06. International Trade

export incentives

reduced production costs, use of excess production, price premium, risk spreading

import incentives

cheaper supplies, additions to product line, reduces risk

mercantilism

absolute advantage

comparative advantage

Heckscher & Ohlin theory of factor endowments

product life cycle theory

new trade theories

porters’ national competitive advantage

subsidies are…

financial assistance to domestic producers

export financing is…

loans to finance export sales and export credit insurance to reduce risk

foreign trade zones are…

designated geographic regions in which merchandise can pass through with lower custom duties and/or fewer procedures

tariffs are…

a government levy on products imported or exported into a country

antidumping policies…

punish foreign firms that engage in dumping and protect domestic producers

embargoes are…

a complete ban on trade in one or more products with a specific country

local content requirements are…

a percentage of a good that must be manufactured domestically using local raw materials and labour

the world trade organisation (WTO) is an umbrella organisation for…

GATT, GATS and TRIPS

GATT stands for

general agreement on tariffs and trade

GATS stands for

general agreement on trade in services

TRIPS stands for

agreement on trade-related aspects of intellectual property rights

first mover implications

invest early in global markets that can only support a few firms

location implications

consider countries with comparative advantage for the appropriate MNCs

government policy implications

international firms have incentive to lobby for free trade