BUAD 3030 Chapter 4
What is a trading bloc? Identify four major trading blocs and the area of the world in which the member countries are located.
A trading bloc is a group of nations in a particular geographic area that agree to join together to remove trade barriers with one another. The major trading blocs are: NAFTA: United States, Canada, Mexico EU: Europe ASEAN: Southeast Asia APEC: countries of the Pacific Rim, including the United States, Canada, and China Mercosur: Latin America CAFTA: Central America
Which of the following is a cultural dimension in the GLOBE project? A. Humane orientation B. Power seeking C. Ethnic egalitarianism D. Failure avoidance E. Group performance
A. Humane orientation
______ is a trading status that describes a condition in which a country grants other countries favorable trading treatment such as a reduction of import duties. A. Most favored nation B. Liberty status C. Protected trade D. Mercosur E. Free trading status
A. Most favored nation
Over 682,000 U.S. workers have lost their jobs because they were moved south of the border as a result of A. NAFTA. B. WTO. C. Mercosur. D. IMF. E. EU.
A. NAFTA.
Which of the following is an event that helped spur the inception of the global economy? A. The opening of Asian markets to foreign investors. B. Improved race relations worldwide. C. The industrial revolution. D. The invention of the Internet. E. The increasing regulation of economies across the world.
A. The opening of Asian markets to foreign investors.
Which of the following is a cultural dimension measured in the GLOBE project? A. Uncertainty avoidance B. Hierarchical structure C. Ethnic egalitarianism D. Profit seeking E. Ethical orientation
A. Uncertainty avoidance
The ______ is controversial because it has been accused of financing projects, which harm the environment and of helping countries that permit sweatshops or suppress religious freedom. A. World Bank B. WTO C. ASEAN D. GATT E. EU
A. World Bank
Which of the following organizations succeeded GATT? A. World Trade Organization B. World Bank C. EU D. International Monetary Fund E. NAFTA
A. World Trade Organization
Christine prefers not to deviate from the practices she has always used as a U.S. manager, even though she is now working at an Asian subsidiary. She has been heard saying that she is "just ensuring the job gets done right." Christine is most likely a(n) ________ manager. A. ethnocentric B. concentric C. prejudicial D. polycentric E. geocentric
A. ethnocentric
The __________ is the rate at which one country's currency can be exchanged for another country's currency. A. exchange rate B. GATT C. terms of transaction D. interest rate E. return rate
A. exchange rate
Eli Lilly has agreed to let a South African company manufacture several of Eli Lilly's diabetes drugs and pay Eli Lilly a fee to distribute the drugs with a different brand name in South Africa. Eli Lilly is engaging in A. licensing. B. franchising. C. countertrading. D. a strategic alliance. E. a greenfield venture.
A. licensing.
The International Red Cross is an example of a A. multinational organization. B. multigovernment organization. C. international social corporation. D. multinational corporation. E. global philanthropy.
A. multinational organization.
When a company uses a supplier outside itself to provide goods and services, it is A. outsourcing. B. countertrading. C. franchising. D. licensing. E. privatizing.
A. outsourcing.
The principal organization that provides low-interest loans to developing nations for improving, for example, their transportation or education systems is A. the World Bank. B. the World Trade Organization. C. the International Monetary Fund. D. APEC. E. GATT.
A. the World Bank.
What are the advantages to your career of working overseas?
Anyone with international experience is likely to have a leg up, higher salary, and be more marketable. Foreign experience demonstrates independence, resourcefulness, and entrepreneurship, according to management recruiters. People who have worked abroad can generally move quickly and are nimble with inquiring minds. People who have worked and supported themselves overseas tend to be adaptive and inquisitive—valuable skills in today's workplace.
