sg 6 -7

56問 • 2年前

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National economic policies that restrict free trade. Usually intended to raise revenue or protect domestic industries from foreign competition.

Protectionism

The checkpoint at national ports of entry where officials inspect imported goods and levy tariffs.

Customs

–A tax on imports (e.g., Citrus, textiles).

Tariff

Government policy, regulation, or procedure that impedes trade.

Nontariff trade barrier

Quantitative restriction on imports of a specific product (e.g., Imports of Japanese cars).

Quota

Rules or laws that hinder foreign direct investment (e.g., Mexico’s restrictions in its oil industry)

Investment barriers

CONSEQUENCES OF PROTECTIONISM

Reduced supply of goods to buyers. Price inflation. Reduced variety, fewer choices available to buyers. Reduced industrial competitiveness. Various adverse unintended consequences (e.g., While the home country dithers, other countries can race ahead)

Weak or young economies sometimes need protection from foreign competitors. e.g., India imposed barriers to shield its huge agricultural sector, which employs millions.

Protection of the national economy

– A young industry may need protection, to give it a chance to grow and succeed. e.g., Japan long protected its car industry.

Protection of an infant industry

Canada restricts foreign investment in its movie and TV industries.

National culture and identity

Protection helps ensure the development of industries that bolster the nation’s economy. • Countries create better jobs and higher tax revenues when they support high value-adding industries, such as IT, automotive, pharmaceuticals, or financial services.

National strategic priorities

Protection helps preserve domestic jobs, at least in the short term. • However, protected industries become less competitive over time, especially in global markets, leading to job loss in the long run.

Increase employment

– Standardized worldwide system that determines tariff amount.

Harmonized code

are government grants (monetary or other resources) to firm(s), intended to ensure their survival or success by facilitating production at reduced prices, or encouraging exports.

Subsidies

is the absence of government coercion so that people can work, produce, consume, and invest however they want to.

economic freedom

introduced the concept of most favored nation (renamed normal trade relations), according to which each member nation agreed to extend the tariff reductions covered in a trade agreement with one country to all other countries. A concession to one became a concession to all.  In 1995 the ___ was superseded by the World Trade Organization (WTO), and grew to include 150 member nations.  The ______ and WTO presided over the greatest global decline in trade barriers in history

GATT

HOW FIRMS CAN RESPOND TO GOVERNMENT INTERVENTION

 Research to gather knowledge and intelligence.  Understand trade and investment barriers abroad. Scan the business environment to identify the nature of government intervention.  Choose the most appropriate entry strategies.  Most firms choose exporting as their initial strategy, but if high tariffs are present, other strategies should be considered, such as licensing, or FDI and JVs that allow the firm to produce directly in the market.

 A geographic area consisting of two or more countries that agree to pursue economic integration by reducing tariffs and other barriers to the cross-border flow of products, services, capital, and, in more advanced cases, labor

ECONOMIC BLOC

Simplest, most common arrangement. Member countries agree to gradually eliminate formal trade barriers within the bloc, while each member maintains an independent international trade policy with countries outside the bloc. One example is NAFTA.

Free trade area

Similar to a free trade area except the members harmonize their trade policies toward nonmember countries, by enacting common tariff and nontariff barriers on imports from nonmember countries. MERCOSUR is an example.

Customs union

Like a customs union, except products, services, and factors of production such as capital, labor, and technology can move freely among the member countries. e.g., The EU countries put in place many common labor and economic policies.

Common market

: Like a common market, but members also aim for common fiscal and monetary policies, and standardized commercial regulations. The EU is moving toward an economic union by forming a monetary union with a single currency, the euro.

 Economic union

OTHER ECONOMIC BLOCS

 Caribbean Community and Common Market (CARICOM).  ComunidadAndina de Naciones (CAN).  Association of Southeast Asian Nations (ASEAN).  Asia Pacific Economic Cooperation (APEC).  Australia and New Zealand Closer Economic Relations Agreement (CER)

is a form of money and a unit of exchange.

Currency

is the price of one currency expressed in terms of another; the number of units of one currency that can be exchanged for another.

