The World Market Place:BUSINESS WITHOUT BORDERS

WHAT IS TRADE?

Business Opportunities are Growing

Advancement in Technology and falling trade barriers have created immense international business opportunities.

High population developing countries such as China, India, and Brazil continue to offer the most potential due to both their economic growth rate and their large population size.

Key Reasons for International Trade

Easily trade with other countries that have different resources than yourself.

Other high end graduates from other countries will work for much less than those of comparable Americans.

Global trade reduces the dependence on just one economic system.

Trading with other countries allows for generating of new ideas.

Competitive Advantage

The value of the production that a company gives up in order to produce the first good is the opportunity costs.

A country has an Absolute Advantage when it can produce more of a good than other nations using the same amount of resources.

A country has a Comparative Advantage if they tend to turn out those goods that have the lowest opportunity costs compared to other countries

Tools for Measuring International Trade

Balance of Trade: A basic measure of the difference between a nation’s exports and imports.

Balance of Payments: A measure of the total flow of money into or out of a country including the balance of trade.

Exchange Rates: A measure of the value of one nation’s currency relative to currency of other nations.

Importing and Exporting

Foreign Outsourcing is when a country has a contractual agreement to produce products, usually at a fraction of the cost of domestic products.

Importing: Is buying products from over seas that have already been produced, rather than contracting with those manufacturers.

Exporting: Producing products domestically and selling them abroad.

Barriers to International trade.

Sociocultural Differences: By embracing the cultural differences companies can be successful in marketing.

Infrastructure: Making sure the country you are entering trade with has good modes of transportation and reliable physical facilities.

Legal and Political Differences: The countries laws can have an effect on what a country brings in and ships out.

Free Trade: The Movement Gains Momentum

General Agreement on Tariffs and Trade (GATT): an international trade accord designed to encourage worldwide trade among its members.

International Monetary Fund: Basic mission is to promote international economic cooperation and stable growth.

North American Free Trade Agreement: was created to allow the free trade among the United States, Mexico, and Canada.