Lesson 8

Trade and the Global Economy

"Governments influence the patterns of imports and exports by tariffs, quotas and other trade restrictions. Students should learn the reasons for these policies."

California History/Social Science Framework

ASSUMPTION

Globalization of the economy is often talked about today as inevitable, necessary and desirable. It is often assumed that trade benefits everyone, and the more the better. While increased trade among countries provides certain benefits to businesses and consumers, a wholesale acceptance of and optimism towards free trade should be questioned. The environmental and social costs of globalization should be considered when assessing the impact of expanded world trade.

DESCRIPTION

Trade has become an increasingly complex topic. Now that multinational corporations gather inputs, produce and sell in many countries, what constitutes an export and what constitutes an import are no longer simple concepts. Students will learn to think through these complexities to better understand core issues in international trade. Once students have gained a basic knowledge of global trade, they will assess what is imported into the United States, the role of the World Trade Organization and the idea of import substitution.

ACTIVITY 8-1

Students will be introduced to the concept of globalization by the powerful example of how a pair of Nike athletic shoes are made. After discussing why we trade, students will try to unscramble and arrange the places, parts and phases of producing a pair of Nikes into a coherent story of global production. Students will finish by evaluating the economic, envi

ronmental and social impact of this approach to production.

ACTIVITY 8-2

Students will learn about and evaluate the current status of US trade. Using the Internet, students will first gather key data and statistics about US trade. Then, in small groups, students will carefully analyze one country that exports to the United States from information downloaded off the Internet. In a role play, these groups will act as trade analysts giving presentations to the US Secretary of Commerce based on their analysis of US imports from that country. They will recommend a US import policy dealing with that particular country. Students will critique all the presentations considering whether any limits should be placed on imports, and if so, how. Finally, students will learn about a 1998 World Trade Organization ruling against the United States' policy of prohibiting the import of shrimp that are caught in nets not safe for endangered sea turtles.

ACTIVITY 8-3

Students will read excerpts from Going Local by Michael Shuman. They will evaluate his argument that communities should become more self reliant and less dependent on imports. Particular emphasis will be on the possibilities for local energy production.

BACKGROUND FOR THE TEACHER

Trade has been a major part of human history. The early days of simple barter between

groups of people are long gone. Now trade is largely facilitated by electronic money, takes place between a wide range of businesses, consumers and governments and involves an immense variety of products ranging from a synthetic rubber shoe sole to a passenger jet. Products can be exported and imported from the same country before delivery to the marketplace. For example, logs are exported from the United States to countries such as Japan, Mexico and Germany to be processed and shipped back to the United States to be sold. As illustrated in activity 6-1, products as seemingly simple as shoes can be produced piece by piece in a variety of places and countries, assembled in another nation and shipped to yet another. Trade is no simple matter these days.

International trade has expanded rapidly since World War II, and even more so in the 1990s. In 1950, total merchandise exports in the world were $58 billion. In 1990 that figure was $3.5 trillion, and in 1997 it was $5.3 trillion. In 1997, world exports grew by over 9.5%, three times greater than world output growth of 3%. Over 3/4 of the world trade is in merchandise or goods ­ primarily industrial equipment, consumer goods, oil and agricultural products. Almost 1/4 of world trade is in services, mostly in banking, insurance, transport, telecommunication, engineering and tourism. Since the 1950s, transportation costs, based on cheap oil, as well as communication costs, have steadily declined. This has helped fuel the explosion in global trade.

Trade is based on specialization. The logic is clear ­ trade what you make the best and exchange it for what others make the best. Trade competition among countries is much more complicated. Much of it depends on the resources or factors of production available in a certain area or country. In general terms, countries or areas will have a resource focus to their economy and consequently to their exports. A country can be labor intensive,

where its competitiveness is based on cheap and available labor. These countries are often poorer and have large populations. Or a country can be capital intensive where its competitiveness is based on the productivity and skill of its labor force with high levels of education and/or available technology and machinery. Or a country can be land intensive, where its competitiveness depends more on an abundance of valuable natural resources such as timber, minerals and farmland.

