Comm

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Export-import Bank

Back 1

US govt agency facilitates US EXPORTS, loans money directly to foreign companies that import US products or guarantees loans from private lenders

Front 2

private export funding corporation (PEFCO)

Back 2

owned by group of private US banks that lend money to foreign to companies that import US products; works closely with Ex-Im Bank

Front 3

Overseas Private Investment Corporation (OPIC)

Back 3

US government agency that encourages US companies to invest in foreign countries; ensures US companies won't lose money bc injures US investment in foreign countries against

1. currency devaluation

2. foreign govt takes control of business investment (several loan programs to help US exporters)

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General Agreement on Tariffs and Trade (GATT)>world trade organizations (WTO)

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160 members (95% of world trade)

-most favored national rule (MFN) trade policies can't discriminate

-trade policies= reciprocity (give and receive same consideration

-TP must be based on binding and enforceable commitments

-TP must be transparent & easily understood

-WTO members acknowledge developing/stuggling econ may need temporary relief from binding agreements

Front 5

world bank

Back 5

after WW2; make loans to countries to help develop economies

-US=largest shareholder (not majority owner)

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International Monetary Foundation

Back 6

promotes international trade and helps countires create and maintain stable economies

-helps primarily with exchange rate problems

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Bank of International Settlements (BIS)

Back 7

facilitate banking & sets international banking standards; headquartered in Switzerland

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UN

Back 8

fosters world peace and cooperation; headquartered in New York

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European Union

Back 9

28 countries; European countries unit (euro); eliminated tariffs & restrictions between member countries and agreed to act as one economic unit in dealing w non-EU countries

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North American Free Trade Agreement (NAFTA)

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Us, Canada, & Mexico into an economic unit; eliminated barriers (tariffs, quotas,etc); controversial-US may have lost thousands of jobs

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Central American Free Trade Agreement (CAFTA)

Back 11

econ agreement between US, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the DR

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Association of Southeast Asian Nations (ASEAN)

Back 12

econ agreement between Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Vietnam, Cambodia, Laos, Myanmar

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Commonwealth of Independent States (CIS)

Back 13

econ agreement between 11 republic that formally composed the Soviet Union-Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan

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Common Market of the Southern Cone (MERCOSUR)

Back 14

econ agreement bt Argentina, Brazil, Paraguay, Uruguay, Venezuela; Columbia, Ecuador, Peru, Bolivia, & Chile are associate countries.

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Organization for Economic Cooperation and Development (OECD)

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organization that promotes free trade bt member countries; 34 countries in NA, Europe, E Asia, & South Pacific; includes US

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dumping

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selling products to other countries below the cost incurred to produce those products in order to foster exports

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domestic business

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all inputs/outputs= domestic

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international business

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(oil produced in foreign country and sold in US)

-has a home country

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global business

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inputs, processes, & outputs come from, are in, and go to markets throughout the world

-has no technical "home" country; island

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free trade

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buying/selling products free from government intervention

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comparative advantage

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business in different countries have an advantaeg in producing certain products (should be used by countries to produce superior products at lower costs than other countries)

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outsourcing

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a business uses another business to build or service all or part of it's product (contract manufacturing>business enters into another business to buy goods manufactured by another business

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offshoring

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use of foreign factors of production instead of or in addition to domestic factors of production

Front 24

increasing value through globalization

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-buy creating new markets and new customers for products

-decreased costs

-decreased risks by diversifying markets and products

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licensing

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LICENSEE is granted the right (LICENSE) to use intellectual property; often for a fee

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joint ventures

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2 or 2+parties enter into a business relationship for a single enterprise or transaction; require each party to make significant investments which is lower than if single company conducted the business (potential profit=lower, risk=lower)

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franchising

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business sells right to use name, process & products (McDonalds)

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strategic alliance

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businesses in different countries help each other to produce or sell multiple products over time

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direct foreign investment (DFI)

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business directly invests in assets to conduct business in different countries (starting new business, expanding current bus or buying existing business); riskiest, but greatest potential for profit

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major factors of doing global business

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1) culture

2) government regulation: trade barriers (protectionism), embargo, quota, tariffs

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foreign exchange rate

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rate to covert one currency to another

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depreciated

Back 32

decreases in value

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appreciated

Back 33

increased in value

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balance of payments

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summary of economic transactions between country and other countries

1) current account

2) capital account

3) financial account

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capital account

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financial assets transferred from one country to another because the owner moves from one country to another

-inclues transfer of ownership from one country to another of intangible assets (patents, trademarks, & copyrights)

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current account

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three elements

1)exports and imports

2)factor payments=include payments of interest and dividends

3)transfer payments= include aid and gifts from one country to another

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financial account

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3 elements

-direct foreign investment

-buying/selling of long term financial assets (debt and stock)

-buying and selling short term financial assets (debts)

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negative trade balance

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imports > exports (trade deficit)

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determinants of foreign exchange

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-income level

-price level

-interest rates

-govt actions

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purchasing power parity

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inflation hurts value of country's currency

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floating exchange rate system

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govt permits price of currency to be determined by free market

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managed floating exchange rate system

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if value rapidly changes, govt steps in

1)restrict flow of currency

2)govt buy & sell their currency & currency of other countries

3)impact level of income& interest rates

4) impose tariffs (increase tariffs, decrease value of foreign currency)

5) limit imports/exports

Front 43

fixed exchange rate system

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SAudi Arabia fixes rate of it's currency to US

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FX rates

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affect demand and supply, revenue and cost

-risk & benefit to them

business like: revenue= appreciating currencies

& cost=depreciating currencies

Front 45

trade accounts

Back 45

export less imports

(aka balance of trade)