Relationships, foreign investment, and trade
special drawing right
IMF asset whose value is based on a "weighted basket" of four currencies
What is a potential influence of the existence of multinational corporation (MNC) on international relations?
Improves relations between countries where the MNC operates
dividend repatriation
return of dividend earnings from FDI to home country
world trade organization
serves as trade moderator in the world. Governments determine how much and what to trade after voting on trade policies that all governments must follow.
foreign direct investment
refers to an investment in or the acquisition of foreign assets with the intent to control and manage them.
Which activity of the International Monetary Fund (IMF) impacts policymaking?
Being owned and directed by the governments of the member nations
Which economic actor benefits as the U.S. dollar weakens?
A U.S. investor abroad invests money in another country by first converting U.S. dollars to a foreign currency, making the investment, then later converting+ it back to U.S. dollars. As the U.S. dollar becomes weaker, the rate of return on the investment is larger as the investor gets more U.S. dollars from converting back from the foreign currency.
domestic/foreign investment
A company's home government usually imposes tax rates and a sanction to persuade companies to invest in the domestic market rather than a foreign one.
most favored nation
A key requirement of the WTO, the most favored nation treatment, seeks to prevent discrimination in foreign investment. Each and every nation that participates in the WTO is obligated to give all investors the same treatment as it provides its most favored trading partner To prohibit domestic content provisions To discourage export performance requirements, such as a requirement for exports to match imports
key requirement of WTO
A key requirement of the WTO, the most favored nation treatment, seeks to prevent discrimination in foreign investment. Each member nation of the WTO is obligated to give all investors the same treatment as it provides its most favored trading partner.
increase in fdi
According to the Levin Institute, the rapid increase in FDI may be due to technology and transportation, the lure for higher profits, the fall of the Berlin Wall, and financial liberalization.
benefits of FDI
An inflow of capital can benefit the global and local economy. Invested capital goes to businesses with the highest potential for growth. The profit motive is color blind, and investments are made regardless of religion or politics. Investors can decrease their risk by diversifying (Amadeo, 2019). Investing capital in firms can lead to growth and subsequently increased jobs. Critics of FDI point out that domestic investments in foreign companies take domestic jobs overseas where the comparative advantage may be that the country has cheaper labor costs
African Continental Free Trade Agreement (CFTA)
CFTA will be the largest trade zone in the world and is expected to increase trade between African countries by 52% by the year 2022, remove tariffs on 90% of goods, liberalize services, and help relieve long delays at border posts. This trade agreement may signal an end to the era of colonialism, which created 55 African countries without regard to ethnicity or culture
How does the existence of a multinational corporation (MNC) affect a country's engagement in political conflict?
Correct! Countries do not like to go to war with a country in which they are doing business. The existence of an MNC could influence the country to not go to war with the home country of the MNC.
Which level of economic integration is formed when trade barriers are removed between member countries but there is no mutual policy on trading with nonmember countries?
Correct! The free trade area allows basic economic cooperation so member countries remove barriers to trade among themselves.
drawbacks of REI
Countries may move production to cheaper labor markets in member countries. Similarly, workers may move to gain access to better jobs and wages. nations may find that they have to give up more of their political and economic rights. may impose greater external trade blocs to keep all trading internal to the bloc. This emphasis on internal trade and the exclusion of external countries decreases the possibility of achieving the ultimate goal, which is global free trade. countries may see a dilution of their national cultural identity. may encourage mergers and acquisitions within the block to create large rivals. Economic power will tend to go to these large conglomerates in the union.
Which agreement was formalized in 1993 to create a political and economic union to help a large group of countries cooperate and coordinate key aspects of their economic policy?
