1- A greater amount of
choice in the availability of
goods and services
2 - Lower prices for goods and services consumed
3 - Higher living
... [Show More] standards - ANSWER What are the benefits of trade?
- Generates jobs
- creates unity by erasing borders
- brings cultural and technical riches
- enhances the skills of domestic workers - ANSWER What are the benefits of foreign investment?
-Mercantilism
-Absolute Advantage
- Theory of Comparative Advantage
- Heckscher-Ohlin Theory
- Factor Price Equalization Theory
- Porter's Diamond Model - ANSWER What are the major international trade theories and what are key features of each one?
Gov't actions altering free flow of merch to and from a country
Historically, main instrument has been import tariff (but now, non-tariff barriers and export subsidies are more prevalent) - ANSWER What is the impact of trade policy on various stakeholders such as businesses, consumers, and governments?
Refers to agreements, sometimes temporary, between countries (or a group of countries) that aim to achieve certain trade outcomes for the countries involved.
Managed trade aims to replace global market or economic forces with government actions to determine trade outcomes - ANSWER What is the rationale for managing trade?
Mercantilism - ANSWER Can only gain from trade if it has trade surplus.
More export, less import
"I sold more goods than I bought, so I win."
gold & silver are very important to country wealth
16th, 17th century Great Brittan
Key words: trade surplus
Absolute Advantage - ANSWER Whoever produces more has the absolute advantage.
key words: specialization & absolute quantities
Criticises mercantilism
Proposed by Adam Smith
Brazil makes more coffee than the U.S. (win, win)
can have as much as you want and trade as much as you want for something different.
Increase in living standards
Competitive Advantage - ANSWER Key word: Opportunity cost
Brazil has coffee beans and if the US wanted to produce coffee beans they would be giving up other opportunities (like corn). Brazil does coffee beans at little opportunity cost.
Less opportunity cost=Higher comparative advantage
Always pick the item with the least opportunity cost
H-O Theory (Heckscher-Ohlin) - ANSWER Key words: factor endorsement equalization
The reason Brazil is better with coffee and US is better with corn is because of what each country has to work with.
Factors of production: labor, land, resources
Explains the reason for the comparative advantage
Factor-Price Equalization - ANSWER Follows the H-O Theory
Allows labor resources to move freely
Large supply of plumbers in Poland, pay down.
Plumber move to U.K. where there is great demand, pay up
Eventually supply and demand even out.
Doesn't really work because people aren't really allowed to move around freely.
Porter's Diamond Model - ANSWER Trade pattern and competitive advantage is determined by: Factor conditions, Firm strategy, structure, rivalry, demand conditions, and related and supporting industries.
The more you produce the better you are.
International Business - ANSWER all commercial transactions, both private and public between nations of the world
factors of production - ANSWER endowments used to produce goods and services: land, labor, capital, and technology.
