International Business and Trade Chapter 6

A set of vocabulary flashcards covering key concepts related to international business and trade.

Exports

Goods and services produced within the domestic country but sold in a foreign country.

Imports

Goods and services produced in a foreign country but purchased domestically.

Balance of Trade

The difference between exports and imports (Balance of Trade = Exports - Imports).

Trade Surplus

A positive balance of trade.

Trade Deficit

A negative balance of trade.

Comparative Advantage

The idea that countries should specialize in the production of goods in which they have a lower opportunity cost.

Opportunity Cost

The benefit, profit, or value of something that must be given up to acquire something else.

Absolute Advantage

A country that can produce a product more efficiently than others.

Pollution Haven

When large industrialized nations seek to set up factories abroad in the cheapest locations.

Licensing

When a firm allows a foreign company to produce its products for a royalty fee.

International Franchise

Allows the franchise to use the business name and sell products in a given market area.

Contract Manufacturing

Allows a foreign company to produce a product under the supervision of the parent company.

International Joint Ventures

A special type of partnership between two or more companies in different countries.

International Strategic Alliance

A less formal partnership between companies.

Foreign Direct Investment (FDI)

The purchase of permanent capital goods or businesses in another country.

Foreign Subsidiary

A company purchased by a parent company in its home country located in another country.

Multinational Corporation

A business that owns a physical presence in a foreign country.

Non-Tradable Goods & Services

Products that are not easily tradable due to their inherent characteristics.

Trade Protection

A barrier established by a government to shield domestic industries from global competition.

Tariff

Taxes placed on imported goods.

Non-Tariff Barriers

Restrictive trade measures that take a form other than tariffs.

World Trade Organization (WTO)

A forum for nations to negotiate international trade rules and facilitate global trade.