EU
Treaty of Maastricht, 1993
EU identified three aims: The first was to establish a single, common currency, which went into effect in 1999. The second was to create monetary and fiscal targets for member countries. Third, the treaty called for a political union, which would include the development of a common foreign and defense policy and common citizenship.
european single market
EU member states have formed a single market with more than five hundred million people, representing 7% of the world's population. This unique market permits the free flow of goods, services, capital, and people in the EU. Although there is a single tariff on goods entering an EU country, once it is in the market, no additional tariffs or taxes can be levied on the goods.
What is an advantage of regional economic integration?
Economic integration often removes labor movement restrictions, which help increase job opportunities
African Economic Community
Economists argue that free trade zones are particularly suited to African countries, which were created under colonial occupation when the land was divided up, often with little regard for the economic sustainability of the newly created plot.2 Also, postindependence conflict in Africa has left much of the continent with a legacy of poor governance and a lack of political integration which free trade zones aim to address. In 2017 and after, the AEC intends to foster the creation of a free-trade zone and customs union in its regional blocs. Beyond that, there are hopes for a shared currency and eventual economic and monetary union.2
power/influence of world bank
Emerging markets, particularly China, has been frustrated with their lack of influence in the World Bank. Rebecca Liao, a China analyst, says, "As the economies of these countries grew in the last 30 years, their voting powers within both organizations remained flat."
united nations millennium development goals
Eradicate extreme poverty and hunger. Achieve universal primary education. Promote gender equality and empower women. Reduce child mortality. Improve maternal health. Combat HIV/AIDS, malaria, and other diseases. Ensure environmental sustainability. Develop a global partnership for development (
fdi benefits
FDIs benefit both developing and developed nations by increasing jobs and bringing capital to the most successful companies.
foreign investors
Foreign investors may be required to purchase a certain percentage of intermediate goods from the host countries. All 159 members of the World Trade Organization (WTO) have developed rules regarding these investments, and they have substantially limited the ability of governments to impose these restrictions
Which agreement was created in 1981 among Arab states, to expand trade, economic growth, and development and to promote social welfare, peace, and stability?
GCC
drawbacks of FDI
Governments are careful not to allow foreign ownership of strategically important industries as this could lower the competitive advantage of the nation. Foreign investors could also take advantage of the company they are investing in and take away all valuable assets then leave the country
methods/results of fdi
Governments are careful to protect vital industries and national security and control FDI so the host country benefits. There are benefits and risks in FDIs for both the host and the investor. Developing countries can have stronger economic growth as a result in FDI. Foreign investors bring knowledge, technology, and capital to more rapidly build infrastructure in a developing country. The outcomes of FDIs are overall positive and can mitigate risk and the effects of inflation for the investor. The UN Conference on Trade and Development, the Organization for Economic Cooperation and Development, the International Monetary Fund, and the Bureau of Economic Analysis all provide investors information on FDI possibilities.
ownership restrictions
Host governments can specify ownership restrictions if they want to keep control of local markets or industries in their citizens' hands. Some countries, such as Malaysia, go even further and encourage that ownership is maintained by a person of Malay origin, known locally as Bumiputera. Although the country's foreign investment committee guidelines are being relaxed, most foreign businesses understand that having a Bumiputera partner will improve their chances of obtaining favorable contracts in Malaysia.
regional economic integration
In addition to reducing trade barriers, economic integration can allow nations to have a set of integrated monetary and fiscal policies. There are five different levels of economic integration, which exist as a spectrum and allow nations to agree to a level of agreement with which they are comfortable. The more similar the nations are the more likely they are to form a successful trade bloc. The goal of a trade bloc is to help all participating nations attain a higher living standard by encouraging specialization, lowering prices, providing more choices on goods and services, increasing productivity, and allowing for more efficient use of natural resources.
Which criticism is made about the World Bank?
It does not consider how funding projects will affect the environment.
