The Global Marketplace
• international trade • protectionism • imports • World Trade • exports • balance of trade • free trade Organization (WTO) • North American Free Trade Agreement (NAFTA) • tariff • European Union (EU) • quota • adaptation • embargo • customization • globalization
International Trade Involves the exchange of goods and services between nations. Goods and services purchased from other countries are called imports. Goods and services sold to other countries are called exports. Economic interdependence happens because each country possesses unique resources and capabilities (labor force, raw materials, capital, etc. )
Advantages of International Trade Absolute advantage: a country has special natural resources or capabilities that allow it to produce a given commodity at a lower cost than any other nation in the world. Comparative advantage: refers to the value that a nation gains by selling the goods it produces more efficiently than other goods.
Advantages of International Trade Producers have the opportunity to grow and expand into other countries (Coca-Cola derives 80% of its total revenues from foreign operations. ) Workers have more opportunities. Four million U. S. jobs are linked to foreign investment. Nations as a whole benefit from international trade-increase the standard of living.
Advantages of International Trade Consumers benefit from the competition generated by foreign companies. ◦ Higher quality ◦ Lower prices ◦ Wider selection
Disadvantages of International Trade Disadvantages include the inability for domestic companies to compete (cheaper labor, raw materials) What are some implications of an unfavorable (negative) balance of trade? As a debtor nation, the U. S. relies on foreign investors who buy U. S securities. Another negative effect of a negative balance of trade can be increased unemployment. http: //useconomy. about. com/od/glossary/g/s ecurities. htm
Trade Barriers Tariffs are taxes on imports. They can be either revenue generating or protective. Revenue producing tariffs were used as a primary source of income before income taxes were established in 1913. Quotas are limits on either the quantity or monetary value of a product that may be imported.
Trade Barriers Embargoes are total bans on specific goods coming into and leaving a country. Embargoes are often used for political reasons. http: //en. wikipedia. org/wiki/Embargo http: //usforeignpolicy. about. com/od/introtofo reignpolicy/a/what-are-sanctions. htm
Protectionism The practice of protecting domestic products by restricting imports or making them too expensive for consumers to buy (by imposing tariffs, quotas, and embargoes). Proponents of a pure market system oppose protectionism. Labor unions favor it to protect domestic jobs.
Trade Agreements WTO: A global coalition of nations that make the rules governing international trade. It was formed in 1995 as the successor to the General Agreement on Tariffs and Trade (GATT). NAFTA: Went into effect January 1, 1994. Eliminated trade barriers and investment restrictions between U. S. , Canada, and Mexico. EU: Is Europe’s trading bloc. In 1992, the Maastricht Treaty created the EU and established free trade among its member nations. The treaty also created a single European currency, the euro, and a central bank.
globalization Selling the same product and using the same promotion methods in all countries. adaptation A company’s use of an existing product or promotion from which changes are made to better suit the characteristics of a country or region. customization Creating specifically designed products or promotions for certain countries or regions.
Food for thought……. . http: //en. wikipedia. org/wiki/List_of_countrie s_with_Mc. Donald%27 s_franchises http: //www. mcdonalds. com. gt/ http: //www. mcdonaldsegypt. com/loader. html
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