A central debate for many years has concerned the virtues of free trade versus protectionism. In simple terms, free trade means the absence of restriction on trade. Essentially, a government pursuing free trade removes barriers to imports and encourages exports. The following arguments for free trade are often made: 1) that more imports will lead to more choices for consumers; 2) that competition from imports makes domestic businesses more competitive which leads to lower prices and better quality for consumers; 3) that imports can provide valuable and/or cheaper inputs for businesses; 4) that welcoming imports can promote trade relations with other countries making it easier for the US to export; and 5) that increased exports will lead to more income and jobs in export industries.

Traditionally, protectionism has meant using barriers to imports that compete with domestic industries. Current arguments for protectionist measures in the US show this definition is expanding, as reasons to limit imports are not just confined to protecting domestic industry. Arguments for protectionism include: 1) protecting import-competing companies and their workers; 2) encouraging local production to substitute for certain imports and therefore keeping more money and jobs in local communities; 3) reducing direct environmental costs: the energy and packaging used to transport goods over long distances; and 4) disagreement with the country where certain imports come from because of its hu

man rights record, labor practices, lax environmental protection, etc. Protectionist measures include tariffs (taxes on imports), quotas (monetary or quantity limits on imports) and non-tariff barriers (restrictions on imports such as standards enforced on imported goods, special tests or markings required on goods and time delays in clearing goods for importation).

Free trade agreements have aimed to reduce these barriers. Free trade is dominating trade policy in the 90s as more and more agreements are being negotiated or considered to increase trade among countries. The most well known and influential has been GATT, the General Agreement on Tariffs and Trade, started in 1947. Through several rounds of talk since then, tariffs have been significantly reduced among the over 70 member nations that account for over 80% of world trade. NAFTA, started in 1993, has significantly reduced tariffs between the US, Canada and Mexico. In the 1990's, the European Union (EU) has removed almost all trade barriers among its member nations.

The World Trade Organization (WTO), established in 1995 to administer and enforce agreements made at the Uruguay Round of GATT, has taken free trade to a new level. Many recent rulings by the WTO have been aimed at removing non-tariff barriers, in particular health and environmental standards on imports, claiming that these represent unfair trade barriers. Many critics suggest that free trade under the WTO is challenging the sovereignty of nations affected by their rulings. [For updates and criticisms on WTO activity, visit the website of Public Citizen's Global Trade Watch at www.citizen.org.]

Who's in control of this increasingly complex world trade system and the trade organizations that govern it? Multinational corporations are becoming less loyal and responsible to any one nation and its laws. Various mul

tinationals have moved operations to countries where production costs are lower or because of lax environmental and labor laws. Where laws are stronger, multinationals may make an effort to change or circumvent those laws. A recent ruling at the WTO serves to demonstrate this trend. In March 1997, the WTO ruled that the European Union must open its markets more to bananas from Latin American countries, mostly Chiquita bananas. The European Union has favored bananas from Caribbean nations mostly grown on small, family farms. Many Caribbean economies depend largely on these exports. The United States had brought this case to the WTO at the urging of Chiquita. Chiquita is based in Cincinnati, Ohio but most of its 45,000 workers are in Guatemala and Honduras where the bananas are harvested. Carl Lindner , the CEO of Chiquita, was a major donor to the Democratic Party. Multinational corporations, like Chiquita, were created by law in their nations of origin but as their global reach has extended, so too has their ability to influence international trade agreements and organizations like the WTO.