United States, Mexico, Canada Agreement (USMCA)
It is an agreement to provide protection and enforcement of intellectual property rights. The new intellectual property agreement will provide ten years of data protection for biological drugs. The country of origin rule that states that automobiles must have 75% of their components manufactured in the United States, Canada, or Mexico to qualify for a zero-tariff rate. Labor provisions for wages state that 40-45% of automobile parts must be made by workers earning a minimum of $16 per hour by 2023. The Canadian dairy market is more accessible to U.S. farmers. A sunset clause that states the agreement expires in 16 years and is subject to review every six years
Which agreement was established in 1988 and now has both political and economic goals to keep peace and stimulates economic growth in South American countries?
MERCOSUR
IMF and sustainability
Many environmentalists criticize the IMF by blaming IMF loans for the exploitation of natural resources. Some say that the IMF does not consider the effect of its projects on the environment. Also, the struggle to pay back IMF loans can lead to practices that damage natural resources to get adequate capital to repay loans. A 70% reduction in the forests along the Ivory Coast may be a direct result of a need to repay an IMF loan
trade diversion
Member countries may trade more with each other rather than with nonmember nations. Increased exclusive internal trade may mean increased trade with a less efficient or more expensive producer because it is a member country.
Which agreement was implemented in 1994 and helped form a free-trade zone between Canada, the United States, and Mexico by decreasing tariffs and trade barriers?
NAFTA
function of WTO
Oversee the implementation and administration of the agreements between nations that are under the WTO's scope of authority. The WTO agreements cover goods, services, and intellectual property. Monitor the transparency of individual government's trade policies. All WTO organization members must undergo a periodic review of their policies. Build trade capacity by supporting developing nations. Provide outreach by maintaining a dialogue with nongovernmental agencies, the media, and the general public to aid in transparency about WTO procedures, enhance cooperation, and increase awareness about WTO activities. Provide a forum for negotiations and settling disputes among nations.
Which country characteristic is most important to foreign direct investors according to a study by the World Bank?
Political stability and security
portfolio risk
Portfolio investment in foreign firms is usually to mitigate risk by investing in corporations in diverse countries and industries.
objective of world bank
Poverty reduction and sustainable growth in the poorest countries, especially in Africa Solutions to the special challenges of post-conflict countries and fragile states Development solutions with customized services, as well as financing for middle-income countries Addressing regional and global issues that cross national borders such as climate change, infectious diseases, and trade Greater development and opportunity in the Arab countries and communities Leveraging the best global knowledge to support development
world bank balance of power
Since voting shares are determined based on the size and "openness" of the countries, the power is in the United States, European countries, and Japan.
currency exchange
Smaller countries may use another country's currency, and multiple countries may use the same currency, such as in the EU; But, generally, each country has its currency that must be exchanged on the foreign exchange. Firms have to pay for supplies and labor in the country where the product was made, but the firm itself gets paid in the currency where the product was sold. Portfolio investors invest in firms based on the anticipated future exchange rate. A government should consider its economic standing and trade balance and consider how it wants to use its policy tools when choosing an exchange rate regime. A free-floating exchange rate fluctuates based on supply and demand. Many country's central banks intervene in a free-floating economy by buying and selling their currency to keep its value within a specific range. This is called a managed float. A fixed exchange rate can be pegged or fixed against gold, or frequently small countries will peg their currency against a large country with which it does the majority of its trade.
Central America Free Trade Agreement
United States, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. The United States is already the principal exporter to these nations, so economists do not think that it will result in a significant increase in U.S. exports.
EU governance
The European Council provides political leadership for the EU. The European Commission provides day-to-day leadership and initiates legislation. It is the EU's executive arm. The European Parliament forms one-half of the EU's legislative body. The parliament consists of 751 members, who are elected by popular vote in their respective countries. The Council of the European Union functions as the other half of the EU's legislative body. It is sometimes called the Council or the Council of Ministers and should not be confused with the European Council. The Court of Justice is composed of the judicial branch of the EU.
