Chapters 7, 8, and 9 Flashcards
Country Risk
Exposure to potential loss or adverse effects on company operations and profitability caused by development in a country’s political and/or legal environments
Political System
A set of formal institutions that constitute a government
Legal System
A system for interpreting and enforcing laws
Rule of law
A legal system in which rules are clear, publicly disclosed, fairly enforced, and widely respected by individuals, organizations and the government
Extraterritoriality
Application of home-country laws to persons or conduct outside national borders
Transparency
The degree to which companies regularly reveal substantial information about their financial condition and accounting practices
Protectionism
National economic policies designed to restrict free trade and protect domestic industries from foreign competition
Tariff
A tax imposed on imported products, effectively increasing the cost of acquisition for the customer
Nontariff trade barrier
A government policy, regulation, or procedure that impedes trade through means other than explicit tariffs
Customs
Checkpoints at the ports of entry in each country where government officials inspect imported products and levy tariffs
Quota
A quantitative restriction placed on imports of a specific product over a specified period of time
Export Control
A government measure intended to manage or prevent the export of certain products or trade with certain countries
Import license
Government authorization granted to a firm for importing a product
Currency control
Restrictions on the outflow of hard currency from a country or on the inflow of foreign currencies
Countervailing duty
Tariff imposed on products imported into a country to offset subsidies given to producers or exporters in the exporting country
Dumping
Pricing exported products at less than their normal value, generally less than their price in the domestic or third-country markets, or at less than production cost
Antidumping duty
A tax imposed on products deemed to be dumped and causing injury to producers of competing products in the importing country
Investment incentive
Transfer payment or tax concession made directly to foreign films to entice them to invest in the country
Foreign Trade Zone (FTZ)
An area within a country that receives imported goods for assembly or other processing and re-export. For customs purposes the FTZ is treated as if it is outside the country’s borders
Maquiladoras
Export-assembly plants in northern Mexico along the U.S. border that produce components and typically finished products destined for the United States on a tariff-free basis
Regional Economic Integration
The growing economic interdependence that results when two or more countries within a geographic region form an alliance aimed at reducing barriers to trade and investment
Free Trade Agreement
A formal arrangement between two or more countries to reduce or eliminate tariffs, quotas, and barriers to trade in products and services
Free trade area
A stage of regional integration in which member countries agree to eliminate tariffs and other barriers to trade in products and services within the bloc
Customs union
A stage of regional integration in which the member countries agree to adopt common tariff and nontariff barriers on imports from nonmember countries
Common market
A stage of regional integration in which trade barriers are reduced or removed, common external barriers are established, and products, services, and factors of production are allowed to move freely among the member countries
Economic Union
A stage of regional integration in which member countries enjoy all the advantages of early stages, but also strive to have common fiscal and monetary policies
