Chapter 3 Global Business
What are the economic consequences of trade restrictions?
1. Higher prices for consumers 2. Restriction of consumers choices 3. Misallocation of international resources 4. Loss of jobs
What are the reasons for trade restrictions?
1. To equalize a nation's balance of payments 2. To protect new or weak industries 3. To protect national security 4. To protect the health of citizens 5. To retaliate for another nation's trade restrictions 6. To protect domestic jobs
A bill of lading is defined as:
A document issued by a transport carrier to an exporter to prove that merchandise has been shipped
What US government export assistance program facilitates advocacy to assist US firms competing for major projects and procurements worldwide?
Advocacy Center
International monetary fund
An international organization of 183 countries, established in 1947 with the goal of promoting cooperation and exchange between nations, and to aid the growth of international trade.
The European Union
An international organization of European countries formed after World War II to reduce trade barriers and increase cooperation among its members.
How have international firms seized the opportunity to compete in foreign markets?
By exporting and importing products and increasing foreign production
Continual deficit can cause what?
Can cause other nations to lose confidence in that nation's economy
Which countries are the United States' best trading partners for US exports?
Canada and Mexico
The United States is efficient at producing software and engineering services but cannot produce clothes and electronics as efficiently as other nations. As such the United States sells software and engineering services to other countries and buys clothes and electronics. This is an example of:
Comparative advantage
What does devaluation do to the price of goods?
Decreases the cost of foreign goods, decreases the cost of domestic goods to foreign firms
The selling of products in a foreign country at lower prices than those charged in the producing country is called:
Dumping
What are principal activities in international trade?
Importing and exporting
Currency devaluation __________ the cost of foreign goods and ___________ the cost of domestic goods to foreign firms
Increases, decreases
Who supports multilateral development banks?
Industrialized nations
What bank specifically makes short term loans to developing countries experiencing balance of payment deficits?
International Monetary Fund
What US government export assistance program offers assistance and information to exporters through its domestic and overseas commercial officers?
International Trade Administration
World Trade Organization
International organization that regulates international trade.
Letter of credit
Issued by a bank for the amount of money needed to pay for the merchandise
What does dumping do to the prices?
It drives down the price of a domestic item
What is the world's third largest economy
Japan's
How may a joint venture be used?
May be used to produce and market an existing product in a foreign nation or to develop an entirely new product
What is the famous principle of the GATT, which means that each member is to be treated equally by all contracting nations?
Most-favored-nation status
A firm that operates on a worldwide scale without ties to any specific nation or region is known as a
Multinational enterprise
What agreement, when ratified, created free trade area among the United States, Mexico, and Canada?
NAFTA
How much investment does licensing require
None
NAFTA
North American Free Trade Agreement; allows open trade with US, Mexico, and Canada.
What is a reason for trade restrictions?
Protection for new or weak industries
What is an important and practical issue for domestic firms dealing with foreign customers?
Securing payment
Sub-Saharan Africa is home to _________ of the top ten fastest growing economies of the world.
Seven
What organization or US government export program publishes guides that offer assistance and exporting information to small and medium-sized companies?
Small Business Administration
A country may attempt to protect its own domestic industries by imposing a _________, a type of tax, on imported products
Tariff
According the the IMF, the world economic growth projections are?
The IMF predicts gradual global growth in both advanced and developing countries
The draft, bill of lading, and letter of credit are sent from who to who?
The exporter to the importers bank
What are the two types of tariffs?
The revenue and protective tariffs
What does it mean when a country imports more than its exports?
There is a negative balance of trade which is unfavorable
What is the main function of the Export-Import Bank of the United States?
To assist in financing the exports of American firms
What is the engine of economic growth?
Trade
Cultural barriers can impede acceptance of products in foreign countries T/F
True
What is the most integrated and dynamic economic relationship in the world?
US, Canada relationship
International trade has increased since what war?
WWII
When are goods and services produced more efficiently?
