Final Review CH 7-11 Flashcards
governments intervene in int’t trade to…
political reasons: weapon to influence other countries
local stakeholders
economic reasons: helping local firms
enhancing competitiveness
retaliation
comparable or fair access to other countries’ markets
industrialization argument
agrarian economies need protection to industrialize
essential industry argument
protect important national industries
infant industry argument
protect new industry until it becomes more competitive
promoting investment inflows
import restrictions lead foreign firms to invest locally
balance of payment objectives
import substitution (don't import, make locally) export promotion (only make products for export)
nontariff bariers
voluntary export restrictions embargoes subsidies customs delays "higher" standards "buy local" laws reciprocal requirements for trade
most favored nation clause
a tariff reduction granted to one MFN must be granted to all other MFN countries
GATT to WTO
more industries (telecomm, financial)
trade in goods AND services
intellectual property rights
better dispute settlement
FDI
at least 10% ownership of productive assets
control of production processes, tech and other competitive assets
flow
amount of FDI over a period of time
stock
total accumulated value of foreign owned assets at a given point in time
outflow
amount of FDI leaving a country
inflow
amount of FDI entering a country
host country
country receiving the FDI
home country
country in which the MNC is headquartered
gross fixed capital formation
total investment of capital in assets
when is FDI preferable to trade
transportation costs too high for exporting
tariff and non tariff barriers very high
lack of excess domestic capacity
scale economies not significant in competitiveness
country of origin effects important
location specific advantages
when is FDI preferable to licensing
risk giving away know how to competitors
licensing implies low control over foreign entity
know how not amenable to licensing
what makes FDI successful
firms have unique advantages for competing that still apply abroad
local firms don’t have this advantage
FDI experience helps firms compete domestically
more stable profits and earnings
gov’t concerns with MNEs
MNCs operate in multiple countries, so decisions made in one can have negative effects on another
sheer size of MNC, greater than GDP of some countries
MNCs take away mkt share from local firms, driving them to bankruptcy
radical view
MNEs enslave less developed countries
Marxism
Dependencia Theory
free market approach
FDI as way to disperse production and flow of goods and services in the most efficient manner
