Trading Around the World
International trade touches us all. We drink soda from cans made of aluminum mined in Australia, wear shoes made in Europe, eat fruit from South America, build
machinery from steel milled in Asia, wear clothes made from African cotton, and live in homes built from North American wood. We take it for granted, yet before we can
enjoy these products and materials, traders must negotiate prices and deliver the goods through a network of relationships that literally spans the globe.
In this activity, students become international traders from one of six continents: Asia, Africa, Australia, Europe, North America or South America. They negotiate
prices with buyers and sellers from the other continents. Sometimes they are thwarted from trading by barriers, and they come to understand how the IMF, by fostering
free trade, enhances the flow of goods and services worldwide.
11-14 year olds (5-8 graders, US) studying Social Studies and Economics in school.
National Economics Content Standards
Standard 5 — Gain from Trade
Voluntary exchange occurs only when all participating parties expect to gain. This is true for trade among individuals or organizations within a
nation, and among individuals or organizations in different nations.
Standard 7 — Markets - Price and Quantity Determination
Markets exist when buyers and sellers interact This interaction determines market prices and thereby allocates scarce goods and services.
Standard 8 — Role of Price in Market System
Prices send signals and provide incentives to buyers and sellers. When supply or demand changes, market prices adjust, affecting incentives.
Standard 9 — Role of Competition
Competition among sellers lowers costs and prices, and encourages producers to produce more of what consumers are willing and able to buy. Competition among
buyers increases prices and allocates goods and services to those people who are willing and able to pay the most for them.
Standard 17 — Using Cost/Benefit Analysis to Evaluate Government Programs
Costs of government policies sometimes exceed benefits. This may occur because of incentives facing voters, government officials, and government employees, because
of actions by special interest groups that can impose costs on the general public, or because social goals other than economic efficiency are being pursued.
Upon starting the interactive, students are encouraged to set goals for their trading efforts. Do they want to:
- Build up as much wealth as you can by selling as much of your commodities as you can?
- Buy the widest range of goods to satisfy diverse consumer tastes at home?
- Focus on buying the raw materials for a particular industry?
Students new to the game are assigned a game number so they can return to their game later, while returning students can type in their game number to resume a previous
game. They then select their avatar (representing each continent, such as Sophie from Europe, Neema from Africa, etc.) and begin trading.
While trading, several pieces of information are always displayed:
- The student's avatar
- Student's money—amount and currency
- Student's goods for sale — items and amounts
- Student's suggested purchase list based on avatar identity.
- A map of the world showing traders in each continent, including their own avatar highlighted
- The state of the global economy. Prices fluctuate from game to game based on the random indicator of global economic growth or recession within a range fixed in
the game's coding. During a game, prices can change based on whether the economy is growing or shrinking.
Students can then choose a trader and item and enter a buy or sell price to start a transaction. The other trader either accepts the buy or sell price, or makes a
counteroffer. The student may choose to accept the counteroffer or cancel the trade. Factors affecting the trade are:
- Minimum and maximum amounts for each commodity and location;
- Affluence of buyer's country;
- Convertability of the student's currency;
- Trade barriers between your countries.
All goods bought or sold go into the pool of items offered for sale by each avatar, including the student's. Thus the student may buy a commodity from an avatar and
sell it to another, possibly even buying it back later if prices change.
The simulation ends when the student:
- runs out of money;
- runs out of goods to sell;
- all other traders run out of money;
- all other traders run out of goods to sell;
- quits the simulation, or
- has been inactive for a given time period.
So how did you do? Did you accumulate wealth in the form of cash? Do you think you could have gotten better prices for your goods? Or did you increase the amount of
goods you have? Did you meet the goal you set for yourself at the beginning of the game?
You traded in a world with few trade barriers. You were able to make your own choices about whom to trade with and where you could buy commodities you want or need.
Imagine how hard it would have been if you couldn't trade with half of the other traders.
Trade barriers restrict the choices people and countries have in international markets. The IMF helps countries to develop the monetary policies that allow free trade, giving everyone
more opportunities to both buy what they want and sell what they produce. To explore the issue of trade barriers further, visit the activities in The IMF In Action.
