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Chapter 7 – The Global Marketplace
Objectives 7.1
Distinguish imports from exports (see terms below).
Interdependence of nations – is the exchange or purchase of goods and services between
nations. It occurs because different countries possess unique resources and capabilities.
Advantage/disadvantage of international trade effect the areas of – consumers, producers,
workers and nations.
Terms 7.1
 International trade – involves the exchange of goods and services between
nations.
 Imports – are goods and services purchased from other countries.
 Exports – are goods and services sold to other countries.
 Absolute advantage – occurs when a country has special natural resources or
capabilities that allow it to produce a given commodity at a lower cost than any
other nation.
 Comparative advantage – refers to the value that a nation gains by selling the
goods it produces more efficiently than other goods.
Objectives 7.2
U.S. balance of trade – is the difference in value between exports and imports.
Three types of trade barriers – are tariffs, quotas and embargoes.
Major agreements governing world trade – are (GATT) General Agreement on Tariffs
and Trade, (NAFTA) North American Free Trade Agreement and (EU) European Union.
Terms 7.2
 Balance of trade– is the difference in value between exports and imports.
 Tariff – is a tax on imports.
 Quota – limits either the quantity or monetary value of a product that may be
imported.
 Embargo – is a total ban on specific goods coming into and leaving a country.
 Most-favored-nation status (MFNS) – is granted to countries with which it wants
to encourage trade.
 Foreign trade zones – are designated areas of a country where foreign businesses
benefit from reduced tariffs.
 Export-import bank (Eximbank) – fosters trade between the US and other
countries.
 International Monetary Fund (IMF) – was established to help stabilize exchange
rates among the currencies of its members.
 GATT – is an international trade agreement designed to promote global free trade
through the reduction of tariffs and the use of a common set of rules for trading.
 NAFTA – is an international trade agreement among the US, Canada and Mexico.
 EU – is a trading bloc that includes 12 European countries.
The Global Marketplace – continued
Objectives 7.3
Three basic means of getting involved in international trade – are importing, exporting
and setting up shop abroad.
Standard business practices of importing and exporting – are customs brokers, freight
forwarding companies, quotas, letters of credit, draft and daft time.
Three factors to consider to consider is international trade – are cultural (language),
economic (labor and taxes) and political (government stability).
Terms 7.3
 Customs Brokers – are licensed by the U.S. Treasury Department and are
specialists who know the different laws, procedures and tariffs.
 Letter of Credit – are letters of credit protecting the exporter from non-payment
after the goods have been shipped to the purchasing country.
 Draft – is like a reverse check that tells the bank to collect the money owed for the
shipment from the foreign customer.
 Time Draft – allows customer to take delivery of goods with promise to pay in the
future.
 Multinationals – are large corporations that have operations in several countries.
 Mini-Nationals – are midsized and smaller companies that have operations in
foreign countries.
 Joint Ventures – are when foreign investors must have a domestic partners.
 Nationalize – occurs when a country takes over ownership of a business and the
owners get nothing in return.