value of all goods and services produced by a country's domestic and international activities over a one-year period

note this is both domestic and international activities

e-business

use of computer networks to purchase, sell, or exchange products to service customers; and to collaborate with partners

3 types of international activities

1. exports
2. imports
3. investments

Multinational Corporations generate

significant jobs, investments, and tax revenue for regions/nations they enter

direct investment

The foreign company buys foreign assets that is directly involved to make money

portfolio investment

foreign company buys foreign assets just to make money not directly involved but participates in meetings just for money

market globalization

process through which the world's national economies become integrated into a single global exchange system organized by market principles

NAFTA

North American Free Trade Agreement; allows open trade with US, Mexico, and Canada.

Globalization Business Environment elements (4)

1. forces of globalization
2. international business environment
3. many national business environment
4. international firm management

globalization of markets benefits 5

1. reduces marketing costs
2. creates new market opportunities
3. levels uneven income streams
4. local buyers needs
5. global sustainability

Globalization or Production benefits 3

1. access lower cost workers
2. access technical expertise
3. Access production inputs

2 main forces driving globalization of markets and production

1. falling barriers to trade and investments
2. technological innovation

European Union (EU)

an economic association 28 Western European countries to promote free trade among its members

GDP/GNP per capita

Nation's GDP or GNP divided by its population

Globalization benefits for company (3)

1. expand markets
2. increase sales
3. more risk

Is domestic business like international business? why?

NO
because off differences in the external business environment factors of Foreign Markets

example why domestic and international business different

Disney does not have the same customs in Disney world in Florida to Disney in Japan
ex characters don't hug in Japan but they bow and height for rides are different

Regional Economic Integration (REI)
also called Regionalism

process whereby countries in a geographic region cooperate to reduce/eliminate barriers to the international flow of products, people, and capital

regional trading bloc

a group of nations in a geographic region undergoing economic integration

name all 5 levels of national integration (from lowest extent of integration to highest extent of integration)

1. Free Trade Area
2. Custom Unions
3. Common Market
4. Economic Union
5. Political Union

Free Trade Area

economic integration whereby countries seek to remove all barriers to trade among themselves but where each country determines its own barriers against nonmembers - ex NAFTA

Customs Union

economic integration whereby countries remove all barriers to trade among themselves and set a common trade policy against nonmembers - ex MERCOSUR

Common Market

economic integration whereby countries remove all barriers to trade and to the movement of labor and capital among themselves and set a common trade policy against nonmembers

Economic Union

economic integration whereby countries remove barriers to trade and the movement of labor and capital among members, set a common trade policy against nonmembers, and coordinate their economic policies ex EU (European Union)

Political Union

economic and political integration whereby countries coordinate aspects of their economic and political systems

____________ _____________ requires member nations to harmonize their tax, monetary, and fiscal policies and create a common currency

Economic Union

European Union

EFTA

European Free Trade Association

NAFTA

North American Free Trade Agreement

CAN

Andean Community

MERCOSUR

Southern Common Market

CARICOM

Caribbean community and common market

ASEAN

Association of Southeast Asian Nations

APEC

Asia Pacific Economic Cooperation

CER

Closer Economic Relations Agreement

African Union

Trade Creation

increase in the level of trade between nations that result from REI

Trade Diversion

diversion of trade away from nations not belonging to a trading bloc and toward member nations

European Monetary Union

European Union plan that established its own central bank and currency

Geo politics

A foreign policy based on a consideration of the strategic locations or products of other lands.

USED to be
Military - attack and conquer 1st
economy good 2nd

geo-economics

geographic distribution of wealth
NOW its
economy good 1st
Military - protect 2nd

SEA

Single European Act

Maastrict Treaty

a treaty ratified by all European Union member states and implemented by means of extensive amendment including the change from the name European Economic Community to European Union

EU government 3 governing bodies

1. European Commission
2. European Parliament
3. European Council

Court of Justice of the European Union

court of appeals of the EU and is composed of one judge from each member nation

Court of Auditors of the European Union

assists European Commission and audits EU accounts and implements budget

Certificate of Origin (COO)

NAFTA requires that every product have a certificate to move from Mexico to USA to Canada

BRICS

five major emerging national economies: Brazil, Russia, India, China and South Africa

NAFTA value to get through countries

X% of the products total value originated in a NAFTA COUNTRY

subsidy

financial assistance to domestic producers in the form of cash payments, low-interest loans, tax breaks, product price supports, or other forms

Foreign Trade Zone (FTZ)

designated geographic region through which merchandise is allowed to pass with lower customs duties (taxes) and/or fewer customs procedures

Tariff

government tax levied on a product as it enters or leaves a country

Ad Valorem Tariff

tariff levied as a percentage of the stated price of an imported product

Specific Tariff

tariff levied as a specific fee for each unit (measured by number, weight, etc.) of imported product

compound tariff

tariff levied on an imported product and calculated partly as a percentage of its stated price and partly as a specific fee for each unit

Quota

restriction on the amount (measured in units or weight) of a good that can enter or leave a country during a certain period of time

Voluntary Export Restraint (VER)

unique version of export quota that nation imposes on it exports usually at the request of an importing nation

tariff-quota

lower tariff rate for a certain quantity of imports and a higher rate for quantities that exceed the quota

embargo

complete ban on trade (imports and exports) in one or more products with a particular country

administrative delays

regulatory control or bureaucratic rules designed to impair the flow of imports into a country

currency controls

restrictions on the convertibility of a currency into other currencies

normal trade relations (formerly most favored status)

requirement that WTO members extend the same favorable terms of trade to all members that they extend to any single member

dumping

exporting a product at a price either lower than the price that the product normally commands in its domestic market or lower than the cost of production

antidumping duty

additional tariff placed on an imported product that a nation believes is being dumped on its market

countervailing duty

additional tariff placed on an imported product that a nation believes is receiving an unfair subsidy

3 types of tariffs and which one is eliminated in the world?

1. import tariffs
2. export tariffs
3. transit tariffs - eliminated in the world

import tariffs

levied by the government of a country that is importing a product

export tariffs

levied by the government of a country that is exporting a product

transit tariffs

levied by government of country that the product is going through to get to final destination

3 reasons why governments intervene in trade

political objectives
economic objectives
cultural objectives

political objectives

when government intervenes with trade to protect jobs, preserve national security, responding to other nations unfair trade practices, and gaining influence over other nations
know an example

economic objectives

when government intervenes with trade to protection of young industries from competition and the promotion of strategic trade policies
-know example

Cultural objectives

when government intervenes with trade to protect national identity
-know example

MATH on EXAM - know how to calculate AD, Specific, and compound tariffs

AD - dollar amount $ times the rate given
Specific - weight or amount times the cents per weight
compound - both specific and AD added together

The US got an import from Holland of 5,000 lbs of fruit that cost them $10,000. The US harmonized tariffs are 3% and 0.12 cents per lb

AD - would be $10,000 0.03 = $300
Specific - would be 5,000 0.12 = $600
compound - $300 + $600 = $900

Knowt