Which of the following is a major trading bloc? A. GATT B. APEC C. GLOBE D. IMF E. WTO
B. APEC
__________ is the practice of a foreign company exporting products abroad at a lower price than the price in the home market or even below the costs of production in order to drive down the price of the domestic product. A. Export crashing B. Dumping C. Predatory selling D. Loss transaction E. Alien advantage
B. Dumping
__________ managers believe that their native country, culture, language, and behavior are superior to all others. A. Expatriate B. Ethnocentric C. Geocentric D. Polycentric E. Global
B. Ethnocentric
The ________ has had a role in trying to shore up some weaker European countries during the recent financial crisis, including making loans to Greece, Portugal, and Ireland. A. World Bank B. IMF C. WTO D. EU E. GATT
B. IMF
Which of the following is a primary reason that companies expand internationally? A. Political expediency B. Lower labor costs C. Higher tariffs D. More diverse employees E. Prevention of counterfeiting
B. Lower labor costs
Which of the following countries is a member of Mercosur? A. China B. Paraguay C. Greece D. Panama E. Mexico
B. Paraguay
The __________ is designed to monitor and enforce trade agreements. A. World Bank B. WTO C. IMF D. GATT E. EU
B. WTO
A company that barters goods for other goods is involved in A. outsourcing. B. countertrading. C. importing. D. exporting. E. franchising.
B. countertrading.
A nation's __________ is the shared set of beliefs, values, knowledge, and patterns of behavior common to its people. A. economic policy B. culture C. social pattern D. demography E. political process
B. culture
Import quotas are designed to prevent A. embargoes. B. dumping. C. exports. D. tariffs. E. outsourcing.
B. dumping.
According to management recruiters, ______ demonstrates independence, resourcefulness, and entrepreneurship to potential employers. A. importing goods from another country B. foreign work experience C. holding school leadership positions D. speaking a second language E. studying the fine arts
B. foreign work experience
Pizza Hut provides the use of its name plus operating know-how to companies in Costa Rica in return for a fee plus a percentage of profits. Pizza Hut is A. exporting. B. franchising. C. countertrading. D. involved in a strategic alliance. E. involved in a greenfield venture.
B. franchising.
The movement of goods and services among nations without political or economic obstruction is called A. trade policy. B. free trade. C. trade protectionism. D. privatization. E. trade embargo.
B. free trade.
The trend of the world economy toward becoming a more interdependent system is called A. international cooperation. B. globalization. C. world partnership. D. economic defragmentation. E. international unification.
B. globalization.
In a(n) ______, shared meanings are primarily derived from written and spoken words rather than situational cues. A. core values system B. low-context culture C. expatriate system D. societal value system E. high-context culture
B. low-context culture
The EU has recently agreed to cut the taxes it charges on bananas imported from Central and South America. This tax is a type of A. embargo. B. tariff. C. import quota. D. predatory selling. E. boycott.
B. tariff.
Polo Ralph Lauren, Tommy Hilfiger, and Wrangler manufacture jeans at plants in Mexico, thanks to the inexpensive labor there and various tax breaks from the Mexican government. These companies are A. repatriating. B. using maquiladoras. C. countertrading. D. franchising. E. licensing.
B. using maquiladoras.
Explain the three primary barriers to free trade that can exist, and why a country might erect such barriers. Give an example of each.
Barriers include protective tariffs, import quotas, and embargoes. Countries often use such barriers as a form of trade protectionism, the use of government regulations to limit the import of goods and services, to protect their domestic industries against foreign competition. The justification they often use is that this saves jobs. Tariffs are duties or taxes levied on imports. Tariffs may be used to raise money for the government (revenue tariffs) or to protect domestic production (protective tariffs). An example of the second type is the U.S. tariff on Chinese tires. Import quotas are limits on the numbers of a product that can be imported. These also protect domestic industries. The United States has also used this technique to protect domestic steel production against Japanese competition. Embargoes are complete bans on import or export of particular products. This may be done to protect domestic production or for reasons of foreign policy or protection of technological secrets. For example, the United States has banned the import of Cuban cigars and sugar for political reasons.
The economic community that includes China and Thailand is the A. NAFTA. B. EU. C. ASEAN. D. Mercosur. E. IMF.
