Chapter 3 Flashcards
Importing
Buying products from another country
Exporting
Selling products to another country
Free Trade
The movement of goods and services among nations without political or economic barriers
Comparative Advantage Theory
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 effectively
Absolute Advantage
The advantage that exists when a country produces a specific product more efficiently than all other ccountries
Balance of Trade
Total value of a nation’s exports compared to its imports measured over a particular period
Trade Surplus
A favorable balance of trade; occurs when the value of a country’s exports exceeds that of its imports
Trade deficit
An unfavorable balance of trade; occurs when the value of a country’s imports exceeds that of its exports
Balance of Payments
The difference between money coming into a country (from exports) and money leaving the country (from imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment
Dumping
Selling products in a foreign country at lower prices than those charged in the producing country
Licensing
A global strategy in which a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a free
Franchising
A contractual agreement whereby someone with a good idea for a business sells other the rights to use the business name and sell a product or service
Contract Manufacturing
A foreign company’s production of private label goods to which a domestic company then attaches its brand name or trademark
Joint Venture
Is a partnership in which two or more companies join to undertake a project
Strategic Alliance
Long-term partnership between two or more companies established to help each company build competitive markets
Foreign Direct Investment (FDI)
The buying of permanent property and businesses in foreign nations
Foreign Subsidiary
A company owned in a foreign country by another company (called the parent)
Multinational Corporation
An organization that manufactures and markets products in many different countries and has multinational stock ownership and management
Sovereign Wealth Funds (SWRs)
Investment funds controlled by governments holding investment stakes in foreign companies
Exchange Rate
The value of one nation’s currency relative to the currencies of other countries
Devaluation
Lowering the value of a nation’s currency relative to other currencies
Countertrade
A complex form of bartering in which several countries may be involved
Trade Protectionism
Use of government regulations to limit the import of goods and services
Tariff
A tax imposed on imports
Import Quota
A limit on the number of products in certain categories that a nation can import
Embargo
A complete ban on the import or export of a certain product
General Agreement on Tariffs and Trade (GATT)
A 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions
Common Market (Trading Bloc)
A regional group of countries that have a common external tariff, no internal tariffs and a coordination of laws to facilitate exchange
North American Free Trade Agreement (NAFTA)
Agreement that created a free-trade area among the United States, Canada, and Mexico