IMF
The IMF helps maintain liquidity of global funding by providing a straight-forward method for nations to borrow and loan to each other through a mechanism called the special drawing right. To help ensure that the IMF loans are used for the intended purpose and repaid, the IMF sets conditions both before and during the loan phase. These conditions are not without controversy. The conditions put on the loan require the recipient country to have a policy of austerity. This policy, which usually results in a cut in funding for social programs, can have a significant effect on citizens who are living in poverty, according to critics of the IMF. Other criticisms of the IMF address a lack of representation by the global south and an overrepresentation by the United States.
What is a characteristic of the International Monetary Fund (IMF)?
The IMF is a cooperative institution and provides more effective currency exchange.
WTO criticism
The WTO reserves the right to review each nation's trade policies. Critics say that this required review compromises national sovereignty. If a country wants to institute rules and regulations to protect its workers, industries, or environment, these must be made available to the WTO. Most developed countries used a system of tariff protections in their development phase. The WTO trade rules prohibit this. Supporters for the WTO say that it is the job of countries, not the WTO, to settle on a plan for tariff reduction in agriculture. just like the IMF and the World Bank, has been accused of ignoring environmental concerns. Environmental protections cost money. Countries without a system in place for sustainability and environmental protection can export more cheaply, and those countries with more stringent requirements cannot charge more to recoup costs.
world bank and natural resources
The World Bank is often accused of not considering how funding projects will adversely affect the environment. One example of how funding a project can negatively impact the environment was the Western Poverty Reduction Project in China that required resettling 37,000 ethnic Chinese in Tibet.The World Bank is often accused of not considering how funding projects will adversely affect the environment. One example of how funding a project can negatively impact the environment was the Western Poverty Reduction Project in China that required resettling 37,000 ethnic Chinese in Tibet.
world bank
The World Bank's priorities are to help build sustainable economic growth, invest in people, and build resilience for shocks and threats. The World Bank, like the IMF, has its supporters and critics, but it is common to not prefer a world in which a World Bank was not able to assist in disasters and provide emergency loans to countries in need. The power and size of the world's economies are changing, especially since China has the second-largest economy in the world. The power and control at the administrative level of the World Bank have not evolved as quickly. The World Bank Group is comprised of private lending banks as well as the World Bank.
Which organization was formed after World War II to encourage international commerce?
The World Trade Organization was formed after World War II to encourage international trade by creating a mechanism to negotiate trade agreements.
Trade-Related Aspects of Intellectual Property Rights (TRIPS)
WTO agreement, Intellectual property refers to anything that a person or entity creates with the mind. It includes inventions, music, art, and writing, as well as words, phrases, sayings, and graphics—to name a few.
Backward Vertical FDI
The auto, oil, and infrastructure industries are good examples of this. Firms from these industries invest in production or plant facilities in a country to supply raw materials, parts, or finished products to their home country. In recent years, these same industries have also started to provide forward FDI by providing raw materials, parts, or finished products to newly emerging local or regional markets.
Which level of economic integration permits the formation of economically integrated exchanges of goods and services between parties from member countries?
The common market permits the formation of economically integrated markets between member countries, removing trade barriers and any restrictions on the movement of labor, technology, and capital.
How does the International Monetary Fund (IMF) impact international organizations and governments?
The conditions put on the IMF loan require the recipient country to have a policy of austerity. It reduces funding for social programs.
Which criticism is associated with the World Bank?
The developed countries of U.S. and Europe have too much control over its decisions.
Which economic actor benefits as the U.S. dollar strengthens?
The firm earns U.S. dollars through export sales, then converts it back into their home currency. A stronger U.S. dollar would mean they can buy more of the home currency.
What is a potential disadvantage of foreign direct investment from a host government's perspective?
The host country's natural resources may be depleted.
What is a benefit of foreign direct investment?
