Countries specialize, too. Practically everyone knows that Japan and West
Germany make cars. Usually the kind of resources available to a country influence
what is specializes in producing.
An important part of international transactions in the foreign exchange rate,
the value of one currency in relationship to another. Exchange rates for currencies
can change from day to day. So there are some risks in dealing with different
currencies. World trade involves regulations and taxes on goods moving from one
country to another. Governments are involved in overseeing trade among
countries.
Quotas on imported items also can be used by a country to show that it
doesn't approve of another country's policies. Quotas can be used to protect a
country's own business firms from too much competition from other countries. In
some instances, quotas have been used to help protect new business that has just
been used to help protect new business that has just been established.
A tariff is a special tax on goods made in another country and sold here. It is
a small part of the federal government's revenue. If a country wants to import more
of product, it may not put a tariff on the product, or it may impose a very low one.
The item can thus be given a lower price, which in turn will encourage more
people to buy it. If a country wants to reduce imports, it can increase the tariff and
thereby the price. Tariff rates can be changed, removed, or added as the
government sees a need for increasing or decreasing imports.
Sometimes
governments may wish to stop the import or export of goods, that is, it places an
embargo on them. An embargo may be used to prevent foreign firms from
competing with a country's own business. Governments use world trade to help
achieve their own economic and foreign policy goals.
