Term
| Foreign Direct Investment (FDI) |
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Definition
| International companies must make FDI to establish and expand their overseas operations |
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Term
| Why are people our major trade partners |
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Definition
geographic
size of the market
comparative competitiveness
cultural similarity
political and regulatory environment |
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Term
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Definition
more than 50% of exports from developing nations go to developed countries
nearly 3/4 of exports from developed economies go to industrialized countries |
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Term
| Two components of foreign investment |
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Definition
| Portfolio investment and direct investment |
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Term
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Definition
| solely for the purpose of making a profit |
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Term
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Definition
| investors participate in the management of the firm and get a return |
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Term
| Why enter foreign markets? |
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Definition
1. Increase profits and sales
2. Protect domestic customers
3. attack competitor's home market
4. guarantee supply of raw materials
5. acquire technology and management know-how
6. geographic diversification |
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Term
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Definition
1. a nation's wealth depends on accumulated treasure (usually gold)
2. to increase wealth, government policies should promote exports and discourage imports
(export positive, import negative) |
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Term
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Definition
| the capability of one nation to produce more of a good with the same amount of input than another country |
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Term
| Assumptions of Absolute Advantage |
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Definition
1. perfect competition and no transportation costs in a world of 2 countries and 2 products
2. each nation has 2 input units it can use to produce 2 products
3. each country uses one unit of input to produce each product |
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Term
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Definition
| a nation has a comparative advantage in producing the good in which its absolute disadvantage is less |
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Term
| arguments for and against trade restrictions |
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Definition
1. national defense
2. protect infant industries
3. scientific tariff or fair competition
4. protect domestic jobs from cheap labor (retaliation of on dumping) |
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Term
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Definition
| selling a product abroad for less than the cost of production, the price in the home market, OR the price to third countries |
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Term
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Definition
1. sell excess production without disrupting prices in the domestic market
2. force all domestic producers in the importing nation out of business |
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Term
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Definition
192 member countries
created to promote and maintain world peace
six languages (arabic, spanish, chinese, english, french, russian) |
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Term
| Organizations underneath the UN |
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Definition
General Assembly
Security Council
The Secretariat
The Economic and Social Council
International Court of Justice |
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Term
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Definition
main deliberative body of the UN where each nation has one vote
decisions have no legally binding force for governments or citizens
(school body) |
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Term
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Definition
main policy-setting body of the UN with 15 seats
5 permanent members: US, China, France, Russia, UK
each permanent member has the power to veto any measure
(principal/school board) |
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Term
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Definition
| carries out day to day administrative functions of the UN (basically the secretary) |
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Term
| The Economic and Social Council |
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Definition
concerned with issues such as trade, transport, industrialization, economic development and social issues
makes recommendations on how to improve education and health conditions
promotes respect for and observation of human rights and freedoms of people everywhere
(guidance counsellor) |
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Term
| International Court of JUSTICE!!!! |
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Definition
also the "World Court"
can only litigate nations
15 judges from different countries
(professor in charge of detention) |
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Term
| General Agreement of Tariffs and Trade (GATT) |
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Definition
negotiations were conducted in rounds
original rounds reduced tariffs among industrial countries from 40% to 5% (8 rounds from 1947-1986) |
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Term
| World Trade Organization (WTO) |
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Definition
multinational organization designed to deal with rules of trade between nations (153 member-countries)
headquartered in Geneva, Switzerland
purpose: help producers, exporters and importers conduct their business by reducing or eliminating trade barriers and restrictions worldwide |
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Term
| International Monetary Fund (IMF) |
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Definition
deals solely with governments
objectives:
1. orderly foreign exchange arrangements
2. convertible currencies
3. a shorter duration and lesser degree of balance-of-payments disequilibrium
contributes to policy coordination among major industrial companies (G8)
184 member-countries |
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Term
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Definition
Free Trade Area
Customs Union
Common Market
Complete Economic Integration |
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Term
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Definition
tariffs are abolished among member-countries
each member-country maintains its own external tariffs on imports from nonmember countries |
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Term
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Definition
| a free trade area where member-countries add a common external tariff |
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Term
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Definition
| a customs union plus the abolition of restrictions on the mobility of capital and labor among member-countries |
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Term
| Complete Economic Integration |
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Definition
| involves a high degree of political integration as member-countries surrender important elements of their sovereignty |
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Term
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Definition
a supernational entity (regional government)
1957 Treaty of Rome serves as law for EU
member-nations sought 4 freedoms:
movement of goods, capital, services and people |
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Term
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Definition
European Commission
Council of Ministers
Parliament of the European Union
European Court of Justice
European Economic and Monetary Union |
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Term
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Definition
the executive institution in charge of administering daily operations of the EU
"Guardian of the Treaty" (ensures proper implementation of the Treaty of Rome)
27 commissioners from 27 member-nations
(lawyers) |
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Term
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Definition
primary policy setting institution of EU
ministers are representatives of their national governments
sets forth regulations and directives
presidency rotates every 6 months
holder of presidency sets agenda and location of meetings |
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Term
| Parliament of the European Union |
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Definition
first elected in 1979 (now elected every 5 years by European vote)
can reject EU budget
largely symbolic, built for the future of the EU |
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Term
| European Court of Justice |
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Definition
decides all cases arising under Treaty of Rome
authority supersedes that of member-country courts
(supreme court) |
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Term
| European Economic and Monetary Union |
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Definition
launched january 1999
16 member-nations make up the euro-zone
3 original members chose to not participate: UK, Denmark, Sweden |
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Term
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Definition
the accounting book to present a country's trade relationship with other countries
1. current account
2. capital account
3. official reserves account |
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Term
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Definition
goods or merchandise (visibles)
balance on this account = TRADE BALANCE!!!
services (invisibles)
interest or dividends on foreign investment
unilateral transfers
giving money without expecting a return (charity/aid) |
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Term
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Definition
records the net changes in a nation's international financial assets and liabilities over the BOP period
1. direct investment
2. portfolio investment
3. international movements of short-term capital/"hot money" (hedging) |
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Term
| Official Reserves Account |
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Definition
total credits and debits must be equal because of the double-entry accounting system used to report BOP
deals with:
gold imports/exports
changes in foreign exchange held by government
changes in liabilities to foreign central banks |
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