Chapter 7 – The Global Marketplace

Objectives 7.1

Distinguish imports from exports (see terms below).

Interdependence of nations – is the exchange or purchase of goods and services between nations. It occurs because different countries possess unique resources and capabilities.

Advantage/disadvantage of international trade effect the areas of – consumers, producers, workers and nations.

Terms 7.1

  • International trade – involves the exchange of goods and services between nations.
  • Imports – are goods and services purchased from other countries.
  • Exports – are goods and services sold to other countries.
  • Absolute advantage – occurs when a country has special natural resources or capabilities that allow it to produce a given commodity at a lower cost than any other nation.
  • Comparative advantage – refers to the value that a nation gains by selling the goods it produces more efficiently than other goods.

Objectives 7.2

U.S. balance of trade – is the difference in value between exports and imports.

Three types of trade barriers – are tariffs, quotas and embargoes.

Major agreements governing world trade – are (GATT) General Agreement on Tariffs and Trade, (NAFTA) North American Free Trade Agreement and (EU) European Union.

Terms 7.2

  • Balance of trade– is the difference in value between exports and imports.
  • Tariff – is a tax on imports.
  • Quota – limits either the quantity or monetary value of a product that may be imported.
  • Embargo – is a total ban on specific goods coming into and leaving a country.
  • Most-favored-nation status (MFNS) – is granted to countries with which it wants to encourage trade.
  • Foreign trade zones – are designated areas of a country where foreign businesses benefit from reduced tariffs.
  • Export-import bank (Eximbank) – fosters trade between the US and other countries.
  • International Monetary Fund (IMF) – was established to help stabilize exchange rates among the currencies of its members.
  • GATT–is an international trade agreement designed to promote global free trade through the reduction of tariffs and the use of a common set of rules for trading.
  • NAFTA – is an international trade agreement among the US, Canada and Mexico.
  • EU – is a trading bloc that includes 12 European countries.

The Global Marketplace – continued

Objectives 7.3

Three basic means of getting involved in international trade – are importing, exporting and setting up shop abroad.

Standard business practices of importing and exporting –are customs brokers, freight forwarding companies, quotas, letters of credit, draft and daft time.

Three factors to consider to consider is international trade – are cultural (language), economic (labor and taxes) and political (government stability).

Terms 7.3

  • Customs Brokers –are licensed by the U.S. Treasury Department and are specialists who know the different laws, procedures and tariffs.
  • Letter of Credit – are letters of credit protecting the exporter from non-payment after the goods have been shipped to the purchasing country.
  • Draft – is like a reverse check that tells the bank to collect the money owed for the shipment from the foreign customer.
  • Time Draft – allows customer to take delivery of goods with promise to pay in the future.
  • Multinationals – are large corporations that have operations in several countries.
  • Mini-Nationals – are midsized and smaller companies that have operations in foreign countries.
  • Joint Ventures – are when foreign investors must have a domestic partners.
  • Nationalize – occurs when a country takes over ownership of a business and the owners get nothing in return.