Unit 1: International trade Flashcards
1
Q
What is the definition of a business
A
- An organization that produces a good in for money to make a profit.
2
Q
What is the definition of a transaction
A
An exchange of things of value.
3
Q
What is a domestic business? Give an example.
A
- A business that makes most of its transactions within the border of the country in which it is based.
- Ex. Pizza Nova buys from Saputo Cheese
4
Q
What is an International business
A
- Any company that conducts financial transactions outside of their native country is considered an international business
- Ex. Transactions between a Canadian company and a U.S.A
5
Q
What are example of International Business
A
- Companies - McDonalds
- Government organizations - W.T.O
- Non-profit organizations - Unicef,
6
Q
What are the Five Ways for a Business to be considered “International”?
A
- Export to business abroad
- Import from business abroad.
- Invest in business abroad
- Own a retail or distribution outlet in another country.
- Own a manufacturing plant in another country
7
Q
What is trade and why do we do it?
A
- Trade: Exchanging goods and services
- We trade in order to get goods that we don’t have
8
Q
What is Interdependence, give an example
A
- Interdependence: The reliance of people on each other for goods, services, or ideas
- Ex. Canada is dependent on tropical countries for various fruits and vegetables.
9
Q
What is the difference between an import and an export?
A
- Imports: Are products or services brought into a country for trade
- Exports: are products or services sent from one country to another
- Want more exports than imports
- Canada exports: Oil, wood, beef, pork, fish
10
Q
Define the balance of trade; trade surplus; and trade deficit.
A
- Balance of Trade: The difference between a country’s exports and imports.
- Trade surplus: When a country exports more goods than it imports.
- Trade deficit: When a country imports more goods than it.
11
Q
What is CETA? And why is it significant?
A
- CETA stands for the comprehensive economic and trade agreement.
- It’s important because it was a major deal with Canada and the EU, eliminating 99% of the duties on imports between Canada and 27 EU countries.
12
Q
What are the main changes in the new USMCA from NAFTA?
A
The large Mexican market allows for
* new sales
* lower labor costs for Canadian companies
13
Q
What are the 7 Advantages of International Trade?
A
- Variety of products
- Lower prices
- Access to new markets
- Cultural development
- Job creation
- foreign investment
- New Technology
14
Q
What is the difference between foreign direct investment and portfolio investment?
A
- Foreign direct investment (ownership)- to control some or all of a business’s operations
- Portfolio investment (Investment) - the purchase of stocks, bonds, and other financial instruments issued by Canadian firms
15
Q
A
16
Q
What are the 2 disadvantages of international trade?
A
- Canadian jobs can be lost if the foreign investors move their business elsewhere.
- The Canada branches of the company need to pay the home country’s companies salaries and costs. This reduces the amount of taxes the Canadian government receives and increases foreign jobs.
17
Q
What are 5 problems that are associated with foreign ownership of Canadian business?
A
- Job loss
- Revenues leave Canada to pay head-office costs
- Research and development challenges
- Reduced exports
- Economic destabilization
18
Q
What is Globalization ?
A
- Globalization is the spread of products, technology, information and jobs across national borders and cultures.
- The world is one giant market.
19
Q
What are the 7 Positive Effects of Globalization?
A
- Outsourcing: Some countries offer cheap raw materials and labor, which enables businesses to offer lower prices
- Lower prices: from added competition
- Decrease in poverty: people earning more
- Innovation: Open borders enable more sharing of knowledge
- Optimal Use of Resources: Increase productivity leads to improved standard of living
- Better Jobs: export jobs usually require higher education and skill level, which means higher pay.
- Increased capital flow: companies have more options to borrow money outside of their home nation. Used to invest or get out of debt.
20
Q
What are the 9 Negative Effects of Globalization?
A
- Lost jobs
- Fear of job loss
- Loss of Canadian Productivity:
- Exploitation of cheap labor: such as children and migrant workers. Ex. FIFA 2022 world cup
- Increased pollution: companies may move to countries that have less pollutionlaws
- Safety Concerns: Business in other nations do not have strict regulations
- Spread of disease: foreign diseases may be brought into Canada. Ex. Covid, West Nile, or Zika.
- Increase in income gap: gap between rich and poor growing throughout the world
- Influence of MNCs: Powerful multinational corporations can manipulate global politics
21
Q
What is populism
A
- an ideology that is concern for oridinary people, and often promotes protectionism in trade policies
22
Q
What is protectionism
A
- an economic policy that aims to restrict imports through tariffs, quotas, and regulations in an effort to boost democratic industry
23
Q
What is Brexit and why is it important for the U.K.?
