Chapter3 Flashcards
buying products from another country.
Importing
selling products to another country
Exporting
movement of goods and services among nations without political or economic barriers.
Free trade
states that a country should sell to other countries those products it produces most effectively and efficiently, and buy from other countries those products it cannot produce as effectively or efficiently
Comparative advantage theory
produce a specific product more efficiently than all other countries.
Absolute advantage
total value of a nation’s exports compared to its imports measured over a particular period
Balance of trade
occurs when the value of a country’s exports exceeds that of its imports.
Trade surplus
difference between money coming into a country (from exports) and money leaving the country (for imports) plus money flows coming into or leaving a country 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 charged in the producing country
Dumping
the right to manufacture its product or use its trademark to a foreign company (the licensee) for a fee (a royalty)
Licensing
foreign company produces private-label goods to which a domestic company then attaches its own brand name or trademark
Contract manufacturing
partnership in which two or more companies (often from different countries) join to undertake a major project.
Joint venture
long-term partnership between two or more companies established to help each company build competitive market advantages.
Strategic alliance
buying of permanent property and businesses in foreign nations.
Foreign direct investment
company owned in a foreign country by another company, called the parent company.
foreign subsidiary
one that manufactures and markets products in many different countries and has multinational stock ownership and management.
multinational corporation
investment funds controlled by governments holding investment stakes in foreign companies.
sovereign wealth funds
is the value of one nation’s currency relative to the currencies of other countries.
Exchange rate
lowers the value of a nation’s currency relative to others.
Devaluation
Complex form of bartering in which several countries each trade goods or services for other goods or services.
Countertrading
use of government regulations to limit the import of goods and services.
Trade protectionism
taxes on imports, making imported goods more expensive to buy.
Tariffs
limits the number of products in certain categories a nation can import.
Import quota
complete ban on the import or export of a certain product, or the stopping of all trade with a particular country.
Embargo
global forum for reducing trade restrictions on goods, services, ideas, and cultural programs
General Agreement on Tariffs and Trade (GATT)
mediate trade disputes among nations.
World Trade Organization (WTO)
(also called a trading bloc) is a regional group of countries with a common external tariff, no internal tariffs, and coordinated laws to facilitate exchange among members.
Common market
which created a free-trade area among the United States, Canada, and Mexico.
North American Free Trade Agreement (NAFTA)
