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MKTG 401 Ch. 2 Vocab
Gresham (ISUB 401)
Terms in this set (27)
General Agreement on Tariffs and Trade; a trade agreement signed by the US and 22 other countries shortly after WWII. The original agreement provided a process to reduce tariffs and created an agency to patrol world trade; the treaty and subsequent meetings have produced agreements significantly reducing tariffs.
History of GATT
Following WWI international trade had ground to a halt when nations followed the example set by the US with the passing of the Smoot-Hawley Act which raised average U.S. tariffs by nearly 60%. 60 countries followed suit and trade stalled as well as most economies leading to depressions across the globe. To ensure that something like this would not happen again world leaders created GATT
Smoot-Hawley Act (1930)
A tariff act sponsored by two congressmen that raised tariffs on over 20,000 imported goods to record levels. Was originally stated as a tariff to protect the american people and domestic businesses, it led to global retaliation and halted international trade abruptly.
The Marshall Plan
A massive aid package offered by US that gave food and economic assistance to Europe to help countries rebuild following WWII. Was also another move by the US to spread capitalism and try to prevent the spread of communism.
U.S. Multinational Corporations (MNC's)
Resistance to direct investment and increasing competition in export markets were major challenges at the close of the 1960's affecting.....?
Balance of Payments
The system of accounts that records a nation's international financial transactions. It keeps track of all imports and exports and seeks to find a balance if not a surplus.
Current account, capital account, and reserves account
What are the three accounts included in a Balance of Payments statement
a record of all merchandise exports, imports, and services plus unilateral transfers of funds. Primary interest to international business
a record of direct investment, portfolio investment, and short-term capital movements to and from countries
a record of exports and imports of gold, increases or decreases in foreign exchange, and increases or decreases in liabilities to foreign central banks
Consequences of Long-term Deficit
once the wealth of a country whose expenditures exceed its income has been exhausted that country must reduce its standard of living. (Value of US $ dropping in currency exchange)
The use by nations of legal barriers, exchange barriers, and psychological barriers to restrain entry of goods from other countries.
Seven Different Trade Barriers
3) voluntary export restraints (VER)
4) Boycotts and Embargoes
5) Monetary Barriers
7) Antidumping Penalties
a tax imposed by a government on goods entering at its borders.
quotas, boycotts, monetary barriers, and market barriers
a specific unt or dollar limit applied to a particular type of good
Voluntary Export Restraints (VERs)
an agreement between the importing country and the exporting country for a restriction on the volume of exports
Boycotts and Embargoes
one prohibits all purchases and imports from a country.
The other refuses to export or sell to another country
a government effectively regulates its international trade position by various forms of exchange control restrictions.
A monetary barrier used as a political weapon or response to difficult balance of payments situations. blockage cuts off importing by refusing to exchange currencies with another country.
Monetary barrier that is used to secure foreign exchange. often used by countries experiencing severe shortages of foreign exchange
a nontariff barrier including standards to protect health, safety, and product quality.
designed to prevent foreign producers from predatory pricing, a purchase whereby foreiign producers intentionally sells its products in the US for less than the cost of production to undermine the competition and take control of the market
The Omnibus Trade and Competitiveness Act
designed to deal with trade deficits, protectionism, and overall fairness of our trading partners
Market access, export expansion, and import relief
What are the three critical areas that the OTCA cover to help improve US trade?
World Trade Organization (WTO)
Formed in 1994, this organization encompasses the GATT structure and extends it to new areas that had not been adequately covered previously. All member countries have equal representation
The International Monetary Fund (IMF)
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