In addition to issues of national sovereignty, there is also concern over how certain imports are produced and the impact such production has across borders. Health, environmental and social standards in poorer countries that export to the US are often considerably below those of the US. Human rights violations in China and Nigeria, devastating pollution in Korea and China and extremely low wages in Indonesia are examples that reflect these different standards. By buying from these countries, some argue we are supporting their policies. In other cases, the actual production of goods exported to the US have had a direct effect on the health and environment in the US. During a visit to Tijuana in 1997, Carl Pope, Director of the Sierra Club, pointed out that pesticides banned in the US are made in California, used in Mexico and then shipped back to the US on fruits and vegetables. More

recently on a visit to Tijuana Mexico, Pope learned about hazardous industrial wastes discharged into a local river from electronics factories that largely export to the US and Canada. Not only has this harmed the health of those who live in Tijuana (producing,for example, a high incidence of birth defects) but this river flows to Imperial Beach, California where many others surf and swim. Another report in Time magazine (May 1997) revealed high incidences of serious birth defects in Brownsville, Texas from 1988 to 1992. This was also a time when US companies like General Motors, Kemet Electronics and Trico, a windshield wiper manufacturer, set up factories across the Rio Grande in Matamoros, Mexico. It is widely believed that pollution from these factories led to this health crisis. Differences in environmental regulations between the US and Mexico have been a central concern of those opposed to NAFTA.

A final concern about the expansion of the global economy is that many countries, especially the United States, are becoming more (and too) dependent on imports. This condition of interdependence, while predicated on countries specializing in what they produce most competitively, can leave trading partners vulnerable. In a world rife with civil wars in distant places, subject to sudden changes in their economies and shifts in government authority, anticipated exchanges may go awry. With these concerns among others, there is a growing school of thought suggesting we restrict what we import. This "protectionism" does not have to come about through government measures like higher tariffs or quotas. Rather, a coordinated effort to support, invest in and boost local production of essential products could lead to a gradual replacement of imports. With a focus on essentials like food, shelter and energy, this would leave communities less vulnerable to the risks involved in relying on products from hundreds and thousands of miles away. This is part of Michael Shuman's thesis in his 1998 book,

Going Local. Shuman further argues that replacing imports with local products can improve the local economy by creating jobs and keeping income in the community. Limiting imports of essential goods to protect local communities from outside forces also reduces the environmental costs of transportation over great distances. While import replacement does not eliminate trade, it may help to constrain trade when it does not promote a better quality of life.

Questions to Explore:

How have product life cycles been changed by globalization?

What are the trade-offs of free trade and globalization?

What can be done about globalization's negative impacts? Alternatives?

Activity 8-1

Objectives

· To recognize the increasing globalization of the economy

· To understand how and why the production of a product from a multinational company has become globalized

· To begin assessing the benefits and downsides to a global economy

Materials

Transparency Model: World Trade

2 different color fine point pens

Student Handout: The Global Athletic Shoe

Story: "Shoes" from Stuff by John Ryan and Alan Durning

Time

One - two class periods

Evaluation

Completion of handout

Vocabulary

globalization interdependence specialization resource focus capital intensive labor intensive land intensive

Suggested Procedure

1. Have students look at clothing labels. Create a list from student responses of all countries and areas in the US where their clothes are made. Derive concept of globalization. Ask students why clothing is made in these places (cheap labor, etc.).

2. Have class discuss why we trade. Derive concept of specialization, exports and imports.

3. Have students read the handout, The Global Shoe and elaborate on resource focus/specialization to help determine where different phases/parts of production take place.

4. Have students work in pairs to complete the handout: The Global Shoe.

5. Read story, Global Shoe, and have students modify their story/diagram with a different color pen. Stop frequently to discuss the production process.

6. Have class discuss what might be good and bad about this global production of shoes.

World Trade

World trade has increased dramatically since World War II. On average, trade has grown 3 times as fast as world economic growth. This development is often referred to as the globalization of the economy.

Trade has become much more complicated as well. Trade consisting of one country trading its end products for those of another country, such as the United States trading wheat to Germany for automobiles, is only one part of trade these days. Instead, many end products today are the result of coordinating inputs from many different parts of the world, assembling in another country and shipping to many countries. This is a truly amazing feat in many ways. It also has created concern over the impact of such globalization on people and the environment.

TRANSPARENCY MODEL 8-1

The Global Athletic Shoe

Directions: Try to create the story of how a typical Nike athletic shoe is made. First, determine how the different phases of production and materials fit together. Create a diagram. Use 1 color pen only. Then based on any knowledge you may have of the different places listed, try to determine which phase of production corresponds to that location. You may use each location up to 2 times. After completing this process, discuss with your group or partner what you feel are the positives and negatives of producing shoes this way.

