Tampa’s main industry was cigar manufacturing. Wars, ban and embargos on key material (tobacco) in the manufacture of a product for which there is demand can diminish sales, force closure or relocation of a business.

4. a. There were once 149 cigar factories that shipped worldwide. These businesses thrived and so did Tampa. b. J.C. Newman Cigar Co. has managed to remain in business for three generations producing 31 brands of cigars, in spite of U.S. embargos on Cuban-grown tobacco.

b. The company exports its product and must import raw material (tobacco). You might review the history of American tobacco growers.

5. Easing of U.S. embargos could mean access to trade for Cuban tobacco. It could also mean more competition from imported Cuban cigars. The company currently imports its tobacco from Ecuador, Nicaragua and the Dominican Republic. Later in the article, readers learn that when the U.S. instituted the trade embargo on Cuban tobacco, most of the Tampa region cigar makers were forced to relocate to countries where tobacco leaves grew and were available to stay in business.

6. The Food and Drug Administration in 2016 introduced new guidelines that will require cigar manufacturers to get approval for new products, pay increased fees and add prominent warning labels. The company must comply by the end of 2016 by registering more than 1,300 cigar varieties.

7. a. The FDA says the measures, which will be phased in over three years, are a matter of public safety and are meant to curb underage tobacco use.

b. The success and survival of businesses like J.C. Newman Cigar Co. are influenced by trade agreements, Dept. of Commerce and FDA regulations and CDC findings.

8. Employees feel that their pay and benefits are good: For example, “Ana Rodriguez, who affixes bar code stickers onto individual cigars, has been here 15 years. She stays, she says, because she has a 401(k) and five weeks of paid annual leave.” For these benefits and working conditions, there are high expectations; for example: “Yesterday she bundled 6,700 cigars into 335 packages. The day before, 7,300.”

9. Because of varied factors (wages, cost of materials including transportation, taxes, regulations) U.S.-based business have divided facilities between the U.S. and another country or moved operations abroad. Tariffs may be imposed, but it may still be advantageous to remain abroad. Tariffs can be paid for by raising the price U.S. consumers pay for the products.

10. Ybor City was founded in 1880s by Spanish cigar maker Vicente Martinez Ybor. He built houses to attract workers who immigrated from Cuba, Italy, Germany and Spain. “For many immigrants, this was the land of opportunity.”

11. Manufacturers and small businesses (low wages even for hand-crafted items, greater the profit margin)

Costs added because of federal regulations will be passed on to consumers

New administrations bring policy changes that benefit or adversely affect businesses.

12. Answers will vary. Think of the trades that are displayed in the Smithsonian National Museum of American History and illustrated in Colonial Williamsburg and in Greenfield Village.

More Resources for This Guide

Business

Federal Reserve at 100

It Adds Up

Where in the World is Cuba?

District of Columbia Public Schools Academic Content Standards

Social Studies | Market Economy. E.3. Students analyze the elements of America’s market economy in a global setting.

1. Explain the relationship of the concept of incentives to the law of supply and the relationship of the concept of incentives and substitutes to the law of demand.

2. Describe the effects of changes in supply and/or demand on the relative scarcity, price, and quantity of particular products.

7. Analyze how domestic and international competition in a market economy affects goods and services produced, and the quality, quantity, and price of those products.

Social Studies | U.S. Labor Market. E.4. Students analyze the elements of the U.S. labor market in a global setting.

2. Describe the current economy and labor market, including the types of goods and services produced, the types of skills workers need, the effects of rapid technological change, and the impact of international competition.

3. Describe wage differences among jobs and professions, using the laws of demand and supply and the concept of productivity.

4. Explain the effects of international mobility of capital and labor on the U.S. economy.

5. Measure the impact of free trade agreements, transnational labor outsourcing, and legal and illegal immigration on domestic and international workers and U.S. economic foreign policy.

Social Studies | International Trade. E.5. Students analyze issues of international trade and explain how the U.S. economy affects, and is affected by, economic forces beyond U.S. borders.

3. Explain the changing role of international political borders and territorial sovereignty in a global economy.

The District of Columbia has adopted the Common Core State Standards in reading and mathematics. In addition, DCPS has adopted new learning standards in arts, health and physical education, science, social studies, technology and world languages.

Academic Content Standards may be found at http://osse.dc.gov/service/dc-educational-standards.

Maryland Academic Content Standards

Economics. The student will demonstrate an understanding of economic principles, institutions, and processes required to formulate government policy. 4.1

4.1.2 The student will utilize the principles of economic costs and benefits and opportunity to analyze the effectiveness of government policy in achieving socio-economic goals.

• The role of scarcity and opportunity cost in government decision making.

• Competing socio-economic goals including: economic freedom, growth, stability, equity, security, productivity, national defense, environmental protection, and educational quality.

Economics. The student will examine regulatory agencies and their social, economic and political impact on the country, a region or on/within a state. 4.1.3

• Regulatory agencies that respond to social issues and/or market failures:
Environmental Protection Agency (EPA)
Food and Drug Administration (FDA)
Federal Trade Commission (FTC)
Federal Communications Commission (FCC)
Federal Aviation Administration (FAA)

Other national agencies and state and local agencies can be used, but information will be provided in the item.

The Maryland Voluntary State Curriculum Content Standards can be found online at http://mdk12.org/assessments/standards/9-12.html

Virginia Academic Content Standards

Economics and Personal Finance. The student will demonstrate knowledge of the role of government in a market economy by

a) identifying goods and services provided by government to benefit society;

b) identifying the role the government plays in providing a legal structure to protect property rights and enforce contracts;

c) providing examples of government regulation of the market;

d) explaining that governments redistribute wealth; and

e) explaining that taxes and fees fund all government-provided goods and services. EPF.8

Economics and Personal Finance. The student will demonstrate knowledge of the global economy by

a) explaining that when parties trade voluntarily, all benefit;

b) distinguishing between absolute and comparative advantage;

c) distinguishing between trade deficit and trade surplus;

d) explaining exchange rates, and the impact of a strong dollar and weak dollar on economic decisions;

e) describing the costs and benefits of trade barriers;

f) describing the effects of international trade agreements and the World Trade Organization;

and

g) explaining growing economic interdependence. EPF.9

Academic Content Standards may be found at http://www.doe.virginia.gov/testing/index.shtml.

Common Core Standards

Craft and Structure. Analyze in detail how a complex primary source is structured, including how key sentences, paragraphs, and larger portions of the text contribute to the whole. CCSS.ELA-LITERACY.RH.11-12.5

Craft and Structure. Evaluate authors’ differing points of view on the same historical event or issue by assessing the authors’ claims, reasoning and evidence. CCSS.ELA-LITERACY.RH.11-12.6

Integration of Knowledge and Ideas. Integrate information from diverse sources, both primary and secondary, into a coherent understanding or an idea or event, noting discrepancies among sources. CCSS.ELA-LITERACY.RH.11-12.9

Common Core standards may be found at www.corestandards.org.

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