Competition Flashcards
(19 cards)
Why do nations trade
Countries trade when they each have a surplus of the product they specialise in and want a product the other country specialises in
What is absolute advantage
A country can produce at a lower cost than any other country
OR
They are the only country that can provide a product
What is comparative advantage
Each country specialises in the goods it can produce most readily and cheaply
What are the 2 ways to measure international trade
Balance of Trade (Exports - Imports) -> Trade deficit
Balance of payments (Total inflow - total outflow)
What is the reason to restrict international trade
From internal political and economic pressures to mistrust other nations
What are the 3 types of trade barriers on international trade
Natural barriers
Tariff barriers
Non-tariff barriers
What are the 2 tariff barriers
Tax
Protective tariffs to make imported products less attractive to buyers
What are the 4 nontariff barriers
Import quotas
Embargo
Foreign exchange control
Currency devaluation
What are the 6 reasons FOR trade restrictions
To equalise a nation’s balance of payments
To protect new or weak industries
To protect domestic jobs
To protect national security
To protect the health of citizens
To retaliate for another country’s trade restrictions
What are the 6 reasons reasons AGAINST trade restrictions
Higher prices for consumers
Restriction of consumers’ choices
Loss of jobs
Misallocation of international resources
To retaliate for another country’s trade restrictions
What are two organisations working to foster trade
World Bank
International Monetary Fund
What do international economic communities do
Reduce trade barriers among members of the economic community
Name 3 economic communities
European Union
South African Development Community (SADC)
North American Free Trade Agreement (NAFTA)
What are the 4 methods of entering global markets
Licensing
Exporting
Joint ventures
Direct foreign investment
What is countertrade
Effectively an international barter transaction
Part or all of payment for goods or services in the form of other goods and services
What are two more methods of entering international business
Strategic alliances
Trading companies
What are 3 threats and opportunities in the global marketplace
Political consideration
Cultural differences
Economic environment
What are 4 advantages of multinational companies
Often headquartered in more than one country
Can sidestep restrictive trade and licensing requirements
Can move operations depending on which location offers more favourable conditions
Can tap into vast knowledge and technological expertise of a global workforce
