Topic 2 (Chapter 3) Flashcards
Pros of free trade
- keeps prices down
- inspires innovations
- access to foreign investments
Cons of free trade
- domestic workers can lose their jobs
- workers may have to accept pay cuts
- loss of service jobs
Free trade
The movement of goods and services among nations without political or economic barriers
Comparative advantage theory
The 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 products that it cannot produce
Absolute advantage
Exist when a country has a monopoly on producing a specific product, or is able to produce it more efficiently than all other countries
Balance of trade
The total value of a nations exports compared to a Imports over a particular.
Trade surplus
A favorable balance of trade: occurs when the value of a country exports exceeds that of its imports
Trade deficit
Unfavorable balance of trade: value of countries imports exceeds that of its exports
Balance of payments
The difference between money coming into a country and money leaving a country
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 allows a foreign company (licensee) to produce its product in exchange for a fee
Contract manufacturing
A foreign companies, production of private label goods to which a domestic company then attaches it’s brand name or trademark
Joint venture
A partnership in which two or more companies join to undertake a major project
Strategic alliance
A long term partnership between two or more companies established to help each company build competitive market advantages
Foreign direct investment
The buying of permanent property and businesses in foreign nations
Foreign subsidiary
A company owned any foreign country by another company, called the parent company
Multinational corporation
An organization that manufactures and markets products in many different countries and has multinational stock ownership
Sovereign wealth funds
Investment funds controlled by governments holding large stakes in foreign companies
Exchange rate
The value of one nations currency relative to the currencies of other countries
Devaluation
Lowering the value of a nations currency relative to other currencies
Name some corrupt business countries
Somalia, South Sudan, north Korea, Syria, Yemen etc
Trade protectionism
The 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 in the import or export of a certain product or the stopping of all trade with a particular country
Common market
A 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
Created a free trade area among the States and Mexico
WTO (world trade organization)
An international organization, that mediates the rules of trade among nations
General agreement on tariffs and trades (GATT)
An agreement establishing a forum for discussion of international trade problems, and mutual reductions in trade restrictions and tariffs
Countertrading agreement
Foreign trade agreements involving bartering, and which other products are exchanged, instead of currency may involve several nations