When each country specializes in the products for which it has comparative advantage
The organization established by the Uruguay Round of GATT, whose purpose is to mediate trade disputes among nations is called:
World Trade Organization
Embargo
a complete halt to trading with a particular nation or of a particular product
Licensing
a contractual agreement in which one firm permits another to produce and market its product and use its brand name in return for a royalty or other compensation
Multinational enterprise
a firm that operates on a worldwide scale without ties to any specific nation or region
Import quota
a limit on the number of products in certain categories that a nation can import
Trade deficit
a negative balance of trade
Nontariff barrier
a non tax measure imposed by a government to favor domestic over foreign suppliers
Joint ventures
a partnership formed to achieve a specific goal or to operate for a specific period of time
Foreign exchange control
a restriction on the amount of a particular foreign currency that can be purchased or sold
Import duty
a tax levied on a particular foreign product entering a country
The Kennedy Round
aimed at reducing tariffs, succeeded in reducing tariffs on products
Export-Import Bank of the United States
an independent agency of the U.S. government whose function is to assist in financing the exports of American firms
The General Agreement on Tariffs and Trade (GATT)
an international organization of 164 nations dedicated to reducing or eliminating tariffs and other barriers to world trade
Multilateral development bank
an internationally supported bank that provides loans to developing countries to help them grow
Economic community
an organization of nations formed to promote the free movement of resources and products among its members and to create common economic policies
Brexit
citizens of the UK voted to exit the EU
Brazil has excellent resources and expertise to farm and produce coffee beans whereas the United States is ill-suited for the production of coffee. Brazil should:
continue to produce coffee and trade it for US products Brazil needs and cannot produce
What affect the international operations and flow of cash
currency exchange rates, tariffs and foreign exchange controls, and tax structures
International business
encompasses all business activities that involve exchanges across national boundaries
Countertrade
essentially an international barter transaction in which goods and services are exchanged for different goods and services
Dumping
exportation of large quantities of a product at a price lower than that of the same product in the home market
What does it mean when a country exports more than it imports
favorable balance of trade
What are the two forms of direct investment
firm builds or purchases manufacturing and other facilities in the foreign country or the purchase of an existing firm in foreign country
Revenue tariffs
imposed solely to generate income for the government
Protective tariffs
imposed to protect a domestic industry from competition by keeping the price of competing imports level with or higher than the price of similar domestic products
Totally owned facilities
its own production and marketing facilities in one or more foreign nations
Uruguay Round
launched to extend trade liberalization and widen the GATT treaty to include textiles, agricultural products, business services, and intellectual property rights
A contractual agreement in which one firm permits another to produce and market its product and use its brand name in return for a royalty or other compensation is known as:
licensing
Draft
orders the importer's bank to pay for the merchandise
Trading companies
provides a link between buyers and sellers in different countries
Direct investment
provides complete control over operations, but carries a greater risk
Importing
purchasing raw materials or products in other nations and bringing them into one's own country
Exporting
selling and shipping raw materials or products to other nations
Exporting
selling products to another country
Absolute advantage
the ability to produce a specific product more efficiently than any other nation
Comparative advantage
the ability to produce a specific product more efficiently than any other product
Bill of lading
the carrier transporting the merchandise provides the exporter with evidence of the shipment
A country with a trade surplus generally has a favorable balance of payment which means:
the country is receiving more money from trade with foreign countries than it is paying out
Who is the go between in importer and exporter deals
the local domestic banks involved in international business
Strategic alliance
the newest form of international business structure, a partnership formed to create competitive advantage on a worldwide basis
Currency devaluation
the reduction of the value of a nation's currency relative to the currencies of other countries
Tokyo Round
the seventh round of trade talks, in which tariffs were reduced further across the board and developing countries were granted tariff preferences
Balance of payments
the total flow of money into a country minus the total flow of money out of that country over some period of time
Balance of trade
the total value of its exports minus the total value of its imports over some period of time