Global trade doesn’t just influence business, it also affects all the countries and people of the world.

We are all part of the global marketplace. The global marketplace exists anywhere business crosses national borders. Countries can satisfy their citizens’ wants and needs by buying them in the global market.

The global marketplace works much like a shopping mall or a supermarket. The United States is rich in resources—human, natural, and production—but it still needs things from other countries.

MAJOR EXPORTS AND IMPORTS OF THE UNITED STATES Look at the graph to see what products the United States imports and exports. Name the product that the United States exports more than it imports. Source: Standard & Poor’s

Countries specialize in producing certain goods and services. By specializing, countries can sell what they produce best so they can buy the products they need from other countries. The kinds of resources available to a country often influence what it specializes in producing. A country with little money or advanced technology but a large population might specialize in manual labor.

Imports are goods and services that one country buys from another country. Exports are goods and services that one country sells to another country. Other types of trade include: Investment Exchange of human resources Tourism Military aid Loans

Countries have to pay for each other’s products with currency. Currency is another name for money. Just as countries use different languages, they use different currencies, such as dollars, pesos, and yen. The foreign exchange market is made up of banks where different currencies are exchanged. The exchange rate is the price at which one currency can buy another currency. Exchange rates change from day to day and from country to country. How much the currency of a country is worth depends on how many other countries want to buy its products.

A company follows the change in exchange rates to find the best prices for products. When the value of a country’s currency goes up compared to another country’s, it has a favorable exchange rate. Some countries choose to lower the value of their currency to bring in more business.

Balance of trade is the difference in the value between how much a country imports and how much it exports.30 When a country exports more than it imports, it has a trade surplus. When a country imports more than it exports, it has a trade deficit. A country can have an unfavorable balance of trade with one country and a favorable balance with another.

Weak Currency FAVORABLE BALANCE OF TRADE More exports than imports Strong Currency More imports than exports NEGATIVE BALANCE OF TRADE Trade surplus (leftover money) Trade deficit (debt)

Global competition often leads to trade disputes between countries. At the heart of most trade disputes is whether there should be limits on trade.

Understanding international business and finance has become increasingly important for the consumer, wage earner, investor, citizen, and business leader. An understanding of international business helps you understand why goods and services are at particular prices.

The business leader of tomorrow will have a good grasp of international business and finance.