1. International Trade
Chapter #4

2. International Trade
Is the exchange of goods and services among national
Imports – are goods and services purchased from other countries
Exports – are goods and services sold to other countries

3. Interdependence of Nations
Countries can’t produce everything they need they need to trade with other countries.
Absolute Advantage – occurs when a country has natural resources or talents that allow it to produce an item at the lowest cost possible.
China produces 80 of the worlds silk.
Comparative Advantage – is the value that a national gains by selling what it produces most efficiently.
US sells High Tech goods because of its infrastructure, raw materials and educated work force.

4. Benefits of International Trade
Consumers
High Quality Goods
Lower Prices
Variety of Goods
Producers
Expand Business
More Customers
Workers
Higher employment rates

5. Government Involvement in International Trade
US monitors imports and exports through the customs division of the US Treasury Department.
Balance of Trade – the difference in value between exports and imports.
Positive Balance – surplus country exports more than it imports
Negative Balance – Trade deficit when a nation imports more than it exports
US has a trade deficit – We focus on services not goods, We purchase more than other nations, we are the largest exporter. More money leaves the country than comes into the country.

6. Trade Barriers Free Trade – No barriers free market principles
Tariffs – Tax on imports, Creates revenue for a country
Protective Tariffs are used to increase the costs of imported goods so domestic goods can compete.
Quotas – limits the quantity or value of goods that can be imported
We limit the number of cars coming from other countries.

7. Trade Barriers Cont…
Embargoes – a total ban on specific goods coming into and leaving a country.
Cuba and the USA
Protectionism – is a government establishment of economic policies that systematically restrict imports in order to protect domestic industries
Subsidies – Government funding of domestic products to make them competitive.

8. Trade Agreements and Alliances
World Trade Organization (WTO) 148 members coalition of nationals that make rules governing international trade.
North American Free Trade Agreement (NAFTA) trade agreement between USA, Mexico and Canada (1994) get rid of trade barriers.
European Union (EU) Europe’s trading Bloc (1992) free trade, central bank and a single currency.

9. Optional for International Business
Importing – Purchasing goods from other countries
Must meet same standards as US goods
Be aware of quotas
Exporting – Selling goods (minimal risks) US will help companies
Licensing – involves letting another company use a company name, or some other intellectual property for a fee or royalty.
Contract Manufacturing – involves hiring a foreign manufacturer to make your product according to your specifications
Joint Ventures- is a business enterprise that companies set up together.

10. Joint Ventures
Joint Ventures are considered foreign direct investments – is the establishment of a business in a foreign country.
Multinationals – large corporations that have operations in several countries
Mini-nationals – are midsize or smaller companies that have operations in foreign countries.

11. International Trade Options
Exporting – Lower Risk – Low Profit Potential
Licensing – Larger Risk – Larger Profit
Contact Manufacturing – Higher risk – higher profit
Direct Investment – Highest Risk – Highest Profit

12. Global Environment Scan
Political – Governments stability
Trade Regulations and Laws
Economic Factors – Infrastructure, Labor Force, Employee Benefits, Taxes, standard of living, Foreign Exchange Rate
Socio-Cultural Factors- Language, Holidays, Religion, Business Etiquette
Technological Factors -

13. Global Marketing Strategies
Globalization- is selling the same product and using the same promotion methods in all countries.
Adaptation- is a company’s use of an existing product or promotion to which changes are made to better suit the country
Customization- involves creating specially designed products or promotions for certain countries or regions.

14. REVIEW
Page 91
Questions 1-11