-
Importing
- Buying products from another
- country.
-
Exporting
- Selling products to another
- country.
-
free trade
- The movement of goods and
- services among nations without
- political or economic barriers.
-
comparative advantage
theory
- Theory that states that a
- country should sell to other
- countries those products that it
- produces most effectively and
- efficiently, and buy from other
- countries those products that it
- cannot produce as effectively
- or efficiently.
-
absolute advantage
- The advantage that exists
- when a country produces a
- specific product more
- efficiently than all other
- countries.
-
balance of trade
- The total value of a nation’s
- exports compared to its
- imports measured over a
- particular period.
-
trade surplus
- A favorable balance of trade;
- occurs when the value of a
- country’s exports exceeds that
- of its imports.
-
trade deficit
- An unfavorable balance of
- trade; occurs when the value of
- a country’s imports exceeds
- that of its exports.
-
balance of payments
- The difference between money
- coming into a country (from
- exports) and money leaving the
- country (for imports) plus
- money flows from other factors
- such as tourism, foreign aid,
- military expenditures, and
- foreign investment.
-
dumping
- Selling products in a foreign
- country at lower prices than
- those charged in the producing
- country.
-
licensing
- A global strategy in which a
- firm (the licensor) allows a
- foreign company (the licensee)
- to produce its product in
- exchange for a fee (a royalty).
-
Franchising
- Franchising is a contractual agreement whereby
- someone with a good idea for a business sells others
- the rights to use the business name and sell a product
- or service in a given territory in a specified manner.
-
contract manufacturing
- A foreign company’s
- production of private-label
- goods to which a domestic
- company then attaches its
- brand name or trademark; part
- of the broad category of
- outsourcing.
-
joint venture
- A partnership in which two or
- more companies (often from
- different countries) join to
- undertake a major project.
-
strategic alliance
- A long-term partnership
- between two or more
- companies established to help
- each company build
- competitive market
- advantages
-
foreign direct investment
(FDI)
- The buying of permanent
- property and businesses in
- foreign nations.
-
foreign subsidiary
- A company owned in a foreign
- country by another company,
- called the parent company.
-
multinational corporation
- An organization that
- manufactures and markets
- products in many different
- countries and has multinational
- stock ownership and
- multinational management.
-
sovereign wealth funds
(SWFs)
- Investment funds controlled by
- governments holding
- investment stakes in foreign
- companies.
-
exchange rate
- The value of one nation’s
- currency relative to the
- currencies of other countries.
-
devaluation
- Lowering the value of a nation’s
- currency relative to other
- currencies.
-
countertrading
- A complex form of bartering in
- which several countries may be
- involved, each trading goods
- for goods or services for
- services.
-
trade protectionism
- The use of government
- regulations to limit the import of
- goods and services.
-
tariff
A tax imposed on imports.
-
import quota
- A limit on the number of
- products in certain categories
- that a nation can import.
-
embargo
- A complete ban on the import
- or export of a certain product,
- or the stopping of all trade with
- a particular country.
-
General Agreement on
Tariffs and Trade (GATT)
- A 1948 agreement that
- established an international
- forum for negotiating mutual
- reductions in trade restrictions.
-
World Trade Organization
(WTO)
- The international organization
- that replaced the General
- Agreement on Tariffs and Trade
- and was assigned the duty to
- mediate trade disputes among
- nations.
-
common market
- A regional group of countries
- that have a common external
- tariff, no internal tariffs, and a
- coordination of laws to facilitate
- exchange; also called a trading
- bloc. An example is the
- European Union.
-
North American Free Trade
Agreement (NAFTA)
- Agreement that created a freetrade
- area among the United
- States, Canada, and Mexico.
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