Parts of Final Product

Upper

Midsole (foam)

Outer sole

Tissue Paper

Box

Input Materials/Process

petroleum (oil) (2 times)

natural gas

coal

cowhide

tanning chemicals

benzene (made from coal; when mixed with oil makes synthetic rubber)

vinyl acetate (made from natural gas and CO)

ethylene (made from oil)

EVA (ethylene vinyl acetate: foam substance)

polyurethane bag filled with a gas ("air")

100% recycled, unbleached corrugated cardboard

paper pulp

super container ship

assembly of shoes

design of shoes

control of operations

Places

Oregon,Texas, Los Angeles

Taiwan, S. Korea

Tangerang, Indonesia, Sumatran rainforest, Indonesia

GOOD LUCK!!

(Activity based on "Shoes" from Stuff: The Secret Lives of Everyday Things by Alan Durning and John Ryan, 1997)

Activity 8-2

Objectives

· To learn about the status and scope of US trade

· To analyze what is imported into the United States using data charts

· To consider limits on various imports

· To analyze the role of the WTO in promoting "free trade"

· To use the internet to gather data on US trade (optional)

Materials

Student Handout-US Trade Highlights/Import Analysis

Student Handout/Story-WTO, Free Trade and Sea Turtles

Time

Three -four days

Evaluation

Students should be evaluated on completion of the US Trade Highlights Handout, group presentation on selected country and written response to Sea Turtle case. In all parts, students should demonstrate ability to interpret trade statistics, apply concepts of trade and analyze how trade affects our economy and quality of life.

Vocabulary

import export, balance of trade trade deficit trade surplus

import substitution specialization capital intensive labor intensive land intensive free trade WTO protectionism tariffs quotas non tariff barriers bilateral/multilateral trade negotiations

Suggested Procedure

1. Have all students read and complete Part A of first Handout.

2. Have students complete Part B by working in small groups or pairs on the Internet at specified site. Before this activity, arrange students in equal sized groups. Assign each group to one of the following countries from where the US imports products. These groups will prepare a presentation once they gather the appropriate data from the website.

3. Debrief findings from website. Review questions from handout and get students to critically think about the statistics they have found:

- Why does the US trade the most with Canada? Mexico? Japan? others?

- Why does the US have a trade deficit with Japan? China? Mexico? others?

- Which region(s) does the US trade with the most? Why? deficits with regions?

** Other information about US trade to note: The United States economy, based on workers with high levels of education and available technology, is largely capital intensive as evidenced by its exports. The United States primary exports are in finance, entertainment, aerospace, industrial equipment, pharmaceuticals and communications. The United States is a world leader in trade. In 1997, the United States exported $937 billion and imported $1,048

billion (or $1.05 trillion) of goods and services. Canada, Japan, Mexico, China, the United Kingdom and Germany are top trading partners with US.

4. Have all students discuss why the US should and should not import products from other countries. Make it clear that trade involves exports but that this lesson mostly focuses on imports. As a class, develop a criteria for determining what would make some imports more desirable than others. Students should consider cost, quality, necessity of product, availability and potential of substitutes, distance to transport, practices of country from where import came and so on in assessing what makes certain imports more desirable than others.

5. Using import charts gathered in Part B of Handout, have students follow directions in Part C and prepare a presentation based on analyzing that data. Part C could be extended by having students research country and its government's practices to better prepare their argument on trade with that country.

* To help you answer question 2 in part C, note the following: Looking at statistics on imports into the United States from other countries (as students will do in activity 6-2), one can deduce the general resource focus of different countries in the world economy. The United States, Canada, Germany, Japan and now Mexico seem to be mostly capital intensive. One can speculate that Mexico's resource focus has become more capital intensive as more and more international companies, especially from the US and since NAFTA, have moved factories there. Chile (agriculture), South Africa (metals/minerals) and Saudi Arabia (crude oil) are more land intensive. China is a mix of labor and capital intensity while Indonesia is mostly labor intensive. These classifications oversimplify these countries economies but provide a starting point for understanding differences between what countries trade and the forces of globalization.

