Chapter 3 Flashcards
Buying products from another country
Importing
Selling Products to another country
Exporting
The movement of goods and services among nations without political or economic barriers
Free Trade
Theory that states that a country should sell to other countries those products that it produces most effectively and efficiently and buy from other countries those products that it cannot produce as effectively or efficiently
Comparative Advantage
The advantage that exists when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries
Absolute Advantage
The total value of a nation’s exports compared to its imports measured over a particular period
Balance of Trade
A favorable balance of trade; occurs when the value of a country’s exports exceeds that of its imports
Trade Surplus
An unfavorable balance of trade; occurs when the value of a country’s imports exceeds that of its exports
Trade Deficit
The difference between money coming into a country (from exports) and money leaving the country (for imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment
Balance of Payments
Selling products in a foreign country at lower prices than those charge in the producing country
Dumping
A global strategy in which a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee (A royalty)
Licensing
A foreign country’s production of private-label goods to which a domestic company then attaches its brand name or trademark; part of the broad category of outsourcing
Contract Manufacturing
A partnership in which two or more companies (often from different countries) join to undertake a major product
Joint Venture
A long-term partnership between two or more companies established to help each company build competitive market advantages
Strategic alliance
The buying of permanent property and businesses in foreign nations
Foreign Direct Investment (FDI)
A company owned in a foreign country by another company, called the parent company
Foreign Subsidiary
An organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management
Multinational Corporation
Investment funds controlled by governments holding large stakes in foreign companies
Sovereign Wealth Funds (SWFs)
The value of one nation’s currency relative to the currencies of other countries
Exchange Rate
Lowing the value of a nations currency relative to other currencies
Devaluation
A complex form of bartering in which several countries may be involved, each trading goods for goods or service for services
Countertrading
The use of government regulations to limit the import of goods and services
Trade Protection
A tax imposed on imports
Tariff
A limit on the number of products in certain categories that a nation can import
Import Quota
A complete ban on the import or export of a certain product, or the stopping of all trade with a particular country
Embargo
A 1948 agreement that established on inter nation forum for negotiating mutual reductions in trade restrictions
General Agreement on Tariffs and Trade (GATT)
The international organization that replaced the General Agreement on Tariffs and Trade and was assigned the duty to mediate trade disputes among nations
World Trade Organization (WTO)
A regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange; also called a trading bloc. An example is the European Union
Common Market
Agreement that created a free-trade area among the United States, Canada, and Mexico
North American Free Trade Agreement (NAFTA)