Foreign Direct Investment FDI - ANSWER inflows of capital from abroad for investing in domestic plant and equipment for the production of goods and/or services as well as for buying domestic companies
Trade - ANSWER the two-way flow of exports and imports of goods (merchandise trade) and services (service trade)
outsourced - ANSWER the corporate practice of acquiring or producing quality goods or services abroad at a lower cost thereby eliminating domestic production
trade surplus - ANSWER when the value of exports exceeds the value of imports; the opposite of a trade deficit
Factor Endowments - ANSWER the quantity and quality of labor, land, and natural resources of a country
Trade policy - ANSWER all government actions that seek to alter the size of merchandise and/or service flows from and to a country
tariffs - ANSWER Taxes on imported goods (a.k.a. custom duties)
factor price equalization theory - ANSWER the theory (attributed to Paul A. Samuelson) that when factors of production are allowed to move freely among nations as a result of international trade, the prices of identical factors of production will be equalized across said nations
factor price equalization - ANSWER when the prices of identical factors of production are equalized across international borders
Specific Tariff - ANSWER an import tax that assigns a fixed dollar amount per physical unit
preferential duties - ANSWER an especially advantageous or low import tariff established by a nation for all or some goods of certain countries and not applied to the same goods of other countries
Generalized System of Preferences (GSP) - ANSWER an agreement where a large number of developed countries permit duty-free imports of a selected list of products that originate from specific countries
Ad Volorem Tariff - ANSWER a tax on imports levied as a constant percentage of the monetary value of one unit of the imported good
export subsidies - ANSWER a negative tariff or tax aimed at boosting exports
most favored nation (MFN) - ANSWER an agreement among two WTO countries in which any tariff concession granted by one member to any other country will automatically be extended to all other countries of WTO
domestic content provisions - ANSWER regulations requiring that a certain percentage of the value of import be sourced domestically
Voluntary Export Restraint (VER) - ANSWER a non-tariff barrier in which an efficient exporting nation agrees to limit exports of a product to another country for a temporary period
export taxes - ANSWER taxes meant to raise export cost and divert production for home consumption
import quotas - ANSWER also known as Quantitative Restrictions (QRs) are regulations that limit the amount or number of units of products that can be imported to a country
Managed trade - ANSWER agreements, sometimes temporary, between countries (or a group of countries) that aim at achieving certain trade outcomes
countertrade - ANSWER agreement in which an exporter of goods or services to another country commits to import goods or services of corresponding value from that country
Embargo - ANSWER trade sanctions that are imposed upon a nation to restrict trade with that country
infant industry argument - ANSWER temporary provision of protection to nascent industries that have good prospects of becoming globally competitive in the medium term
Outsourcing - ANSWER a corporate practice of acquiring or producing quality goods and services abroad at a lower cost thereby eliminating domestic production
export cartels - ANSWER a group of countries that could effectively control export volume to keep their export prices, revenues, and economic growth stable or high
a. Health and Safety - ANSWER Of the following, which is NOT in the geo-political category of managed trade?
a. Health and safety
b. Strategic industries
c. National security
d. Embargoes
e. Protection of critical industries
B Mexico - ANSWER which country is likely to be involvded in more captive sourcing?
a Nigeria, b Mexico, c Columbia, d France
a. Higher living standards
b. Lower prices for goods and services consumed
c. A greater amount of choice in the availability of goods
d A greater amount of choice in the availability of services - ANSWER Benefits of international trade are:
e Belgium - ANSWER Of the following countries, which is identified as a high income country?
a. Thailand
b. China
c. Vietnam
d. Turkey
e. Belgium
d government - ANSWER Porter identified two crucial variables outside the diamond that play an important role in the competitiveness of nations: chance and _____.
a. duty
b. change
c. roles
d. government
e. ethics
d Alarm - ANSWER ____ refers to an external shock or development that could drastically change or hasten the course of economic development.
a. Pressure
b. Chance
c. Distress
d. Alarm
e. Environmental influence
d ad valorem - ANSWER If a car dealer in the United States imports a $50,000 BMW from Germany, the 2.5 percent tariff or $1,250 that the dealer must pay the U.S. government will be passed on to the customer. This is an example of a(n) _____ tariff.
a. generalized
b. specific
c. preferential
d. ad valorem
e. custom
b. domestic content provision - ANSWER Suppose Bangladesh government recently passed regulations requiring a certain percentage of the value of import be sourced domestically. This regulation would be known as a _____.
a. domestic content import
b. domestic content provision
c. quantitative restriction
d. qualitative restriction
e. voluntary export restriction
d countertrade - ANSWER An agreement in which an exporter of goods or services to another country commits to import goods or services of corresponding value from that country is referred to as _____.
a. bartering
b. an embargo
c. managed trade
d. countertrade
e. an export carte
e Embargoes - ANSWER Of the following, which is NOT in the socio-economic category of managed trade?
a. The infant industry argument
b. Countertrade
c. Ethics and safety
d. Export cartels
e. Embargoes [Show Less]