6. Have students present their import profiles. Have students in audience compile a list of important and less important imports from the presentations, while you act as Secretary of Commerce evaluating their advice. After the presentations, announce which import limits for the different countries will be adopted.

7. Discuss with class whether the Secretary's decisions to limit some imports and not others were good choices or not. Discuss how to limit imports, or different forms of protectionism.

8. After establishing that there can be some reasons for import limits, read the story of WTO, Free Trade and Sea Turtles to demonstrate how the WTO's goal of free trade can conflict with, even override, a nation's mandate to restrict certain imports (a protectionist measure). Have students write a response to the decision stating whether they agreed or disagreed with the decision and applying ideas from previous parts of lesson. Have students discuss their responses.

US Trade Highlights and Import Analysis

After reviewing key trade concepts and gathering current statistics on US trade, you will research what one of the following countries exports to the US. Circle your assigned country:

Canada Chile China Germany Japan Mexico S. Africa S. Arabia Indonesia

Part A: Review these terms fill in where needed:

balance of trade ­ difference between a countries exports of goods and imports of goods

trade surplus ­

trade deficit ­

Imports/exports are usually determined on account of national origin (location) NOT national ownership. Therefore, which of the following is a US export? US import?

a. tire made by British company in Ohio and sold in Brazil

b. toy made in China by a US company and sold in Japan

c. car made in Mexico by a German company and sold in the US

Part B:

Find answers to the questions below using the website of the US Office of Trade Statistics and Analysis (Department of Commerce). Go to www.ita.doc.gov. Click on trade statistics. Then click on "Foreign Trade Highlights" section.

<Section-"US Aggregate Foreign Trade Data......">

1. How much did the US EXPORT in the most recent year?

2. How much did the US IMPORT in the most recent year?

3. Was there a trade deficit or surplus for that year? How much?

4. How long has the US had a trade deficit?

For questions #5-8, specify where your assigned country ranks.

5. To which five countries do the US EXPORT the most? How much for each?

6. From which five countries does the US IMPORT the most? How much for each?

7. With which five countries did the US have the greatest trade DEFICIT? How much for each?

8. What are the three largest EXPORTS and three largest IMPORTS of the US? How much for each?

<Section-"US Commodity Trade by World and Region">

11. Record how much is exported and imported from 5 major regions in the world: Europe, Caribbean Basin, Africa, Oceania and Asia.

12. Overall, what do you feel is positive and negative about the status of US trade? What else would you like to know?

<Section- "US Commodity Trade by Country">

13. Print US import statistics from assigned country. (Before printing, go to "Page Set-Up" and change alignment from standard to horizontal.)

14. Look up other statistics you would like to know from any section and record.

Part C

Your group has been assigned to investigate imports from ________ by the United States Department of Commerce. Your resources are your knowledge of current US trade status (from Part A), your import data sheet (printed out from Part A), and most importantly your collective brains.

Purpose of Investigation: The Secretary of Commerce, under directions from the US President, has asked that you carefully assess the importance of the top 20 imports from one of eight significant trading partners. The President, under pressure from groups of US citizens, had become concerned that we may be importing too much.

DISCUSS THE FOLLOWING WITH YOUR CLASS: Why should we import? What are reasons to limit imports? What imports do we benefit from the most? the least?

Your Task:

GROUP ROLES:

Facilitator: leads discussion for steps 1-4, designs poster

Recorder: records decisions from steps 1-4, labels poster

Artist: participates in discussions, creates art for poster

Presenter: participates in discussions and poster design, leads presentation

1. Carefully read the import chart. Discuss what each type of import is and how much of each is imported.

2. Determine whether theses imports into the US from your assigned country are capital intensive, land intensive or labor intensive (resource focus).

