Untitled Flashcards Set

Tariffs

Taxes on imports/exports; can be specific (fixed fee per unit) or ad valorem (percentage of value).

Subsidies

Government payments to domestic producers to enhance competitiveness.

Import Quotas

Limits on the quantity of goods that can be imported.

Voluntary Export Restraints (VERs)

Agreements to limit exports to avoid tariffs.

Local Content Requirements (LCRs)

Mandates that a certain percentage of a product be produced domestically.

Administrative Policies

Bureaucratic rules that hinder imports.

Foreign Direct Investment (FDI)

Investment made by a company or individual in one country in business interests in another country.

Greenfield Investment

Establishing new operations in a foreign country from the ground up.

Acquisitions

Purchasing existing firms to gain immediate access to valuable strategic assets.

Internalization Theory

Theory explaining why firms prefer internal transactions to market transactions to maintain control over proprietary assets.

Pragmatic Nationalism

Recognition that FDI has both benefits and costs for host and home countries.

Free Trade Area

An area where trade barriers between member countries are eliminated.

Customs Union

A union that eliminates trade barriers among its members and adopts a common external trade policy.

Economic Union

A union that requires a high degree of integration and coordination of economic policies among member states.

Political Union

The highest level of economic integration where member states coordinate their political policies and governance.

Balancing Act

Weighing the pros and cons of FDI for both host and home countries.

Quota Rent

Economic benefits derived from limited supply, typically resulting in higher prices due to scarcity.

Market Access

The ability of a company or country to sell goods and services across borders without trade barriers.

Trade Creation

Occurs when lower-cost suppliers replace higher-cost domestic suppliers.

Trade Diversion

Occurs when trade shifts from a more efficient global supplier to a less efficient regional supplier due to preferential treatment.

Foreign Exchange Market

A global marketplace for the trading of national currencies against one another.

Forward Exchange Rate

The rate agreed upon today for a currency exchange that will occur at a future date.

Purchasing Power Parity (PPP)

An economic theory which states that the prices of goods should be equivalent across different countries.

Carry Trade

A strategy involving borrowing in a low-interest currency and investing in a high-interest currency.