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Global Trade
The import and export of goods and services across international borders.
Importing
Buying products from another country.
Exporting
Selling products to another country.
Comparative Advantage
A country should sell to other countries those products that it produces most efficiently and buy from others what it cannot produce as effectively.
Absolute Advantage
A country has a monopoly on producing a specific product or can produce it more efficiently than all other countries.
Free Trade
The movement of goods and services among nations without political or economic barriers.
Balance of Trade
Total value of a nation’s exports compared to its imports over a particular period.
Trade Surplus
When the value of a country’s exports exceeds that of its imports.
Trade Deficit
When the value of a country’s imports exceeds that of its exports.
Dumping
Selling products in a foreign country at lower prices than those charged in the producing country.
Licensing
A global strategy where a firm allows a foreign company to produce its product in exchange for a fee.
Franchising
A contractual agreement where someone sells others the rights to use their business idea and sell a product or service.
Joint Venture
A partnership in which two or more companies join to undertake a major project.
Foreign Direct Investment (FDI)
The buying of permanent property and businesses in foreign nations.
Multinational Corporation
An organization that manufactures and markets products in many countries, having multinational stock ownership and management.
Tariff
A tax imposed on imports.
Protective Tariff
Import taxes that protect domestic industries by making foreign goods more expensive.
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 on all trade with a specific country.
Trade Protectionism
The use of government regulations to limit the import of goods and services.
Sociocultural Forces
Cultural and social structures, values, beliefs, and institutions that influence international business.
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 trade goods or services for other goods or services.
World Trade Organization (WTO)
An independent entity overseeing cross-border trade issues, comprised of 164 member nations.
Common Market
A regional group of countries with a common external tariff and no internal tariffs to facilitate exchange.
NAFTA
The North American Free Trade Agreement that created a free-trade area among the U.S., Canada, and Mexico.
Offshore Outsourcing
Outsourcing jobs to other countries to take advantage of lower labor costs.
Ethnocentricity
The belief that one’s own culture is superior to others, affecting global business operations.
Trade Surplus
A situation where a country exports more than it imports.