3. As a group, discuss and then decide which 3-6 imports are most important and 3-6 that are least important. You will recommend that we continue importing the top 3-6 and stop importing the bottom 3-6.

4. Discuss what might be good and bad about trading with your specific country. Consider the government policies of that country, geographic distance, what you may suspect about labor/environmental practices of that country.

5. Create a poster (as a TEACHING AID for your presentation to the Secretary of Commerce) that contains the following:

a. graphic representations of the 3 most important and 3 least important imports from your assigned country

-label each with name, how much in $ was imported in most recent year and place an X over the least important ones

b. label poster with name of country, resource focus of exports, reasons overall why we should or should not import from that country and your names on poster

*TEACHING AID should contain few words and be used as an outline for presentation

6. Prepare for presentation. Presenter will lead, but all should be prepared to explain everything and answer questions from the Secretary of Commerce.

Presentation

You need to present the following to the Secretary of Commerce:

a. resource focus of country and why you chose that

b. reasons overall to support and not support trade with this country

c. arguments for specific products to continue importing

d. arguments for specific products to stop importing

e. anything else you would like to add to convince the Secretary to adopt your recommendations

The WTO, Free Trade and Sea Turtles

In March 1998, the World Trade Organization (WTO) ruled that a US trade ban designed to protect endangered sea turtles violates global trade rules. The US ban was placed on the import of wild shrimp from nations not adequately protecting sea turtles.

Most species of sea turtles have been given endangered status under the Endangered Species Act (ESA) in the United States and the Convention on International Trade of Endangered Species (CITES) worldwide. The CITES has listed five of the world's seven sea turtle species as "threatened by extinction [and] affected by trade". The Kemp's ridley sea turtle is considered the most endangered. The Earth Island Institute (EII) estimates that 500-1000 nesting females are left. They all nest on the same beach on the Gulf Coast of Mexico and migrate along the eastern coast of the United States as far as New York during the spring and summer. EII estimates that 40,000 nested at the same location in 1947.

There are multiple man-made causes that have led to the depletion of sea turtles. Commercial development in coastal areas has harmed their nesting habitats on beaches. General pollution of the oceans has been a cause as evidenced by plastic and oil debris found in dead turtles' intestines. Hunting turtles for their skins (to make shoes, purses, boots, etc.) and shells (to make combs, eyeglass frames, cigarette lighters, etc.) has reduced their numbers. The trade issue brought to the WTO involves another cause.

Environmental groups estimate that 150,000 sea turtles per year are killed by shrimp fishers who use nets not adequate for protecting sea turtles. EII also claims that these nets capture 10 pounds of marine life other than shrimp for every 1 pound of shrimp caught. EII, among other groups, claims these shrimpers need more "targeted" nets.

Shrimpers in the United States are required to use more "targeted nets" that are equipped with Turtle Excluder Devices (TEDs). A TED allows turtles and other marine life to swim free through an escape hatch. EII claims that studies show TEDs save 97% of turtles from shrimp nets and cost between $50-$350 per net. A provision in the Endangered Species Act requires all US shrimpers to use TEDs effectively and bans the import of wild caught shrimp that are caught without effective protection for sea turtles. Seventeen nations followed the US and adopted a similar policy. In December 1995, various environmental groups won a hearing at the US Court of International Trade compelling the government to enforce the import ban. In 1998, the WTO panel did not agree with this ban.

The WTO, established in 1995, has become the authoritative body on world trade with over 120 member nations. The United States is one of many nations that agreed to be a part of this organization. WTO regulations state that all member nations must "ensure the conformity of their laws, regulations and administrative procedures" with WTO rules. When conflicts occur between one nation's laws and those of the WTO, other nations can bring the case to the WTO. A panel of three trade experts who mostly meet in secret makes WTO rulings. A ruling can only be overturned by a unanimous vote of all member nations. Failure to comply with a ruling results in financial penalties.The primary "rule" of the WTO is to reduce protectionism and increase trade among nations.