C. ASEAN.
______ time is a preference for doing one thing at a time. A. Singular B. Unichronic C. Monochronic D. Absolute E. Unitary
C. Monochronic
Which form of technology was exploding when the notion of a "global village" was first developed? A. Newspapers B. Telephones C. Television D. Cell phones E. The Internet
C. Television
On GLOBE dimensions, the U.S. managerial sample scored high on A. power distance and uncertainty avoidance B. in-group collectivism and future orientation C. assertiveness and performance orientation D. institutional collectivism and uncertainty avoidance E. masculinity and humane orientation
C. assertiveness and performance orientation
South Korea recently lifted its ban on beef and beef products imported from Canada, one that had originated because of cases of bovine spongiform encephalopathy (BSE) among Canadian cattle. The ban is an example of a(n) A. revenue tariff. B. boycott. C. embargo. D. protective tariff. E. import quota.
C. embargo.
Jill, a native of New Orleans, was living in Berlin and working for a U.S. news magazine. Jill would best be termed a(n) A. countertrader. B. franchisor. C. expatriate. D. outsourcer. E. refugee.
C. expatriate.
Seref purchases handcrafted Turkish rugs overseas and brings them to the United States to sell in his retail store. He is involved in A. outsourcing. B. countertrading. C. importing. D. franchising. E. exporting.
C. importing.
China does not allow foreign car manufacturers to sell vehicles independently in its country but instead requires them to partner with a Chinese company. This type of partnership is known as a A. franchise agreement. B. countertrade. C. joint venture. D. maquiladora. E. greenfield venture.
C. joint venture.
When a company allows a foreign firm to pay it a fee to make or distribute the first company's product or service it is called A. outsourcing. B. franchising. C. licensing. D. countertrading. E. a joint venture.
C. licensing.
Billie runs a successful cell-phone accessory store online. She loves designing and marketing the products, and she manages others who do the production, but the shipping had become a real problem. She decided to contract with FedEx to handle this logistical part of her business. Billie is A. countertrading. B. franchising. C. outsourcing. D. licensing. E. privatizing.
C. outsourcing.
When conducting business in English in Asia, if the answer to a question is "yes," one should assume that means A. with certainty. B. no. C. the question is understood. D. I can be persuaded. E. this is fair.
C. the question is understood.
The earliest forms of communication, the hallmark of great civilizations, were based on A. personal relationships. B. technology. C. transportation. D. warfare. E. agriculture.
C. transportation.
Skoda Auto, originally a Czech company and one that still manufactures there as well as in other international locations, is one of the largest automakers in Central Europe. In 2000, its acquisition by Germany's Volkswagen Group was complete, and it is now one of four brands for that company. Skoda is now a ______ of Volkswagen. A. maquiladora B. strategically C. wholly owned subsidiary D. greenfield venture E. licensee
C. wholly owned subsidiary
Which of the following is a form of trade protectionism? A. A trade bloc B. A countertrade C. A revenue tariff D. An embargo E. Outsourcing
D. An embargo
John recently received his CPA license and plans to run a small tax consulting business, so he just put up a website. What advantage does his business have over larger competitors? A. It has greater access to capital. B. It has superior distribution. C. It has more access to young talent. D. It can change direction quicker. E. It has well-defined bureaucratic systems.
D. It can change direction quicker.
Which of the following is a negative effect for the United States of global economic interdependency? A. Decreased economic activity B. Poorer quality goods C. Lower standards of living D. Loss of well-paying jobs E. More expensive products
D. Loss of well-paying jobs
David was feeling very anxious, confused, and out of place since he arrived for his new job in Taipei, Taiwan. It seemed like just about everything was different from what he was used to. David was experiencing A. overseas difficulties. B. sociological struggles. C. complexity issues. D. culture shock. E. adjustment pains.
D. culture shock.
A company that is producing goods domestically and sells them outside the country is involved in A. countertrading. B. outsourcing. C. importing. D. exporting. E. franchising.
D. exporting.
If your Chinese coworker in Hong Kong tells you that you have gained weight, you should interpret this comment as A. an insult. B. flirtation. C. a misunderstanding. D. friendliness. E. too personal.
D. friendliness.
How much pride and loyalty people should have for their family or organization is a cultural dimension in the GLOBE project known as A. institutional collectivism. B. power distance. C. social egalitarianism. D. in-group collectivism. E. human egalitarianism.
