Chapter 13: INTERNATIONAL TRADE Flashcards
The expanding cultural, political, and economic connections between people around the world; including the process of international integration or increased mobility across national borders of products, workers, capital, and technology.
globalization
The goods and services that one produces abroad and then sells domestically
imports
The goods and services that one produces domestically and sells abroad
exports
The buying and selling of goods between countries, measures the balance of trade
trade flows
The trade of intangible products, such as telecommunications or information technology
trade in services
Investments by a firm or individual in one country into an entity based in another country (e.g., treasury bills owned by foreign countries, foreign bonds, and foreign stocks)
foreign direct investment (FDI)
An economic practice that seeks to maximize exports and minimize imports
mercantilism
When a country or person can produce more of a good than anyone else with the same amount of resources; can be the result of a country’s natural endowment
absolute advantage
When a country or person can produce a good at a lower opportunity cost than anyone else; it can produce a good at a lower cost in terms of other goods
comparative advantage
Trade gives each country the ability to consume more
gain from trade
When an entity has economic independence; they are self-sufficient and not open to trade
autarky
Focus on your biggest advantage and sell that to other countries
Ricardo’s theory
Trade occurs due to differences in endowments (mainly labor and capital) across countries
Heckscher-Ohlin theory
As prices of output goods are equalized between countries as they move to free trade, the prices of the factors (capital and labor) will also be equalized
factor price equalization theory
A rise in the relative price of a good will lead to a more than proportional rise in the return of the factor used intensively in the production of that good
Stolper-Samuelson theory
When a company entrusts some part of their business process to an outside vendor (third party)
outsourcing
When a company does some part of their business process in a different country than where they are based
offshoring
Policies that often seek to shield domestic producers and domestic workers from foreign competition.
protectionism
Taxes that governments place on imported goods; either a specific tax or an ad valorem tax
tariffs
Numerical limitations on the quantity of products that a country can import
import quotas
All the other ways that a nation can draw up rules, regulations, inspections, and paperwork to make it more costly or difficult to import products
nontariff barriers
A forum in which nations could come together to negotiate reductions in tariffs and other barriers to trade
General Agreement on Tariffs and Trade (GATT)
Participants allow each other’s imports without tariffs or quotas
free trade agreements
Participants have a common external trade policy as well as free trade within the group
common markets
