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Ch.3 Terms
Doing Business in Global Markets
28
Business
Professional
02/05/2014

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Term
importing
Definition
Buying products from another country.
Term
exporting
Definition
Selling products to another country
Term
free trade
Definition
The movement of goods and services among nations without political or economic barriers.
Term
comparative advantage theory
Definition
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.
Term
absolute advantage
Definition
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.
Term
balance of trade
Definition
The total value of a nation's exports compared to its imports measured over a particular period.
Term
trade surplus
Definition
A favorable balance of trade; occurs when the value of a country's exports exceeds that of its imports.
Term
trade deficit
Definition
An unfavorable balance of trade; occurs when the value of a country's imports exceeds that of its exports.
Term
balance of payments
Definition
The difference between money coming into a country (from exports) and money leaving the country (for imports) plus money flow from other factors such as tourism, foreign aid, military expenditure, and foreign investment.
Term
dumping
Definition
Selling products in a foreign country at lower prices than those charged in the producing country.
Term
licensing
Definition
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).
Term
contract manufacturing
Definition
A foreign country's production of private-label goods to which a domestic company then attaches its brandname or trademark; part of the broad category of outsourcing.
Term
joint venture
Definition
A partnership in which two or more companies (often from different countries) join to undertake a major project.
Term
strategic alliance
Definition
A long-term partnership between two or more companies established to help each company build competitive market advantages.
Term
foreign direct investment (FDI)
Definition
The buying of permanent property and businesses in foreign nations.
Term
foreign subsidiary
Definition
A company owned in a foreign country by another company, called the parent company.
Term
multinational corporation
Definition
An organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management.
Term
sovereign wealth funds (SWFs)
Definition
Investment funds controlled by governments holding large stakes in foreign companies.
Term
exchange rate
Definition
The value of one nation's currency relative to the currencies of other countries.
Term
devaluation
Definition
Lowering the value of a nation's currency relative to other currencies.
Term
countertrading
Definition
A complex form of bartering in which several countries may be involved, each trading goods for goods or services for services.
Term
trade protectionism
Definition
The use of government regulations to limit the import of goods and services.
Term
tariff
Definition
A tax imposed on imports.
Term
embargo
Definition
A complete ban on the import or export of a certain product, or the stopping of all trade with a particular country.
Term
General Agreement on Tariffs and Trade (GATT)
Definition
A 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions.
Term
World Trade Organization (WTO)
Definition
The international organization that replaced the General Agreement on Tariffs and Trade and was assigned the duty to mediate trade disputes among nations.
Term
common market
Definition
A regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange; also called a trading bloc.

Ex: European Union
Term
North American Free Trade Agreement (NAFTA)
Definition
Agreement that created a free-trade area among the U.S., Canada and Mexico.
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