The inflow of capital benefits global and local economies
governments and foreign investors
The internet and the use of email have markedly improved the ability of firms to communicate with foreign affiliates. The price and speed of air travel have increased transportation options. When investors see that developing economies are having a period of rapid growth, it is appealing to investors to invest in that economy in anticipation of significant returns of their investment. The end to the Cold War led to the conversion of many socialist economies to capitalist with an accompanying increase in the privatization of industries. In addition, the demise of the Soviet Union made investors feel more comfortable that funds invested in developing nations would not be expropriated if the current government was overthrown
What was one of the results of the Uruguay Round of the World Trade Organization negotiations?
The major accomplishment of the Uruguay Round of the World Trade Organization negotiations was a reduction in the number and size of tariffs.
crawling bands
The market value of a national currency is permitted to fluctuate within a range specified by a band of fluctuation. This band is determined by international agreements or by unilateral decision by a central bank. The bands are adjusted periodically by the country's central bank.
What is an accurate characterization of the relationships between multinational corporations (MNCs) and the host country governments in which they operate?
The relationships between an MNC and the host country can be both good and bad depending on a number of factors including economic development, resource distribution, and employment.
MNCs and international relations
The relationships between government leaders and CEOs of multinational corporations with citizens of a country are complex and ever-changing. This changing environment can complicate a decision for an MNC to enter a particular market. Many MNCs have a higher value than many small countries. Multinational corporations, because they can quickly move capital, are frequently described as highly influential or catalysts for action in countries. Local and national governments compete with each other to attract multinational corporations. The need for market expansion, resource acquisition, and the emergence of China and India are expected to continue to propel world trade.
result of president hoover and trade bills
These actions led to a fall in global trade from $3 billion to $1 billion and was a major contributing factor to the great depression. Countries recognized the problem and worked to develop a general agreement on tariffs and trade (GATT). At their highest level in 1930, tariffs were approximately 70%.
Pegged with Horizontal Bands
This system is similar to crawling bands, but the currency is allowed to fluctuate within a larger band of greater than 1% of the currency's value.
5 levels of economic integration
free trade area customs union common market economic union political union
What is a reason for companies to engage in foreign direct investments?
To take advantage of tax exemptions offered by the host country
What is a benefit of creating a regional economic integration agreement?
Trade agreements create more growth opportunities for countries to trade among themselves as barriers to trade and investment are removed.
benefits of REI
Trade agreements create more opportunities for countries to trade with one another by removing the barriers to trade and investment. Due to a reduction or removal of tariffs, cooperation results in lower prices for consumers in the bloc countries. significantly contributes to the relatively high growth rates in less-developed countries. expand job opportunities. Member nations may find it easier to agree with smaller numbers of countries. Regional understanding and similarities may also facilitate closer political cooperation.
regional integration bloc
Trade blocs force companies in the same bloc to compete with each other to lower prices. They present a bigger market so many companies can decrease prices due to economies of scale. Large firms or corporations can force domestic smaller firms out of business. Having a foreign subsidiary may give a firm with the same decreased or absent tariff benefits as the local companies. NAFTA was controversial with workers in manufacturing plants and environmentalists. The United States-Mexico-Canada Agreement may replace the NAFTA agreement. The CAFTA-DR agreement is unusual because of the inequality in economic size between the United States and the other nations. Mercosur is both an economic and political agreement with the goals of keeping peace in the Southern cone and promoting economic growth in the region. The EU was initially established to prevent any future wars. The EU faces many challenges but has its long history and shared governance to help the EU countries overcome their differences. Trade blocs in the global south have increased the speed of the economic growth of its member countries.
benefits/drawbacks of REI
Trading blocs create free trade among geographically close regions, which can lead to lower prices, higher growth, increased competition, and increased export potential. Some domestic firms may lose to multinationals. Less developed regions can attract more FDI and therefore catch up to more developed countries. If one country in the trading bloc has economic difficulties, all of the countries may be affected.
