International Business & Trade Vocabulary Flashcards

A comprehensive set of vocabulary and collocations covering international business transactions, trade theories, and trade policy based on lecture materials.

International business

The study of transactions taking place across national borders for the purpose of satisfying the needs of individuals and organisations.

Exports

Goods and services produced by a firm in one country and then sent to another country.

Imports

Goods and services produced in one country and bought in by another country.

International trade

The exchange of goods and services across international borders.

A six-fold increase

A growth to six times the original amount; e.g. exports rose almost six-fold from $1990$ to $2017$.

Axiomatic

Self-evidently true; used to describe the fact that world exports must equal world imports.

Bartering

Exchanging goods directly without money, as humans have done since the dawn of civilisation.

Economic globalization

The growing interdependence of locations and economic actors across countries and regions.

Interdependence

The mutual reliance between groups of actors including individuals, firms, countries or regions.

Economic actors

Individuals, firms, or entities (e.g. entrepreneurs or nation-states) that take part in the economy.

Multinational enterprises (MNEs)

A multi-plant firm that controls and coordinates operations in at least two countries.

Headquarters organisations

The central offices that coordinate operations across different locations of an MNE.

Affiliate or Associate

A company in which a parent firm has a minority stake of between $20$ and $50$ percent.

Subsidiary

A business whose parent company holds a majority stake of $50$ percent or more of all shares.

Wholly owned subsidiary

A subsidiary of which the parent corporation owns $100$ percent of the shares.

Foreign direct investment (FDI)

Equity investments by private firms in firms located in other nations, undertaken by MNEs which exercise control of their foreign affiliates.

Portfolio (financial) investment

Investment involving the ownership of shares or bonds of firms overseas without the control associated with direct investment.

Regional integration

Formal agreements among geographically proximate countries to increase FDI and trade within a region.

Economies of scale

Cost advantages gained by increased production or scale.

Bargaining power

The relative strength or leverage a country or firm has when negotiating.

Upstream production

The process of exploring and extracting raw materials in the production process.

Downstream stage

The stage involving the processing of materials into a finished product and selling it.

Innovation

The introduction of any novelty; it occurs only when a new product, device, or process is involved in a commercial transaction.

Technology

The cumulative stock of innovations; the accumulated body of innovations available to an economic actor.

Institutions

Sets of common habits, routines, established practices, rules, or laws that regulate interaction between individuals and groups.

Formal institutions

Rules taking the form of legal codes, laws, promulgations, and government decrees that are legally laid out and codified.

Informal institutions

Rules that are not laid out in writing but come from usage and tradition; often unwritten and tacit.

World Trade Organization (WTO)

An international organisation dealing with the rules of trade among member countries that acts as a dispute-settlement mechanism.

General Agreement on Tariffs and Trade (GATT)

A major trade agreement established to negotiate trade concessions, later superseded by the WTO.

Liberalisation

The easing of government regulations, involving the liberalisation of capital flows, trade regimes, and markets.

Bretton Woods agreement

The $1944$ agreement that established regulations leading to multinational banking, international money markets, and derivatives trading.

SMEs (small and medium-sized enterprises)

Firms with fewer than $250$ employees in Europe, or fewer than $500$ in the US.

Global value chains (GVCs)

Chains involving intra-firm or inter-firm economic activities beyond national borders, from conception to production to consumption.

Global production networks (GPNs)

Organisational platforms where various actors from globally dispersed locations compete and cooperate for value creation.

Producer-driven chains

Global value chains common in high-tech sectors (e.g. pharmaceuticals) where 'flagship' firms control product design.

Buyer-driven chains

Global value chains where retailers control production abroad but focus on marketing and sales (e.g. apparel or food).

Outsourcing

Having parts or components manufactured by someone else, traditionally done by manufacturing firms.

Offshoring

Outsourcing done to a location beyond the national borders, either to a foreign affiliate or a third party.

Captive offshoring

Offshoring specifically to a company's own foreign affiliates.

Nearshoring

Relocation or offshoring to a nearby country, often driven by smaller time zone differences and lesser liability of foreignness.

Firm-specific advantage (FSA)

A company's own unique competitive strengths, such as brand, technology, or product quality.

Country-specific advantage (CSA)

Advantages arising from the specific characteristics of a particular country, such as natural resources or the labor pool.

Joint venture

A business arrangement or commercial enterprise where two or more parties share ownership.

Franchise

Licensing the right to operate a store using a company's brand and business model to individuals.

Acquisition

The purchase of another company, such as Starbucks' $\$83$ million purchase of Seattle Coffee Company.

Strategic alliance

A cooperative business arrangement or agreement between two firms for mutual benefit.

Barriers to entry

Obstacles or high costs that prevent a firm or entrepreneur from entering a market.

Flat packing

Packing furniture disassembled and flat for easy transport, a key to efficiency for firms like IKEA.

Standardization

Providing the same built products across different international markets.

