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30 Terms

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Global Trade

The import and export of goods and services across international borders.

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Importing

Buying products from another country.

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Exporting

Selling products to another country.

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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.

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Absolute Advantage

A country has a monopoly on producing a specific product or can produce it more efficiently than all other countries.

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Free Trade

The movement of goods and services among nations without political or economic barriers.

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Balance of Trade

Total value of a nation’s exports compared to its imports over a particular period.

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Trade Surplus

When the value of a country’s exports exceeds that of its imports.

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Trade Deficit

When the value of a country’s imports exceeds that of its exports.

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Dumping

Selling products in a foreign country at lower prices than those charged in the producing country.

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Licensing

A global strategy where a firm allows a foreign company to produce its product in exchange for a fee.

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Franchising

A contractual agreement where someone sells others the rights to use their business idea and sell a product or service.

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Joint Venture

A partnership in which two or more companies join to undertake a major project.

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Foreign Direct Investment (FDI)

The buying of permanent property and businesses in foreign nations.

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Multinational Corporation

An organization that manufactures and markets products in many countries, having multinational stock ownership and management.

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Tariff

A tax imposed on imports.

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Protective Tariff

Import taxes that protect domestic industries by making foreign goods more expensive.

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Import Quota

A limit on the number of products in certain categories that a nation can import.

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Embargo

A complete ban on the import or export of a certain product or on all trade with a specific country.

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Trade Protectionism

The use of government regulations to limit the import of goods and services.

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Sociocultural Forces

Cultural and social structures, values, beliefs, and institutions that influence international business.

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Exchange Rate

The value of one nation’s currency relative to the currencies of other countries.

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Devaluation

Lowering the value of a nation’s currency relative to other currencies.

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Countertrading

A complex form of bartering in which several countries trade goods or services for other goods or services.

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World Trade Organization (WTO)

An independent entity overseeing cross-border trade issues, comprised of 164 member nations.

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Common Market

A regional group of countries with a common external tariff and no internal tariffs to facilitate exchange.

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NAFTA

The North American Free Trade Agreement that created a free-trade area among the U.S., Canada, and Mexico.

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Offshore Outsourcing

Outsourcing jobs to other countries to take advantage of lower labor costs.

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Ethnocentricity

The belief that one’s own culture is superior to others, affecting global business operations.

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Trade Surplus

A situation where a country exports more than it imports.