1. Ch 4.1 International Trade The Global Marketplace

2. Imports / Exports International Trade- Exchange of goods and services between two nations International Trade- Exchange of goods and services between two nations Imports-Goods and Services purchased from other countries Imports-Goods and Services purchased from other countries Exports-Goods and Services sold to other countries Exports-Goods and Services sold to other countries

3. Trade-Why? Countries trade because different countries have different capabilities and natural resources Countries trade because different countries have different capabilities and natural resources Weather, raw materials, labor force, capital resources, location Weather, raw materials, labor force, capital resources, location US, Canada- good climates for agriculture US, Canada- good climates for agriculture Middle east, Africa, Mexico – oil Middle east, Africa, Mexico – oil Asia, Eastern Europe- inexpensive labor force Asia, Eastern Europe- inexpensive labor force

4. Two types of Trade Advantages Absolute Advantage-When a country has a special natural resource or talent that allows them to produce an item at the lowest cost Absolute Advantage-When a country has a special natural resource or talent that allows them to produce an item at the lowest cost China – 80% of world’s silk China – 80% of world’s silk

5. Comparative Advantage The value a nation gains by selling goods that it produces most efficiently The value a nation gains by selling goods that it produces most efficiently Although they may not be the lowest it is still product well suited by their countries capabilities compared to producing other things Although they may not be the lowest it is still product well suited by their countries capabilities compared to producing other things US still has a comparative advantage in producing technology, among other things US still has a comparative advantage in producing technology, among other things

6. Benefits of International Trade Consumers- competition-higher quality products lower prices, greater variety Producers- expand their business into other countries Workers- increased trade higher employment rates Global and economic alliances are created

7. Government and Trade All trade monitored by US Customs All trade monitored by US Customs Balance of Trade – difference between imports and exports Balance of Trade – difference between imports and exports More imports = trade deficit More imports = trade deficit More exports = trade surplus More exports = trade surplus US has which? US has which? Trade deficit reduces nation’s revenue (debtor Nation) Trade deficit reduces nation’s revenue (debtor Nation)

8. Trade Barriers Government imposed restrictions on trade Government imposed restrictions on trade Tariffs- tax on imports Tariffs- tax on imports Protective Tariffs- much higher, used to protect infant industries and domestic products from competition Protective Tariffs- much higher, used to protect infant industries and domestic products from competition Quotas-limits quantity or monetary value of product being imported Quotas-limits quantity or monetary value of product being imported

9. Trade Barriers Embargos – total ban on specific goods coming or leaving country Embargos – total ban on specific goods coming or leaving country UN often imposes embargo on nations for political reasons UN often imposes embargo on nations for political reasons

10. Trade Agreements World Trade Organization (WTO) global coalition overseas trade World Trade Organization (WTO) global coalition overseas trade NAFTA – North American Free Trade Agreement- Between Canada, US, Mexico – goal eliminate all trade barriers by 2009 NAFTA – North American Free Trade Agreement- Between Canada, US, Mexico – goal eliminate all trade barriers by 2009

11. Ch. 4.2 The Global Marketplace

12. Importing Purchasing goods from a foreign country Purchasing goods from a foreign country Must meet the same standards as domestic markets Must meet the same standards as domestic markets –Quotas can limit the entry of certain goods into the country

13. Licensing Letting another company use a trademark, patent, special formula, company name, or some other intellectual property for a fee or royalty Letting another company use a trademark, patent, special formula, company name, or some other intellectual property for a fee or royalty –Franchising : granting rights to operate under the company name (Mc Donald’s, etc)

14. Doing Business Internationally Profit Potential Exporting Direct InvestmentLicensing Contract Manufacturing Financial Commitment

15. Global Environmental Scan Political Factors Laws and Regulations Economic Factors Socio-Cultural Factors Technological Factors Things to consider:

16. Global Marketing Strategies GlobalizationAdaptation N/ACustomization Our WayYour Way Our Product Your Product