Intro to International Business Exam 2

Regional Economic Integration

Agreements between countries in a geographic region to reduce tariff and non-tariff barriers.

Levels of Economic Integration

Different stages of economic cooperation among countries, including Free Trade Area, Customs Union, Common Market, Economic Union, and Political Union.

Free Trade Area

Most popular form of integration, where all barriers to trade among member countries are removed.

Customs Union

Eliminates trade barriers between member countries and adopts a common external trade policy.

Common Market

No barriers to trade between member countries, a common external trade policy, and free movement of factors of production.

Economic Union

A form of integration that allows free flow of products and factors of production, includes a common currency and harmonization of policies.

Political Union

Combines independent states into a single union with a central political structure for economic, social, and foreign policy coordination.

Trade Creation

Occurs when low-cost producers within a free trade area replace high-cost domestic producers.

Trade Diversion

Occurs when higher-cost suppliers within a free trade area replace lower-cost external suppliers.

North American Free Trade Agreement (NAFTA)

A trade agreement between the U.S., Canada, and Mexico that was renegotiated to become the US-Mexico-Canada Agreement (USMCA).

European Union (EU)

A political and economic union of member states established to facilitate economic cooperation and a single market.

Euro

The common currency used by 19 of the 28 member states of the European Union, adopted under the Maastricht Treaty.

ASEAN

Association of Southeast Asian Nations, a regional intergovernmental organization comprising ten Southeast Asian countries.

MERCOSUR

A South American trade bloc with Brazil, Argentina, Paraguay, Uruguay, and Venezuela aiming for free trade and economic integration.

Maastricht Treaty

A treaty that committed EU members to adopt a single currency and enhanced political integration among its member states.

Implications for Managers

Regional economic integration creates more competitive markets and opens up previously protected markets to foreign competition.

Pros of Regional Integration

Promotes trade, reduces conflict between nations, and provides greater bargaining power in global affairs.

Cons of Regional Integration

Can lead to trade diversion, loss of sovereignty, and may not always result in better trade solutions.

Free Trade

A policy where governments do not restrict what their citizens can buy from or sell to other countries.

Tariffs

Taxes levied on imports to raise the cost of imported products.

Subsidies

Government payments to domestic producers to help them compete against low-cost foreign imports.

Import Quotas

Direct restrictions on the quantity of goods imported into a country.

Voluntary Export Restraints

Quotas on trade imposed by the exporting country at the request of the importing country's government.

Local Content Requirements

Demands that a specific fraction of a product be produced domestically.

Administrative Policies

Trade policies designed to make it difficult for imports to enter a country.

Dumping

Selling goods in a foreign market below their cost of production or fair market value.

World Trade Organization (WTO)

An international organization that regulates trade between nations and emerged from GATT in 1995.

Political Arguments for Trade Intervention

Arguments that focus on protecting certain groups, like producers, at the expense of consumers.

Economic Arguments for Trade Intervention

Arguments aimed at boosting the overall wealth of a nation to benefit both producers and consumers.

Infant Industry Argument

Supporting new industries until they are established and can compete independently.

Strategic Trade Policy Argument

Seeking to establish advantages or dominance in a particular industry.

Quota Rent

The extra profit that domestic producers make when supply is artificially limited by an import quota.

Antidumping Duties

Tariffs imposed to counteract the effects of dumping by foreign firms.

Ethics

Accepted principles of right or wrong that govern the conduct of a person, a profession, or the organization.

Business ethics

Accepted principles of right or wrong governing the conduct of business professionals.

Ethical strategy

A course of action that does not violate accepted ethical principles.

Common ethical issues in business

Include employment practices, human rights, environmental regulations, corruption, and moral obligation.

Tragedy of the commons

A situation where a resource held in common is overused by individuals resulting in its degradation.

Corruption

The practice of giving bribes, which can reduce business investment returns and lead to low economic growth.

Social responsibility

The idea that business decisions should have both good economic and good social consequences.

Ethical dilemmas

Situations where none of the available alternatives seems ethically acceptable.

Determinants of Ethical Behavior

Includes personal ethics, decision-making processes, organizational culture, performance expectations, leadership, and societal culture.

Utilitarian Theory

A philosophical approach that aims to maximize 'goods' over 'bads' for the most people.

Kantian Theory

The concept that people are ends in themselves; ethical behavior must be beneficial universally.

Rights Theories

The idea that humans have basic, universal rights regardless of cultural moral systems.

Justice Theories

Focus on just and equitable distribution of economic benefits.

Organizational culture

The values, beliefs, and norms that shape the behaviors and practices within an organization.

Moral courage

The ability to 'do the right thing' in ethical decision-making.

Cross-Cultural Literacy

An understanding of how cultural differences across and within nations can affect the way business is practiced.

Culture

A system of values and norms shared among a group of people, constituting a design for living.

Social Structure

A society's basic social organization, which emphasizes individual versus group and levels of stratification.

Social Mobility

The extent to which individuals can move out of the strata into which they are born.

Caste System

A closed system of stratification in which social position is determined by birth and change in position is unlikely.

Class System

An open social stratification system where a person's position can change from the one they were born into.

High Context Cultures

Cultures that rely on implicit knowledge of group meanings, values, and rules to communicate appropriate behavior.

Low Context Cultures

Cultures that rely on explicit communication, rules, and goals to guide behavior.

Hofstede's Power Distance

The degree to which less powerful members of a society defer to more powerful members, affecting power distribution.

Individualism vs. Collectivism

The relationship between the individual and the collective; individualism emphasizes personal achievement and independence.

Uncertainty Avoidance

The extent to which different cultures tolerate uncertainty and ambiguity.

Masculinity vs. Femininity

The relationship between gender and work roles, focusing on task-oriented versus people-oriented culture.

Protestant Work Ethic

The belief that hard work, wealth creation, and frugality are central to capitalism, as proposed by Max Weber.

Islamic Economic Implications

Include the right to own property and prohibitions against deception, breaking contracts, and charging interest.

Hinduism

A belief system valuing spiritual growth over material achievements, impacting economic interactions.

Buddhism

Emphasizes spiritual growth and acceptance of mobility between classes while allowing for entrepreneurial activity.

Confucianism

Focuses on moral action, loyalty, and reciprocal obligations, promoting long-term business relations.

Cultural Change

The evolution of culture as influenced by various factors, often catalyzed by multinational enterprises.