WTO
WTO supports developing nations by providing both training and support. The WTO reviews the trade policies of all nations to ensure that each country is treated fairly and equally under the most favored nation requirement. Criticisms of the WTO organization are similar to the objections to the IMF and World Bank: a lack of transparency; neglect for considering the environment when making decisions; and policies in favor of more affluent, developed countries at the expense of poorer nations.
Which drawback is involved when regional agreements are created?
When a regional agreement is made between countries, those members will trade more with each other and trade less with nonmember countries.
brownfield FDI
a company or government entity purchases or leases existing production facilities to launch a new production activity. One application of this strategy is when a commercial site used for an "unclean" business purpose, such as a steel mill or oil refinery, is cleaned up and used for a less polluting purpose, such as commercial office space or a residential area
regional economic integration
a unification between states or countries with a partial or full abolition of tariff and nontariff restrictions on trade between them. The ideal would be global free trade. Since this ideal may be unachievable, trade blocs with free trade among members are considered a second-best option
common market
allows for the creation of economically integrated markets between member countries. Trade barriers are removed, as are any restrictions on the movement of labor, technology, and capital between member countries. Like customs unions, there is a common trade policy for trade with nonmember nations. The primary advantage for workers is that they no longer need a visa or work permit to work in another member country of a common market.
organization for economic cooperation and development
an association of 35 nations in Europe, the Americas, and the Pacific, publishes the inflow and outflows of FDI for all its member countries every quarter. It does not capture statistics from emerging markets.
floating exchange rate
an exchange rate policy under which a government permits its currency to be traded on the open market without direct government control or intervention. type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency. The dollar is an example of a floating currency.
south asia free trade agreement
free trade zone covering 1. 4 billion people in India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan & the Maldives. The seven foreign ministers of the region signed a framework agreement on SAFTA with zero customs duty on the trade of practically all products in the region by end 2012
Mercosur
comprised of Argentina, Brazil, Paraguay, Uruguay, and Venezuela. Mercosur suspended Paraguay in 2012 and has suspended Venezuela indefinitely in 2016.
Association of Southeast Asian Nations
created in 1967 by five founding-member countries: Malaysia, Thailand, Indonesia, Singapore, and the Philippines. Since its inception, Myanmar (Burma), Vietnam, Cambodia, Laos, and Brunei have joined the association.2 ASEAN's primary focus is on economic, social, cultural, and technical cooperation as well as on promoting regional peace and stability.
Gulf Cooperation Council
created in 1981. The six member states are Bahrain, Kuwait, Saudi Arabia, Oman, Qatar, and the United Arab Emirates (UAE). As a political and economic organization, the group focuses on trade, economic, and social issues. The GCC has become as much a political organization as an economic one. Among its various initiatives, the GCC calls for the coordination of a unified military presence in the form of a peninsula shield force.
underrepresentation of the global south
criticism of the IMF
fixed/pegged exchange rate
currency system in which governments try to maintain a constant currency value against a specific currency or good. In a fixed exchange rate system, a country's government decides the worth of its currency in terms of either a fixed weight of an asset, another currency, or a basket of other currencies.
Which economic integration stage offers economic collaboration by removing trade barriers between member countries and establishing a mutual trading policy with nonmembers?
customs union offers economic collaboration by removing trade barriers between member countries and establishing a mutual trading policy with nonmembers.
world bank conditionality
enforced conditionality, or structural reforms causing harm, not help to developing countries. For the World Bank, conditionality most directly comes from its development policy operations where loans are issued after completion of prior actions.
crawling pegs
exchange rate regime, usually seen as a part of fixed exchange rate regimes, that allows gradual depreciation or appreciation in an exchange rate. The system is a method to fully utilize the peg under the fixed exchange regimes and the flexibility under the floating exchange rate regime.