 Exchange rate

is the potential harm that arises from changes in the price of one currency relative to another.

Currency risk

can be easily exchanged for other currencies.

convertible currency

when it is not acceptable for international transactions.

currency is nonconvertible

The rapid sell-off by residents or foreigners of their holdings in a nation’s currency or other assets, usually in response to a domestic crisis that causes investors to lose confidence in the country’s economy

Capital flight

: All forms of internationally-traded monies including foreign currencies, bank deposits, checks, and electronic transfers.

Foreign exchange

The global marketplace for buying and selling national currencies.

foreign exchange market

The greater the supply of a currency, the lower its price. The lower the supply of a currency, the higher its price. The greater the demand for a currency, the higher its price. The lower the demand for a currency, the lower its price.

true

is the increase in value of the goods and services produced by an economy.

Economic growth

regulates the money supply, issues currency and manages the exchange rate, to accommodate economic growth.

central bank

refers to increases in the prices of goods and services; thus, money buys less than before. • Some countries (e.g., Argentina, Israel, Russia) have experienced hyperinflation. • High inflation erodes a currency’s purchasing power. • Interest rates and inflation are positively related; high inflation forces banks to pay high interest. • That is, investors expect to be compensated for inflationinduced decline in

Inflation

refers to investor behavior, such as herding behavior or momentum trading.

Market psychology

 Governments intervene to influence the value of their own currencies, e.g., the Chinese government regularly intervenes in the foreign exchange market to keep the renminbi undervalued, to help ensure exports.

Government Action

is the nation’s balance sheet of trade, investment, and transfer payments with the rest of the world. It reflects the difference between the total amount of money coming into and going out of a country

Balance of payments

Exports exceed imports; may result when the exporter’s currency is undervalued, as in China’s official policy regarding its currency.

Trade surplus –

Imports exceed exports; the government may devalue the nation’s currency to correct a trade deficit.

Trade deficit

The difference between the value of a nation’s exports and its import

balance of trade

dissolved in 1971, as the world economy was evolving and governments could no longer maintain fixed exchange rates on the gold standard

Bretton Woods

Agency that promotes exchange rate stability, monitors exchange systems, provides funding to developing economies.

International Monetary Fund (IMF):

: Agency that provides loans and technical assistance to combat global poverty around the world.

• World Bank

Currency values are determined by market forces.  Their exchange rates are determined daily by supply and demand. gives governments the flexibility to modify monetary policy to fit the circumstances they face at any time.

The Floating Exchange Rate System

 This approach is similar to the system used under the Bretton Woods agreement and is sometimes called a pegged exchange rate system.  The value of a currency is set relative to the value of another (or to the value of a basket of currencies) at a specified rate. As this reference value rises and falls, so does the currency pegged to

 The Fixed Exchange Rate System

The institutional framework, rules, and procedures by which national currencies are exchanged for one another.

International monetary system

The collection of financial institutions that facilitate and regulate the flows of investment and capital funds worldwide. It includes the national and international banking systems, the international bond market, and national stock markets.

Global financial system

. International transactions require firms to deal with huge sums of foreign exchange.

The Firm

Facilities for trading securities and bonds

National Stock Exchanges and Bond Markets.

Lend money to finance business activity, play a key role in nations’ money supplies, and exchange foreign currencies.

Commercial Banks

Regulate money supply, issue currency, manage exchange rates, control national reserves.

• Central Banks.

Supervises Central Bank monetary policy and other activities.

Bank for International Settlements.

provides the framework of and determines the code of behavior for the international monetary system. To help manage currency valuation worldwide, the IMF established a type of international reserve known as the Special Drawing Right (SDR).

International Monetary Fund. IMF

is a unit of account or a reserve asset, a type of currency central banks use to supplement their existing reserves in transactions with the IMF and manage international exchange rates

SDR

Originally known as the International Bank for Reconstruction and Development, the World Bank (www.worldbank.org) was founded to fund reconstruction of Japan and Europe after World War II.

The World Bank

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Jennie Rose Carpo · 24問 · 2年前

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