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Importing |
Buying products from another country |
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Exporting |
selling products to another country |
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Free trade |
the movement of goods and services among nations without political or economic barriers |
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Comparative advantage theory |
Theory that states that a country should sell to other countries those products that it produces most effectively and efficiently, and buy from other countries those products that it cannot produce as effectively or efficiently. |
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Absolute advantage |
The advantage that exists when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries. |
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Balance of trade |
The total value of a nation’s exports compared to its imports measured over a particular period. |
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Trade surplus |
A favorable balance of trade; occurs when the value of a country’s exports exceeds that of its imports. |
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Trade deficit |
An unfavorable balance of trade; occurs when the value of a country’s imports exceeds that of its exports. |
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Balance of payments |
The difference between money coming into a country (from exports) and money leaving the country (for imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment. |
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Dumping |
selling products in a foreign country at lower prices than those charged in the producing country. |
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Licensing |
A global strategy in which a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee (a royalty). |
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Contact manufacturing |
A foreign country’s production of private-label goods to which a domestic company then attaches its brand name or trademark; part of the broad category of outsourcing. |
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Exchange rate |
The value of one nation’s currency relative to the currencies of other countries |
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devaluation |
Lowering the value of a nation’s currency relative to other currencies. |
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Countertrading |
A complex form of bartering in which several countries may be involved, each trading goods for goods or services. |
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Trade protectionism |
The use of government regulations to limit the import of goods and services. |
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Tariff |
a tax imposed on imports |
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Import quota |
A limit on the number of products in certain categories that a nation can import. |
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Embargo |
a complete ban on the import or export of a certain product, or the stopping of all trade with a particular country. |
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General Agreement on Tariffs and Trade |
A 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions. |
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World Trade Organization |
The international organization that replaces the General Agreement of Tariffs and Trade, and was assigned the duty to mediate trade disputes among nations. |
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Common Market |
A regional group of countries that have a common external tariff, o internal tariffs, and a coordination of laws to facilitate exchange; also called a trading bloc. And example is the European Union. |
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North American Free Trade Agreement |
Agreement that created a free trade area among the US, Canada, and Mexico. |
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