BUS 121-51 Chapter 3
all business activities that involve exchanges across national boundaries.
the ability to produce a specific product more efficiently than any other nation.
the ability to produce a specific product more efficiently than any other product.
selling and shipping raw materials or products to other nations.
purchasing raw materials or products in other nations and bringing them into ones's own country.
Balance or trade
the total value of a nation's exports minus the total value of its imports over some period of time.
a negative balance of trade.
Balance of Payments
the total flow of money into a country minus the flow of money out of that country over a some period of time.
Type of Trade Restrictions
2 Nontariffs Barriers
Import Duty (tariffs)
a tax levied on a particular foreign product entering a country.
exportation of large quantities of a product at a price lower than that of the same product in the home market.
a nontax measure imposed by a government to favor domestic over foreign suppliers.
a limit on the amount of a particular good that may be imported into a country during a given period of time.
a complete halt to trading with a particular nation or in a particular product.
a restriction on the amount of a particular foreign currency that can be purchased or sold.
the reduction of the value of a nation's currency relative to the currencies of other countries.
Reason for Trade (5)
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 protect domestic jobs.
Reasons Against Trade Restrictions (4)
1 Higher prices for consumers.
2 Restriction of consumers' choices.
3 Mis-allocation of international resources.
4 Loss of jobs.
General Agreement on Tariffs and Trade (GATT)
an international organization of 153 nations dedicated to reducing or eliminating tariffs and other barriers to world trade.
World Trade Organization (WTO)
powerful successor to GATT that incorporates trade in goods, services, and ideas.
an organization of nations formed to promote the free movement of resources and products among its members and to create common economic policies.
The North American Free Trade Agreement (NAFTA)
joined the United States with its first- and second-largest export trading partners, Canada and Mexico.
European Union (EU)
also known as the European Economic Community and the Common Market was formed in 1957.
The Organization of Petroleum Exporting Countries (OPEC)
was founded in 1960 in response to reductions in the prices that oil companies were willing to pay for crude oil.
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.
Letter of Credit
issued by a bank on request of an importer stating that the bank will pay an amount of money in a stated beneficiary.
Bill of Lading
document issued by transport carrier to an exporter to prove that merchandise has been shipped.
issued by the exporter's bank, ordering the importer's bank to pay for the merchandise, thus guaranteeing payment once accepted by the importer's bank.
is a partnership formed to achieve a specific goal or to operate for a specific period of time.
a partnership formed to create competitive advantages on worldwide basis.
provides a link between buyers and sellers in different countries.
an international barter transaction.
a firm that operates on a worldwide scale without ties to any specific nation or region.
Export-Import Bank of the United States
an independent agency of the U.S. government whose function it is to assist in financing the exports of American firms.
Multilateral Development Banks (MDB)
an internationally supported bank that provides loans to developing countries to help them grow.
International Monetary Fund (IMF)
an international bank with 184 member nations that makes short-term loans to developing countries experiencing balance-of-payment deficits.
BUS 121-51 Chapter 3
Terminology / Other