D. in-group collectivism.
Oxfam International is a nonprofit that works in 90 countries on issues of poverty advocacy and eradication, as well as disaster relief. Oxfam is a(n) A. multinational corporation. B. global aid firm. C. international philanthropy. D. multinational organization. E. global charity.
D. multinational organization.
A polycentric manager believes that A. organizations should maximize the number of managers from different countries in foreign operations. B. her country and culture are superior. C. managers in foreign countries should follow corporate procedures. D. native managers in foreign offices best understand native personnel and practices. E. managers in foreign countries should use whatever techniques are most effective.
D. native managers in foreign offices best understand native personnel and practices.
Ethnocentrism among international managers has been linked to A. higher performance by foreign subsidiaries. B. lower turnover among employees in foreign subsidiaries. C. fewer lawsuits over personnel policies within foreign subsidiaries. D. recruitment difficulties for foreign subsidiaries. E. poor-quality products from foreign subsidiaries.
D. recruitment difficulties for foreign subsidiaries.
A duty imposed on imported goods designed simply to raise money for the government is known as a(n) A. protective tariff. B. income quota. C. income embargo. D. revenue tariff. E. import quota.
D. revenue tariff.
A U.S. company agrees with a foreign company to start a new enterprise together in a foreign country, sharing the risks and the rewards. This is called a A. countertrade. B. greenfield venture. C. wholly owned subsidiary. D. strategic alliance. E. maquiladora.
D. strategic alliance.
China and the United States are both part of what trading bloc? A. NAFTA B. EU C. ASEAN D. Mercosur E. APEC
E. APEC
Which of the following is a way to become a world citizen? A. Dress comfortably and casually, so you are ready for any activity. B. To gain an early upper hand, be very vocal and assertive. C. Be and think globally. D. Speak English at all times since it is the world's language. E. Learn rituals of respect.
E. Learn rituals of respect.
Recently, the Chinese government exchanged 212 railway trucks full of mango juice for a passenger jet from a Russian company. The Russian company is involved in A. importing. B. franchising. C. pseudo-exporting. D. outsourcing. E. countertrading.
E. countertrading.
Wheat producers in the United States claim that the Canadian Wheat Board is selling wheat imported into the United States at unreasonably low prices, and they fear depression of their own prices. The U.S. producers are accusing the Canadians of A. creating an embargo. B. unfair foreign advantage. C. export crashing. D. loss transactions. E. dumping.
E. dumping.
Meredith is a seasoned American manager, currently working in Brazil. She has noticed that some of her management techniques work well in her overseas position, but sometimes she finds it more effective to defer to the practices of her Brazilian counterparts. Meredith can be described as a(n) ______ manager. A. parochial B. ethnocentric C. expatriate D. polycentric E. geocentric
E. geocentric
According to technology philosopher Nicholas Negroponte, the global market driven by electronic information results in an increase of minifirms and A. multinational corporations. B. unstable governments. C. nonprofit organizations. D. intercorporate conflict. E. megamergers.
E. megamergers.
BHP Billilton is an Australian mining company with operations in Brazil, Canada, South Africa, and the United States, among other countries. This company is a A. multiregional conglomerate. B. multinational organization. C. global concern. D. multiregional firm. E. multinational corporation.
E. multinational corporation.
A narrow view in which people see things solely through their own perspective is known as A. concentrism. B. polycentrism. C. geocentrism. D. expatriatism. E. parochialism.
E. parochialism.
Bradley was working for the summer in Costa Rica. He had made arrangements with a business associate to give him a ride to a nearby town at 10 a.m. He was very upset when his ride had still not appeared by 10:30. Bradley did not understand that ______ time is common in Latin America. A. variable B. monochronic C. multitask D. delayed E. polychronic
E. polychronic
When a government uses measures like tariffs and import quotas, it is called A. ethnocentrism. B. free trade. C. a trade bloc. D. an embargo. E. trade protectionism.
E. trade protectionism.
Describe ethnocentrism and the dangers of being an ethnocentric manager when working overseas, and discuss what other approach may be superior.