- Develop interest in the lesson by asking this question: "Would your life be different without international trade?" Count the "yes" votes and
the "no" votes. Engage students in a brief discussion explaining why they voted as they did.
- Suggest to students that all their lives have probably been impacted by trade from every continent. List the names of the six inhabited continents (Asia, Africa,
Australia, Europe, North America or South America) on the board. Have each student look inside his/her shoe, book bag, backpack, jacket, belt, purse, t-shirt, etc.
to find out where the item was made. Have students come to the board and, under the names of the continents, write the name of one item and the country in which
it was produced.
- Create a bar graph that demonstrates how many items came from each continent.
- Post-It notes can be put on a wall map of the world to locate where different goods were produced. Write the name of the item and the country (e.g., Jerry's shoe
—- China) on each note, then stick each note on its appropriate country.
- After about 20 notes have been stuck to the map, announce that the U.S. government just passed a law prohibiting trade with Brazil (or some other country with lots
of Post-It notes on it), and remove all the Post-Its from that country. Read off the items on the notes you removed. Explain that the students whose names are on
the notes would be negatively impacted by the U.S. trade restriction — they would no longer have those items. Engage students in a discussion of how trade
barriers might affect their lives.
- Explain that trade barriers interfere with the free flow of goods and services in markets. Ask, "Have any of you ever been to a market?" Most students
will raise their hands. Then ask, "What is a market?" (Possible answers might describe supermarkets, shopping malls, used car lots, etc.) Explain that a
market describes the interaction of buyers and sellers. (With modern Internet technology, a market is no longer a "place." Most students are familiar
with eBay, a world-wide market bringing buyers and sellers together electronically.)
- Ask, "How are prices determined in a market?" (Some student may say that prices are set by sellers; some may think the government determines prices.)
- Use this demonstration to guide students to understand that the interaction of buyers and sellers determines prices in a market:
- Choose six students to come to the front of the class. Give a handful of dry lima beans (money) to each student. These students are the buyers. Give a small piece
of wrapped candy to another student (NOT one of the six); this student is the seller. Allow the buyers to negotiate with the seller to buy the candy. When a price
is agreed upon between a buyer and the seller, record the price on the board.
- Next, give a small piece of wrapped candy to each of ten different students. Conduct a new trading session, with the original six buyers negotiating with the ten
sellers to buy a piece of candy. When sales are completed, record the prices on the board.
- Note the price of candy when buyers outnumber sellers and when sellers outnumber buyers. Have students suggest reasons for the difference in price. (Students should
note that prices tend to be higher when buyers outnumber sellers, and vice versa.)
Divide the class into six groups, and assign a continent to each. Have each group conduct research to find the top three exports from each of the continents.
Have students use the IMF's "Trading Around the World" activity to negotiate trades in the simulation. Have them note times when trade barriers prohibited the
free exchange of goods between them and another country.
Have students define the following trade barriers: quota, tariff, subsidy, embargo. Have them work in pairs on the Internet to find examples of each barrier, either
current or in history.
Provide each group with markers and poster board. Have them create a poster depicting one of the four trade barriers (quota, tariff, subsidy, embargo), and showing
how it interferes with the free flow of goods and services. Be sure to review poster criteria: neat, brief, focus on one main idea, no misspelled words.
Have each group state one argument in favor of a trade barrier and one argument against it. Ask students to find information about how the IMF works in the world to
promote free and fair trade among all nations.
Online Extension Activities:
Choose 8 students who have finished their assigned work and have them, in pairs, evaluate the following lessons and present them to the class.
Economic Indicators. A lesson about how prices of Beanie Babies are determined by supply and demand.
Fill'er up, Please: A Lesson on Supply and Demand. A lesson about the supply and demand for gasoline.
Coming and Going: Imports and Exports Throughout the World. A lesson about imports and exports around the world.
Don't Fence Me Out! (Barriers to Trade). A lesson about trade barriers and their effect on consumers.
Trading Around the World