The Evolution of International Business mana 1301

international business

all commercial transactions, both private and public, between nations of the world

trade

the two-way flow of exports and imports of goods (merchandise trade) and services (service trade)

foreign direct investment (FDI)

inflows of capital from abroad for investing in domestic plant and equipment for the production of goods and/or services as well as for buying domestic companies

outsourced

the corporate practice of acquiring or producing quality goods or services abroad at a lower cost, thereby eliminating domestic production

Mercantilism

a theory of international trade that supports the premise that a nation could only gain from trade if it had a trade surplus

factors of production

endowments used to produce goods and services: land (quantity, quality, and mineral resources beneath it), labor (quantity and skills), capital (cost), and technology (quality)

trade surplus

when the value of exports exceeds the value of imports; the opposite of a trade deficit

absolute advantage

the ability of one country to produce a good or service more efficiently than another

comparative advantage

the ability of one country that has an absolute advantage in the production of two or more goods (or services) to produce one of them relatively more efficiently than the other

Factor Endowment

the quantity and quality of factors of production (land, labor, capital, and technology) that a country owns

Heckscher–Ohlin (H–O) theory

a theory that attributes the comparative advantage of a nation to its factor endowments. A capital-abundant country will, therefore, export capital-intensive goods, while a labor-abundant country will export labor-intensive goods

factor price equalization theory

the theory (attributed to Paul A. Samuelson) that when factors of production are allowed to move freely among nations as a result of international trade, the prices of identical factors of production will be equalized across said nations

Trade policy

all government actions that seek to alter the size of merchandise and/or service flows from and to a country

Tariffs

taxes on imports; also known as custom duties in some countries

custom duties

taxes on imports that are collected by a designated government agency responsible for regulating imports

specific tariff

an import tax that assigns a fixed dollar amount per physical unit

ad valorem tariff

a tax on imports levied as a constant percentage of the monetary value of one unit of the imported good

Preferential duties

an especially advantageous or low import tariff established by a nation for all or some goods of certain countries and not applied to the same goods of other countries

Generalized System of Preferences (GSP)

an agreement where a large number of developed countries permit duty-free imports of a selected list of products that originate from specific countries

export subsidies

a negative tariff or tax break aimed at boosting exports

export taxes

taxes meant to raise export cost and divert production for home consumption

most favored nation (MFN)

an agreement among WTO countries in which any tariff concession granted by one member to any other country will automatically be extended to all other countries of WTO

Import quotas

also known as Quantitative Restrictions (QRs); regulations that limit the amount or number of units of products that can be imported to a country

Voluntary export restraint (VER)

a nontariff barrier in which an efficient exporting nation agrees to limit exports of a product to another country for a temporary period

Domestic content provisions

regulations requiring that a certain percentage of the value of imports be sourced domestically

Managed trade

agreements, sometimes temporary, between countries (or a group of countries) that aim at achieving certain trade outcomes

countertrade

agreement in which an exporter of goods or services to another country commits to import goods or services of corresponding value from that country

export cartels

a group of countries that could effectively control export volume to keep their export prices, revenues, and economic growth stable or high

infant industry argument

temporary provision of protection to nascent industries that have good prospects of becoming globally competitive in the medium term

embargo

trade sanctions that are imposed upon a nation to restrict trade with that country

outsourcing

the corporate practice of acquiring or producing quality goods or services abroad at a lower cost, thereby eliminating domestic production

embargoes

trade sanctions that are imposed upon a nation to restrict trade with that country