international business test 1 Flashcards
define domestic + ex
a business that operates in between the borders of the same country.
example
- a small tea shop
define international business + ex
a business that operates in different countries
define interdependence
When two or more people are relent on eachother for survival
define balance of trade
difference between a countries exports and imports
define trade surplus
exists when a country exports (sells) more than it imports (buys)
trade deficit
exists when a country imports (buys) more than it exports (sells)
what is the equation for a trade surplus
exports > imports = trade surplus
what is the equation for trade deficit
exports < imports = trade deficit
what is CETA
- Comprehensive economic and trade agreement
- Canada signed a CETA with the european union in 2017 which removed 99 of duties (taxes)
NAFTA
- North american free trade agreement
- Eliminates all tariff and nontariff barriers of trade between canada us and mexico
USMCA
- United states mexico canada agreement
- Supports mutually beneficial trade leading to freer markets
advantages of international trade
- Greater access to goods and services (greater variety of products, lower prices, access to larger markets
- Cultural development (promoted diversity and foster the exchange of cultures)
- Job creation (creates more jobs for canadians)
- Increased foreign investments (FDI - foreign direct investment & portfolio investment)
- New process and technologies (learn new technologies and make contacts)
define foreign direct investment
Investment that is located in a different country than the investor to control some or all of the business operations
define portfolio investment
When foreign investors purchase stocks, bonds and other financial instruments issued by canadian firms but does not result in foreign control
foreign investment restrictions
,
globalization
The process whereby national or regional economies and cultures become integrated through new global communication technologies
who’s Canadas largest trading partner
Canada’s largest trading partner is the united states
name the ways countries can engage in international trade
- Foreign portfolio investments
- Importing
- Exporting
- Listing agreements
- Franchising
- Joint ventures
- Foreign subsidiary
define foreign portfolio investment + ex
Investing in businesses by purchasing foreign stocks, bonds and other financial instruments
Ex
money markets
Capital markets
define importing + ex
Bringing products or services into a county for use by another business or for resale
Ex
The majority of the goods that canada imports come from the united states
global sourcing + ex
The process of buying equipment capital goods, raw materials or services from around the world
- Canada’s top imports include machinery and equipment
define exporting + ex
Selling goods and services to another country for use by a business or for resale
- The majority of canada’s goods exports to the united states
define value added
The amount of worth that is added to a product at each stage of processing
define licensing agreement
Give a company permission to use a product service brand name or patent in exchange for a fee or royalty
define franchising
An agreement to use a company’s name services products and marketing
define joint venture
When two businesses one of which is usually located in foreign country from a new company with shared ownership
Define foreign subsidiaries
When a parent company allows a branch of its company in another country to be run as an independent entity
define/ explain trade barriers
Measures implemented by governments that make it challenging for foreign business to operate in or trade with the host country
-Protects local businesses generates revenue
- Discourages international trade
Define or explain tariffs
Taxes or duties put on imported products or services
- Raises the cost of imports so that locally manufactured products are less expensive
Define or explain trade quotes
A limit on the amount of product that can be imported in certain period of time
- Decreases foreign competition
Define or explain standards
Exists when countries have different criteria for what is acceptable
- Environmental protection - pushes for fuel efficiency
define trade embargoes
a ban on trade of a specific product or with a specific country
- In 2003 30 countries embargoed canada beef exports due to mad cow disease
define trade sanctions
Economic action taken by one country to coerce another to conform to an international agreement or norms of conduct
- Canada does not allow the trading arms with certain countries.
tr
define investment Canada act
Ensures all foreign investments are reviewed to determine how they will benefit canada
define currency speculation
Buying,holding or selling foreign currency in anticipation of its value changing
- Investors profit from the fluctuions in its price
define floating rate
An exchange rate is not fixed in relation to other currencies but changes with respect to other currencies
define hard currency
Easily converted to tohe currencies
- Issues by a nation seen as politcally and economically stabe
- Widely accepted around the world as a form of payment for goods and services & may be preferred over the domestic currency
define soft currencies
- Value fluctuates (predominatly lower) as a result of the countries political or economic uncertinty
- Believed to be unstable
how can a low CAD be good
Exporters - can sell more products to exporters because hry are cheaper - benefits our manufacturing sector
Canadian tourism - visit canada more because their country buys more CAD
Canadian retail - makes shopping online or in person in the US more expensive
how can a low CAD be bad
Importers - more expensive to import and sell products
Canadian travlers - costs more to travel to the us
Major sports team - its harder to pay players because they pay them in USD meaning if the dollar is low its harder to pay the players
why is Canadas banking system regarded favourably
Larger and have great reserves than american or european competitors
Banking system is tightly regulated by the federal government and designed to handle ups and downs of the business cycle