Ethnocentric managers believe that their native country, culture, language, and behavior are superior to all others. Ethnocentric managers tend to believe that they can export the managers and practices of their home countries to anywhere in the world and that they will be more capable and reliable. Ethnocentrism can be bad for business. A survey of 918 companies with home offices in the United States, Japan, and Europe found that ethnocentric policies were linked to such problems as recruiting difficulties, high turnover rates, and lawsuits over personnel policies. Successful international managers are geocentric instead; that is, they accept the differences and similarities between domestic and foreign people and cultures and use whatever management techniques are most effective in particular situations.
A foreign subsidiary that is totally owned and controlled by an organization is called a multinational
FALSE
A greenfield venture is a foreign subsidiary created to exploit previously untapped natural resources in another country
FALSE
A multinational corporation is a nonprofit organization with operations in several countries
FALSE
A parochial manager is able to consider decisions and events from a variety of viewpoints
FALSE
A revenue tariff is designed to protect domestic products from foreign imports by raising the price of the latter.
FALSE
A tariff is a limitation on the numbers of products allowed into a country, imposed by its government to protect domestic industries
FALSE
Among cultural patterns of which one should be aware is the importance of making direct eye contact most of the time with Japanese businesspeople.
FALSE
Among the negative effects of global interdependency are outsourcing and higher-priced goods.
FALSE
An import quota is a trade barrier in the form of a customs duty, or tax, levied mainly on imports
FALSE
Arabs prefer a larger interpersonal space when communicating than Americans.
FALSE
As a result of recent negotiations, the General Agreement on Tariffs and Trade (GATT) is expected to supersede the WTO by 2015.
FALSE
As of 2011, the United States was the world's top exporter
FALSE
Bay-traders are those who trade seafood from the Chesapeake Bay for other goods rather than selling it on the open market.
FALSE
Countertrading refers to a company producing goods domestically and selling them outside the country
FALSE
For international expansion, joint ventures have a lower level of risk than franchising.
FALSE
Geocentric policies have been linked to recruiting difficulties and high turnover
FALSE
Globalization is defined as the elimination of all trade barriers worldwide.
FALSE
If you can describe a job precisely, or write rules for doing it, it is protected against offshoring
FALSE
Maquiladoras are manufacturing plants allowed to operate in South and Central America with special privileges in return for employing citizens in these countries.
FALSE
Most of what we know about our native culture we have learned through formal education
FALSE
Polycentric managers accept that there are differences and similarities between home and foreign personnel and practices and that they should use whatever techniques are most effective.
FALSE
Power distance refers to how loosely or tightly people are socially bonded.
FALSE
Smart phones, e-mail, and videoconferencing have all but eliminated the need for international business travel.
FALSE
Tariffs are common today and still growing in number since they have a long history of successfully protecting jobs in this country.
FALSE
The GLOBE project is a large, ongoing effort to find technological improvements to assist world trade.
FALSE
The Internet has made it more difficult for small firms to get started because now everyone must compete on a global scale.
FALSE
The Mercosur is composed of countries in southeast Asia
FALSE
The United States exports more to China than to any other nation
FALSE
The global economy refers to the heightened economic regulation of many national markets as they protect themselves from one another.
FALSE
The purpose of granting "most favored nation" status to another country is to promote tourism
FALSE
The rate at which one country's currency can be swapped for another country's currency is called the substitution rate.
FALSE
The religion with the most followers worldwide is Hinduism.
FALSE
The term global village refers to the tendency for various cultural groups to cluster in small pods throughout the world.
FALSE
Trade protectionism is a term for government measures that promote and preserve free trade globally.
FALSE
Two of the reasons companies expand internationally are to take advantage of the availability of suppliers, or to charge tariffs or impose import quotas
FALSE
Unless you work outside of the United States, international management is likely to have little relevance during your career.
FALSE
When DuPont agrees to let a Brazilian company make its product Teflon, the nonstick coating, in its local market for a fee it is called franchising.
FALSE
Discuss the cultural differences in language, interpersonal space, time orientation, and religion. Why are these factors important to successful international business?