A
- Britain leaving the European union,
- leaving the EU will help regain control over immigration and borders
- This will allow more job opportunities for working class people in the UK
- It will create distrust between UK and EU government
- Some companies are leaving the UK
- Restrict the movement of people creating less diversity
24
Q
What are the 7 types of international business?
A
- Foreign portfolio investment
- Importing
- Exporting
- Licensing agreements
- Franchising
- Joint ventures
- Foreign subsidies
25
What is the difference between “money markets” and “capital markets”?
* Foreign Portfolio Investment Many Canadians invest in businesses by purchasing stocks, bonus, and other financial instruments
* Money markets: Investments are short-term and liquid
* Capital Markets: Directly purchasing a company’s stock on the stock market
* Reasons to invest outside of Canada:
* Diversification
*Better rate of return in some cases
26
Define: global sourcing. Give an example.
* Global Sourcing: The process of buying equipment, capital goods, raw materials or services from around the world
Services can also be imported such as call centers
27
What is a licensing agreement? Give an example.
* Licensing agreements gives a company permission to use a product, service, brand name or patent in exchange for a fee or royalty
* Ex. Virgin Mobile (Britain) has licensing agreement with Bell Canada
28
Define: franchising. Give some examples of Canadian and foreign owned franchises.
* an agreement to use a company’s name, services, products, and marketing
* Tim Hortons, Boston Pizza, Mr. Sub, Booster Juice, Kernels
29
What are the advantages and disadvantages of franchising?
Advantages:
* Lower risk
* Access to expert knowledge and research
* Financial aid
Disadvantages:
* Less profit
* Stringent guidelines
* Loss of control
30
What is a joint venture? Give an example.
* Occurs when two business, form a new company with shared ownership
* Joint ventures make it easier for Canadian companies to enter markets such as Cuba and China
* Ex.Sun Life operates in China with Everbright
31
What is a foreign subsidiary? Give an example.
* A foreign subsidiary exists when a parent company allows a branch of its company in another country, to be run as an independent entity
* Toyota Canada (Japan)
* Mars Canada (USA)
* McDonald’s company (USA)
* Aviva Canada (United Kingdom
32
List 3 reasons governments implement trade barriers.
* Protect local businesses
* Generate revenue
* Protect citizens from harmful products.
33
Describe the 6 examples of trade barriers discussed in class?
1. Tariffs
2. Trade Quotas
3. Trade embargoes and sanctions
4. Foreign investment restrictions
5. Standards
6. Time zones
34
What is an exchange rates
* The exchange rate is the amount of currency in relation to the currency in another country
35
Who are the winners and losers of a low Canadian dollar?
Winners
* Exporters: Foreign businesses want to buy Canadian goods when dollar is lower
* Canadian tourism: foreigners’ dollars can buy more when they visit Canada
* Canada retail: goods may be chapear to buy in Canada
Losers
* Importers: More expensive to import and sell goods in Canada
* Canadian Travelers: Costs more to travel to USA or Europe
* Major Sports Teams: Many athletes want to be paid In US funds
36
What is floating exchange rate
Canada has a floating exchange rate (Our exchange rate changes with respect to other currencies
37
What is currency devaluation
When supply is greater than demand and the value of the Canadian dollar decreases
38
Describe the 4 factors that affect the exchange rates.
1. Economic conditions in Canada
2. Trading between countries
3. Politics
4. Psychological factors
39
What are Economic conditions in Canada
1. Inflation: the rate at which the prices of goods are rising. A low rate would attract investors because of the perception of a stable market
2. Unemployment: the number of people without jobs. A low unemployment rate signals a stable, healthy economy causing a stronger dollar.
3. Gross domestic product (GDP): the value of finished goods and services produced in a country in a specified period of time. A stable GDP indicates healthy economy and a rising dollar
4. Interest Rates: The cost of borrowing money. A country with higher interest rates attracts foreign investment
40
What are Trading between countries
The greater a country’s exports in comparison to its imports (trade surplus), the greater the demand for its currency
41
what are politics
* The political stability of the government can affect the exchange rate
* If investors are worried about political tension or the threat of terrorism, the demand for that countries currency decreases
42
What is Psychological factors
* Many currencies have historical significance on the international market
* Examples: US Dollar and the Euro as seens as safe
currencies