The three trade experts who decided the sea turtle ruling were from Hong Kong, Brazil and Germany. Shrimp from Brazil had previously been banned because US officials felt their shrimping methods had not been protecting sea turtles adequately. Both Hong Kong and Germany reserved third party rights to this case. The EII states this means they are interested parties in the outcome of the case.

Thailand, Pakistan, Malaysia and India brought this case to the WTO claiming the

HANDOUT 8-2

shrimp ban was an unfair trade barrier. The US argued that sea turtles are threatened with extinction and no other measure protects them adequately. The ruling against the US requires that the US lift their ban by changing the provision in the Endangered Species Act or pay compensation to the other nations for lost trade. The National Fisheries Institution estimates the figure for "lost trade" to be between $200-500 million annually.

In January 1996, the WTO ordered the US to reduce Clean Air standards on imported gasoline to allow imports from Venezuela and Brazil. In May 1997, WTO ruled that the European Union (EU) could not ban beef treated with hormones from the United States. In March 1998, the WTO ruled that the US cannot restrict imports of shrimp that were caught in a manner the US has deemed not safe for sea turtles. Other cases that may be brought to the WTO include the US challenging the EU's ban on fur caught with leghold traps; and US, Canada and Brazil challenging the EU's "eco-labels", particularly labels that certify wood and paper products as being produced in an ecologically sound manner. (Bleifus, Joel, "Taking Care of Business, In These Times, July 28, 1997)

-Do you agree or disagree with the WTO's shrimp ban decision? Explain - using one-half -one page.

-What might be the implications of this ruling? Or in other words, if future decisions are similar, how would you describe what is happening overall?

Actvity 8-3

Objectives

· To understand the trade-offs of globalization and increased trade

· To evaluate local self reliance as a substitute for some forms of trade

· To learn about alternatives to oil based energy

Materials

Student Handout: "Going Local ­ Energy Industries" by Michael Shuman

Time One -two class periods

Evaluation

Completion of handout and participation in class discussion

Vocabulary

import substitution necessities substitutes intrastate trade interstate trade international trade local economy

Suggested Procedure

1. Have a class discussion:

· Why have imports?

· Why limit imports? (These questions are review if Activity 2 was done)

· How would a city or region that imported less benefit from limiting imports?

· What types of products could be more locally produced? Why? How?

Transition:

· Where does our electricity (or other forms of energy) come from?

(90% of US energy comes from fossil fuels: oil, coal and natural gas)

· What is the connection to intrastate trade? interstate trade? international trade? (electric generation from fossil fuels, dams, etc. and distribution system)

2. Have students read "Energy Industries" and respond to questions. Then discuss the following:

· How can energy be produced locally?What are the benefits?

·Why is most energy NOT produced locally now? (oil is cheap/gov't. subsidies/oil corporations are powerful)

· What will make local energy production more widespread?

·What besides local energy production could make us less dependent on imported oil? (CONSERVATION)

· In what other areas would self reliance be a good idea? (other "essentials")

·What are local examples of self reliance or import substitution? (farmers' markets, local fairs with local products)

· Does self reliance mean no trade?

Additional Activity As an addition to this activity and after brainstorming areas in which a community could become self reliant economically, have students create a story of a self reliant community in their journals. In the story, they should explain how food, water, shelter, energy, clothing, medical care and any other items from class discussion will be produced locally.

Going Local-Energy Industries

Terms:

ESCO-Energy Service Companies that provide energy efficiency hardware, software and services to businesses, schools and public agencies

photovoltaic (PV) cells- microchips that convert sunlight to electricity

wind turbine- a machine powered by the rotation of blades driven by the wind

biomass- unused agricultural waste after harvesting such as straw or after consumption such as fruit pits

1. What demonstrates that most US communities are far from self reliant?

2. What "essentials" would a self reliant community provide for itself?

3. Why does the author believe fossil fuels will become more expensive?

4. List the "natural endowments" that different regions have that could be used to produce energy locally.

5. Give reasons that support the following forms of local energy production:

a. wind

b. sun

c. agricultural waste/biomass

6. In a community that is "self reliant" in energy production, what role will imports still play?

HANDOUT 8-3