Which exchange rate regime allows a currency's value to fluctuate according to the foreign exchange market?
floating. it adjusts to economic circumstances
Caribbean Community and Common Market (CARICOM)
formed in 1973 by countries in the Caribbean with the intent of creating a single market with the free flow of goods, services, labor, and investment. The Andean Community (called the Andean Pact until 1996) is a free trade agreement signed in 1969 among Bolivia, Chile, Colombia, Ecuador, and Peru. Eventually, Chile left, while Venezuela joined for about 20 years and left in 2006.
Asia-Pacific Economic Cooperation
founded in 1989 by 12 countries as an informal forum. It now has 21 member economies on both sides of the Pacific Ocean. APEC is the only regional trading group that uses the term member economies, rather than countries, in deference to China. As a result of the Pacific Ocean connection, this geographic grouping includes the United States, Canada, Mexico, Chile, Peru, Russia, Papua New Guinea, New Zealand, and Australia with their Asia-Pacific Rim counterparts.
What was the first loan that the World Bank made after the end of World War II?
france to rebuild infrastructure
vertical FDI
investing internationally to provide input in home market/core operations
greenfield FDI
multinational corporations enter into developing countries to build new factories or stores. These new facilities are built new—usually in an area where no previous facilities existed.
encouraging FDI
offer tax incentives and loans improve/enhance infrastructure streamline establishing/moving processes improve workforce education/training provide transparency export processing zone/special economic zones
horizontal FDI
opening new market
European Union
originally began in 1950 to end the frequent wars between neighboring countries in Europe. The six founding nations were France, West Germany, Italy, and the Benelux countries (Belgium, Luxembourg, and the Netherlands). In 1957, the six nations signed the Treaty of Rome, which established the European Economic Community (EEC) and created a common market between the members.
export processing zone
parts are imported and assembled into a final product by cheap labor and then are exported. Export processing zones frequently have different regulations than the rest of the country, and many are accused of doing so to evade national labor laws. A study by the International Labor Organization reported that hiring laborers at low wages and not allowing them to organize is disturbing, but not a common practice.
Which level of economic integration presents an alliance of all policies by a common organization?
political union
world bank privatization of healthcare
privatizing developing countries faced significant challenges in the 1980s and 1990s. These challenges led to more preconditions being put in place as the privatization process is inherently politically sensitive and subject to potential corruption and abuse.
customs union
provide for economic cooperation as in a free-trade zone. Barriers to trade are removed between member countries. Its primary difference from the free trade area is that members agree to treat trade with nonmember countries similarly, which means they share a common external tariff.
UN conference on trade and development
publishes the Global Investment Trends Monitor, which summarizes FDI trends from around the world. According to the UNCTAD Global Investment Trends Monitor, global FDI fell in 2018 to an estimated $1.3 trillion from $1.47 trillion in 2017, which brings FDI to the same low point as in 2009 after the global financial crisis.
preferential tariff
reduced tariff rate applied to imports from certain countries
portfolio investment
refers to act of investing in a company's stocks, bonds, or assets, but not to control or direct the firm's operations or management.
market capitalization
total dollar value of all the company's outstanding shares
nafta
united states, canada, mexico
fixed rate currency exchange system
when a countrys currency is fixed or pegged
political union
when a single nation is formed. There is a unification of all policies by a common organization.
economic union
when countries enter into an economic agreement to remove barriers to trade and adopt common economic policies. The members use a common currency, harmonized taxes monetary, and fiscal policy.2 An example is the Eurozone, which is a group of EU members who have adopted the euro as their official currency.
transnational company
while MNCs are traditionally national companies with foreign subsidiaries, a TNC does not identify itself with one national home.
What is a common name for the International Bank for Reconstruction and Development?
world bank
differneces between IMF and world bank
world bank (1944) encourages borrowing, developmental institution, originally for reconstructing after wars, 180 member nations. must meet requirements for loans IMF (1945) oversees international monetary system, cooperative institution, used to regulate exchange rates, now provides effective international currency exchange and supervise policies, acts more like a credit union. loans to all member nations.