Per-capita GDP

Gross Domestic Product divided by population, serving as an indicator of a country's economic development.

Disposable income

Income available for spending after taxes and essential living expenses are paid.

Price-conscious

Being very sensitive to price levels and striving to buy items as cheaply as possible.

Price wars

Aggressive competitive price-cutting between rival firms which reduces industry profitability.

Trade surplus

Condition that results when the value of a nation's exports is greater than the value of its imports.

Trade deficit

Condition that results when the value of a country's imports is greater than the value of its exports.

Mercantilism

A trade theory holding that a government should encourage exports and stifle imports to accumulate wealth in precious metals.

Neo-mercantilism

A modern trade theory holding that a government can improve economic well-being by encouraging exports and stifling imports.

Theory of absolute advantage

A trade theory holding that nations can increase economic well-being by specialising in goods they produce more efficiently than anyone else.

Theory of comparative advantage

A trade theory holding that nations should produce goods for which they have the greatest relative advantage.

Factor endowment theory

A trade theory holding that nations produce and export products using abundant production factors and import products requiring scarce factors.

Heckscher-Ohlin theory

A theory extending comparative advantage by considering the endowment and cost of factors of production.

Leontief paradox

The finding by Wassily Leontief that the US exports relatively more labour-intensive goods and imports capital-intensive goods.

International product life cycle (IPLC) theory

A theory tracing a product from its initial invention through various stages to its eventual production in low-cost foreign countries.

Embargo

A complete ban on trade (imports and exports) in one or more products with a particular country.

Subsidy

Financial assistance to domestic producers in the form of cash, tax breaks, or low-interest loans to help fend off international competitors.

Export financing

Government-provided loans or interest rate assistance to help domestic companies export.

Loan guarantee

A government promise to repay a company's loan if the company defaults on repayment.

Foreign trade zone (FTZ)

A designated geographic region where merchandise passes with lower customs duties and/or fewer customs procedures.

Dumping

Selling imported goods at a price below cost or below the price in the home country to achieve market share.

Tariff

A tax levied on goods that are shipped internationally (import, export, or transit).

Ad valorem duty

A tariff based on a percentage of the value of the item.

Specific duty

A tariff based on units, such as a fixed physical amount per item shipped.

Compound duty

A tariff consisting of both a specific duty and an ad valorem duty.

Quotas

Quantity limits or restrictions on the number of units or market share permitted for import during a certain period.

Cartel

A group of firms or producers that cooperate to control price and supply, such as OPEC.

Exchange controls

Financial limits or rules that restrict the amount of currency that can be taken out of a country.

Non-tariff barriers (NTBs)

Rules, regulations, and bureaucratic red tape that delay or preclude the purchase of foreign goods.

Voluntary export restraint (VER)

A quota on trade imposed from the exporting country's side, often to avoid retaliatory action by the importer.

Customs valuation

The process of determining the value of imported goods for the payment of duties, generally based on invoice cost.

Technical barriers

Product and process standards for health, safety, and quality that can exclude foreign products.

Primary commodities

Foodstuffs, fuels, and industrial raw materials that Less Developed Countries (LDCs) are often heavily dependent on.

Net barter terms of trade

The ratio of the unit price of exports to the unit price of imports.

Secular deterioration hypothesis

The theory by Singer and Prebisch about the long-term declining behaviour of Less Developed Countries' terms of trade.

Autarky

The situation in which a country is completely self-sufficient and has no foreign trade.

Balance of payments (BOP)

A statistical summary of a country's total trade, other economic transactions, and financial flows at a given time.

Current account

The balance of payments component showing trade in goods and services, income, and unrequited transfers.

Capital account

The balance of payments component recording currency inflows and outflows due to international dealings in financial assets.

Unrequited transfers

One-way payments such as foreign aid payments or workers' remittances.

Trade policy

The complete framework of laws, regulations, international agreements, and negotiating stances adopted to achieve legally binding market access.

National treatment

A fundamental principle requiring foreign goods or firms to be treated the same as domestic ones.

Competition policy

Governmental approaches to the promotion and protection of market competition and consumer interests.

Predatory pricing

An anti-competitive practice of selling goods below cost to eliminate rivals.

Level playing field

A fair competitive environment where no party has an unfair advantage.

Competitive advantage

A firm's success based on cost advantages or differentiated products (distinct from comparative advantage).

Contingent protection

Legal protective mechanisms (commercial defence mechanisms) like anti-dumping measures triggered by dumping or import surges.

Internationalization

The extension of economic activity across borders to harness lower costs while preserving national economic independence.

Globalization

The increasing integration of national economic systems and the decline in costs of doing business across space.

Protectionism

An economic policy climate that see merit in preventing the exposure of domestic producers to international competition.

Free trade

The free movement across borders of goods, services, capital, and people with minimal constraints.

Bilateral trade agreement

An agreement between two countries setting out conditions under which trade between them will be conducted.