Chapter 15 Flashcards
Absolute Quota
Compound Tariff
Ad valorem Tariff
Absolute Quota
-limits # of units of product allowed into country
Compound Tariff
-tax on product calculated by (unit and unit’s value)
Ad valorem Tariff
-tax calculated based on product’s value
4 Tigers?
Countries that transitioned to Newly Industrialized Countries since WW2
- Hong Kong
- South Korea
- Republic of China (Taiwan)
- Singapore
Franchising?
- company gives Foreign country right to use it’s Brand name, operations etc.
- doesn’t mean it’s owned by Domestic franchise people
Free Trade?
- belief government shouldn’t intervene in international trade (don’t impose trade barriers)
- rely on Free Market System
Import Substitution Growth?
- country doesn’t import goods
- makes everything domestically to stimulate economy
-goods it can’t make, it “substitutes” by importing
Joint Ventures
- two or more firms from separate countries
- create NEW business
*one of fasted growing international trade forms
Investment Controls?
-some countries limit amount of FDI
Licensing?
EX: you give foreign firm right to use some/all of your intellectual property
-in exchange for payment
Ex: NBA gave Dutch Company right to produce and sell
Local Purchase Requirements
-when you are selling your domestic goods in another country
-foreign country requires some percentage of your final product come from their local markets
-to protect them
EX: broadcasting
Management Contracts
-domestic company signs contract to operate facilities or provide services for a FEE
EX: Foreign hotel’s hire Hilton people to run their hotels for fee
- Foreigners provide capital and knowledge of local market
- Hilton people provide management expertise
Explain a Multinational Corporation (MNC)
- firm with extensive business involvement countries
- usually do a lot of FDIs
Non-Quantitative - Non-Tariff Barriers (NQNTBS)
- trade barriers that are NEITHER tariffs or quotas
- usually come from Bureaucratic Gov. (hard to change b/c of that)
5 types of NQNTBS?
Local Purchase Requirements
-requiring certain percentage of a foreign final product sold domestically to come from domestic markets
Public Sector Procurement Policies
-policies that favor local citizens over foreign ones
EX: giving funding to local business to keep money inside country
Product and Testing Standards
-domestic country requires mandatory testing of foreign product before it can be sold in their country (means extra cost)
Restricted Access to local Distribution networks
Regulatory Controls
Transit Tariff
- when product makes halfway point stop before reaching destination
- taxed at halfway point
3 countries who have the highest GDP in order from LARGEST to SMALLEST
United States
-hurt least by WW2
China
Japan
What percentage do developed nations make up of the World’s Economy?
60%
What are the BRIC nations?
Emerging Markets
Brazil
Russia
India
China
What two countries have the most people?
China and India
- 40% of worlds population
- low labor costs (b/c many workers)
China
- most populated
- a lot of people did FDIs in them
- China grew because of it
Victim of it’s own success
- labor costs risen
- no longer go to for low manufacturing
India
- second largest country
- used Import Substitution Growth after WW2
- caused them to lag behind
- recently began lessening trade barriers
- growing a lot because of it
- SECOND LARGEST COMPUTER SOFTWARE exporter
Brazil
- a lot of natural resources (exports raw materials to countries for growth)
- growth due to trading with China
-makes up half of South America’s GDP
Russia
-broke away from USSR after WW2
- President Yeltsin couldn’t control police, taxes, judicial system, military
- couldn’t attract FDIs
- President Vladimir Putin Russia
- gains control of taxes and corruption
- exports a lot of oil to GROW Russia
- still can’t attract FDIs b/c no one trusts Russia
4 other countries that copied the 4 Tigers Export Promotion Growth method
Malaysia
Thailand
Indonesia
The Philippines
How have Latin American Countries tried to grow and how has it worked out?
- Import Substitution Method
- high trade barriers
- countries lagged behind because of it
EX: Brazilians paid 2-3 times normal price for computer because Brazil imposed trade barriers on computers
*afraid of foreign money taking over
International Monetary System
-how countries exchange money between each other
3 banks where exchange of currency takes place the most?
London
Tokyo
New York
Fixed Exchange Rate System
- government agrees to hold value of currency to some major currency
- results in businesses being able to make decisions
Many Multinational Corporations are from ___
Smaller Countries
-b/c their country is shit and they are trying to make something happen
Has the U.S. been slow or fast to Internationalize?
Slow
-b/c U.S. market is very large
Public Choice Analysis
- explains why trade barriers exist
- says special interest groups work harder than public to get government to impose trade barriers
- public is uneducated on issue or doesn’t care
