Ethnocentricitybelief that one's own ethnic group or culture is superior to that of othersExchange rateThe measure of how much one currency is worth in relation to another.Exportingselling products to another countryforeign direct investment(FDI)the buying of permanent property and businesses in foreign nationsForeign subsidiarya company owned in a foreign country by another company, called the parent companyFree Tradethe movement of goods and services among nations without political or economic barriersGeneral Agreement on Tariffs and Trade (GATT)a 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictionsImport quotaa limit on the number of products in certain categories that a nation can importImportingBuying products from another country.Investment Canada ActLegislation that provides rules to review significant investment in Canada by non-Canadians.International Monetary Fund(IMF)An international bank that makes short-term loans to countries experiencing problems with their balance of trade.Joint ventureA partnership in which two or more companies (often from different countries) join to undertake a major project.LicensingA 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).Multinational corporationAn organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management.Producers' cartelsOrganizations of commodity-producing countries that are formed to stabilize or increase prices to optimize overall profits in the long run.Strategic allianceA long-term partnership between two or more companies established to help each company build competitive market advantages.TariffA tax imposed on imports.Trade DeficitAn unfavourable balance of trade; occurs when the value of a country's imports exceeds that of its exports.trade protectionismThe use of government regulations to limit the import of goods and services.trade surplusA favourable balance of trade; occurs when the value of a country's exports exceeds that of its imports.Trading bloc(common market)A regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange; example is the European Union.Unites States-Mexico-Canada AgreementThe agreement among three member countries that coordinates trade. Replaces the NAFTA agreement.World BankAn autonomous United Nations agency that borrows money from the more prosperous countries and lends it to less-developed countries to develop their infrastructure.World Trade Organization(WTO)The international organization that replaced the General Agreement on Tariffs and Trade, and was assigned the duty to mediate trade disputes among nations.LO 1) Why should nations trade with other nations?1) No country is self-sufficient
2) Other countries need products that prosperous countries produce
3) Natural resources and technological skills are not distributed evenly around the worldLO 1) What is the theory of comparative advantage?A country should make and then sell those products it produces most efficiently but buy those it cannot produce as efficiently.LO 1)What is absolute advantage?A country has a monopoly on a certain product or can produce the product more efficiently than any other country.LO 3) Some ways in which a company can get involved in global business?Licensing, exporting, franchising, contract manufacturing, joint ventures and strategic alliances, foreign direct investment and sovereign wealth funds.LO 3) How do multinational corporations differ from other companies that participate in the global business?Also have manufacturing facilities or some other type of physical presence in different nations.LO 4) Forces that affect trading in global markets.Sociocultural, economic and financial, legal.LO 4) Forces that discourage participation in global business?Sociocultural, economic, financial, legal, physical and environmental.LO 5) What are some examples of trade organizations that try to eliminate trade barriers and facilitate trade among nations?WTO replaced the General Agreement on Tariffs and Trade. The WTO mediates trade disputes among nations. IMF is an international bank that makes short-term loans to countries experiencing problems with their balance of trade. The World Bank is a United Nations agency that borrows money from the more prosperous countries and lends it to less-developed countries to develop their infrastructures.