Language: Only 20% of the people of the world speak English, and over 3,000 different languages are spoken. Even when speaking English, how particular words are to be interpreted can vary. Interpersonal space: People of different cultures have different ideas about what is acceptable interpersonal space—that is, how close or far away one should be when communicating with another person. This can lead to cross-cultural misunderstandings and discomfort. Time orientation: Individuals in cultures with monochronic time prefer doing one thing at a time, and perceive time as being limited, precisely segmented, and schedule driven. Those with polychronic orientation find multitasking acceptable, and view time as flexible and multidimensional. This can lead to cross cultural misunderstandings. Religion: Major religions include Christianity, Islam, Hinduism, Buddhism, Judaism, and Chinese traditional religions; members of these religions vary widely in their most important work-related values.
A wholly owned subsidiary is the global expansion strategy with the highest risk and investment.
TRUE
According to the GLOBE project, the United States is among the countries highest in the cultural dimension of performance orientation.
TRUE
Air travel and electronic media have made the global village phenomenon possible.
TRUE
An example of a trading bloc is the European Union.
TRUE
An inherent weakness of the European Union is that stronger countries may have to rescue weaker ones that are in financial crisis.
TRUE
Becoming a world citizen includes learning how not to be an "ugly American."
TRUE
Cuban cigars and sugar cannot legally be imported into the United States because of a trade embargo
TRUE
Deglobalization is a trend to move production back to the United States over fears about geopolitics or energy prices.
TRUE
Dumping is the practice of a foreign company exporting products abroad at a lower price than the price in the home market, or even below the costs of production, in order to drive down the price of the domestic product.
TRUE
E-commerce refers to the buying and selling of products and services through computer networks.
TRUE
Ethnocentrism is a form of parochialism
TRUE
Free trade is the movement of goods and services among nations without political or economic obstruction
TRUE
General Motors working with Shanghai Automotive Industry Group to build Buicks in China is an example of a strategic alliance.
TRUE
Great communications systems have been a hallmark of great civilizations.
TRUE
If Toys R Us provides the use of its name plus its operating know-how to a company in Poland in return for an upfront fee plus a percentage of the profits, Toys R Us would be participating in franchising.
TRUE
If a country's currency drops dramatically and it is unable to import the goods it needs, then an exporter who trades with that country may turn to countertrading.
TRUE
In China, it is permissible for office colleagues to inquire about the size of your apartment and your salary.
TRUE
In polychronic time, time is viewed as being flexible and multidimensional.
TRUE
Jobs that requires face-to-face or physical contact, or those that require recognition of complex patterns, are unlikely to be offshored.
TRUE
Knowing the cultural tendencies of foreign business partners and competitors can give you a strategic competitive advantage.
TRUE
Managers who take the view that native managers in foreign offices best understand native personnel and practices, and so the home office should leave them alone, are called polycentric managers
TRUE
Mergers have surged in the past 20 years because many industries are not suited to midsize or small companies
TRUE
Mexico is part of NAFTA
TRUE
Offshoring is defined as using suppliers outside the home country to provide labor, goods, or services
TRUE
One advantage of small companies over large ones is the former's ability to change direction faster.
TRUE
One way to avoid a tariff is to create a subsidiary to produce the product in the foreign country imposing that tariff
TRUE
Recently, the International Monetary Fund has had a high-profile role in assisting some weaker European countries, including making loans to Greece, Portugal, and Ireland.
TRUE
Successful international managers are most likely to be geocentric rather than ethnocentric or polycentric
TRUE
The GLOBE cultural dimension that examines the extent to which a society should minimize gender discrimination and role inequalities is known as gender egalitarianism.
TRUE
The World Health Organization is an example of a multinational organization
TRUE
The global economy has had a revitalizing effect on some parts of industrial America.
TRUE
The global economy refers to worldwide conditions by which goods, people, and money can move more freely.
TRUE
The organization that assists in smoothing the flow of money between nations is the International Monetary Fund
TRUE
The reasons that companies expand internationally typically have to do with making or saving money.
TRUE
The recent recession has caused an increasing number of Americans to look for work overseas
TRUE
Turnover rates are higher among managers returning from overseas assignments than for those who do not go abroad.
TRUE
When U.S. companies hire UPS to conduct some of their logistics functions for them it is known as outsourcing
TRUE
Explain the various ways that companies can expand internationally. List them in order of lowest to highest risk and investment.
