The buying of permanent property and businesses in foreign nations.
foreign direct investment (FDI)
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.
absolute advantage
Selling products in a foreign country at lower prices than those charged in the producing country.
dumping
Selling products to another country.
exporting
The international organization that replaced the General Agreement on Tariffs and Trade, and was assigned the duty to mediate trade disputes among nations.
World Trade Organization (WTO)
Agreement that created a free-trade area among the United States, Canada, and Mexico.
North American Free Trade Agreement (NAFTA)
A company owned in a foreign country by another company, called the parent company
foreign subsidiary
A 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions.
General Agreement on Tariffs and Trade (GATT)
Investment funds controlled by governments holding large stakes in foreign companies.
sovereign wealth funds (SWFs)
An unfavorable balance of trade; occurs when the value of a country’s imports exceeds that of its exports.
trade deficit
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. An example is the European Union.
common market
A complete ban on the import or export of a certain product, or the stopping of all trade with a particular country.
embargo
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.
comparative advantage theory
A tax imposed on imports.
tariff
The difference between money coming into a country (from exports) and money leaving the country (for imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment.
balance of payments
A complex form of bartering in which several countries may be involved, each trading goods for goods or services for services.
countertrading
Buying products from another country.
importing
A foreign country’s production of private-label goods to which a domestic company then attaches its brand name or trademark; part of the broad category of outsourcing.
contract manufacturing
A favorable balance of trade; occurs when the value of a country’s exports exceeds that of its imports.
trade surplus
The use of government regulations to limit the import of goods and services.
trade protectionism
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).
licensing
The value of one nation’s currency relative to the currencies of other countries.
exchange rate
Lowering the value of a nation’s currency relative to other currencies.
devaluation
A long-term partnership between two or more companies established to help each company build competitive market advantages.
strategic alliance
The total value of a nation’s exports compared to its imports over a particular period.
balance of trade
A limit on the number of products in certain categories that a nation can import.
import quota
The movement of goods and services among nations without political or economic barriers.
free trade
A partnership in which two or more companies (often from different countries) join to undertake a major project.
joint venture
An organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational
multinational corporation