The alternatives are: 1. Global outsourcing: using suppliers outside the country to provide goods and/or services. 2. Importing, exporting, and countertrading: buying foreign products for domestic resale, selling domestic products outside the country, or trading for goods. 3. Licensing or franchising: allowing a foreign company to distribute a good or service for a fee, or allowing a foreign company to use a brand name and organizational know-how in return for a fee and percentage of profits. 4. Joint venture: allying with a foreign company to start a new enterprise together in a foreign country. 5. Wholly owned subsidiary: buying or starting a foreign subsidiary.
Identify at least three benefits for companies of expanding internationally, and provide an example of each.
The benefits include: 1. Availability of supplies. For years oil companies, for example, have expanded their activities outside the United States in seeking cheaper or more plentiful sources of oil. 2. New markets for old products. Sometimes a company will find, as cigarette makers have, that the demand for their product has declined domestically but that they can still make money overseas. 3. Lower labor costs. For example, the rationale for using maquiladoras, manufacturing plants allowed to operate in Mexico with special privileges in return for employing Mexican citizens, is that they provide less expensive labor for assembling everything from appliances to cars. 4. Access to financial capital. Sometimes a foreign government will offer a subsidy in hopes of attracting a company that will create jobs, as Ireland did in the 1970s for Lotus sports-car maker John DeLorean. 5. Avoidance of trade barriers. For example, Japan imposes tariffs on agricultural products, such as rice, imported from the United States. To avoid these penalties, a company might create a subsidiary to produce the product in the foreign country.
What is meant by the term global economy? How will it positively and negatively affect the United States?
The global economy refers to the growing tendency of the economies of the world to interact with one another as one market instead of many national markets. This positively affects the United States by providing additional markets for U.S. products, which will mean domestic growth. In addition, foreign firms are building plants in the United States, revitalizing parts of industrial America. Foreign direct investment makes up 15% of the country's gross domestic product (total value of all goods and services). Companies based overseas provide jobs for approximately 10% of the U.S. workforce. It negatively affects the United States because economic problems in other parts of the world are more likely to affect the U.S. economy. There are risks associated with financially intertwined markets. Another negative effect is the movement, or outsourcing, of formerly well-paying jobs overseas as companies seek cheaper labor costs, particularly in manufacturing.
Describe the history of communication and how it has been important to great civilizations through the modern day, and the concept of the "global village."
The hallmark of great civilizations has been their great systems of communications. In the beginning, communications was based on transportation: the Roman Empire had its network of roads, as did other ancient civilizations, such as the Incas. Later the great European powers had their far-flung navies. In the 19th century, the United States and Canada unified North America by building transcontinental railroads. Later the airplane reduced travel time between continents. Transportation began to yield to the electronic exchange of information. Beginning in 1844, the telegraph ended the short existence of the Pony Express and, beginning in 1876, found itself in competition with the telephone. The amplifying vacuum tube, invented in 1906, led to commercial radio. Television came into being in England in 1925. During the 1950s and 1960s, as television exploded throughout the world, communications philosopher Marshall McLuhan posed the notion of a "global village," which refers to the "shrinking" of time and space as air travel and the electronic media have made it easier for the people of the globe to communicate with one another. Then the world became even faster and smaller. Fifteen years ago, cell phones, pagers, fax, and voice-mail links barely existed. Then came the Internet, the worldwide computer-linked "network of networks," of which there were an estimated 1.7 billion users throughout the world in late 2000. The arrival of the Web quickly led to e-commerce, or electronic commerce, the buying and selling of products and services through computer networks.
Identify and discuss the purpose of the three principal organizations designed to facilitate international trade.
The three organizations are the WTO, the World Bank, and the IMF. The WTO (World Trade Organization) serves as a forum for agreements between nations about international trade, and a means to resolve disputes in that area. The World Bank provides low-interest loans to developing countries for improving their infrastructure, including transportation, education, health, and communications. The IMF (International Monetary Fund) assists in the flow of money between nations, and operates as a last-resort lender that makes short-term loans to countries in financial difficulties.
