IB 150 Study Guide - Midterm Guide: New Trade Theory, Sherman Antitrust Act, General Agreement On Tariffs And Trade

54 views15 pages
Questions/Concepts for Exam I
Lecture 1 Introduction and Globalization
What is international business?
Business conducted across national boundaries
It involves formulation of strategies and tactics to take advantage of internal opportunities
and respond to internal threats
What does it include? (visible or commodity vs. invisible or service trade, FDI, etc.)
U.S. trading positions (about 25% of GDP in merchandise, large trade deficit, among the largest
exporters, etc.).
Which country is the largest trading partner of the United States? China, Canada, Mexico…
Brazil dropped four spots from last year
The US exports much more than what it imports, but has the cash to do it because it is
the nation that most invest in other countries in the world!!!!
Which country has the largest surplus with the U.S.? China
Which country is the world’s leading exporter? China
Which country has the most direct investment (ex. Setting up a company in another territory,
different than buying stocks) in the United States? United Kingdom, companies like HSBC
Who are the major trading partners of the United States? (Canada, Japan, China, Mexico, etc.)
Which country is the largest trading partner of the United States? China, Canada, Mexico…
Brazil dropped four spots from last year
The globalization of U.S. business, its impact on standard of living, jobs, competition, etc.
“The sourcing of goods and services from locations around the globe to take advantage of
national differences in the cost and quality of factors of production (labor, energy, land, and
capital)
companies hope to lower their overall cost structure and/or improve the quality or
functionality of their product offering – increasing their competiveness
What are the driving forces? Two main forces: Technology and WTO, among others.
i.1. Technological change enable international companies to improve and make more
profit
Technology takes jobs, machines do everything that was once done manually
2. Decline in Trade Barriers political, countries mostly decide to low barriers by decreasing
taxes
Cons – job losses in your country
Pros – foreign competition makes the markets better and allow you to buy shit for a better
price. Professor does not like trump’s declining the trade barriers, aka I love him
Borders are Disintegrating: The World Trade Organization
find more resources at oneclass.com
find more resources at oneclass.com
Unlock document

This preview shows pages 1-3 of the document.
Unlock all 15 pages and 3 million more documents.

Already have an account? Log in
Formal structure for continued negotiations and for settling disputes among nations
1947: nations met to reduce tariffs from 45% to less than 5% now – the General Agreement
on Tariffs and Trade (GATT) – most favored nation clause: granting the same trade
concessions to other countries so that they are not discriminated
1986: Negotiations began in Uruguay to continue reducing tariffs. Completed in 94, renamed
WTO
WTO has 164 members (2016)
Trade is good, otherwise you wouldn't do it
According to data from the World Trade Organization, the volume of world merchandise
trade has grown faster than the world economy since 1950 (see figure 1.1).
From 1970 to 2004, the volume of world merchandise trade expanded almost 26-fold,
outstripping world production, which grew about 7.5 times in real terms. (World
merchandise trade includes trade in manufactured goods, agricultural goods and mining
products, but not services.
World production and trade are measured in real, or inflation-adjusted, dollars.) As
suggested by Figure 1.1, due to falling barriers to cross-border trade and investment, the
growth in world trade seems to have accelerated since the early 1980s.
As shown in Figure 1.2, between 1992 and 2004 the total flow of FDI from all countries
increased by about 360 percent, while world trade doubled and world output grew by 35
percent.
As a result of the strong FDI flow, by 2003 the global stock of FDI exceeded $8.1 trillion.
In total, at least 61,000 parent companies had 900,000 affiliates in foreign markets that
collectively employed some 54 million people abroad and generated value accounting for
about one-tenth of global GDP.
The foreign affiliates of multinationals had an estimated $17.6 trillion in global sales, nearly
twice as high as the value of global exports of goods and service combined, which stood at
$9.2 trillion
What are the patterns of investment in international business? Massive FDI growth in recent
years
Foreign Direct Investment (FDI) occurs when a multinational company from one country
has an ownership position located in another country.
Developed countries get the bulk of FDI (69%) while developing countries get around
30%
Least developed countries get minimal FDI
Implications for managers – significant opportunities and risks around the world
Free market reforms are creating a potential group of new competitors
Lectures 2 and 3 Political, Legal Environment
Political/Legal environment always affects international business
The interaction between the political, economic, and legal systems of a country, which affects
the level of economic well-being of the country
System of government in a nation
find more resources at oneclass.com
find more resources at oneclass.com
Unlock document

This preview shows pages 1-3 of the document.
Unlock all 15 pages and 3 million more documents.

Already have an account? Log in
Roots of political systems in individualism and collectivism.
Political systems can be assessed according to two dimensions
Degree to which they emphasize collectivism as opposed to individualism
Degree to which they are democratic or totalitarian, ex: North Korea is a dictatorship
These dimensions are interrelated; systems that emphasize collectivism tend toward
totalitarian, while systems that place a high value on individualism tend to be democratic.
However, a large gray area exists in the middle. It is possible to have democratic societies
that emphasize a mix of collectivism and individualism. Similarly, it is possible to have
totalitarian societies that are not collectivist.
Collectivism
A political system that stresses the primacy of collective goals over individual goals
Advocate by Plato (427-347 BC) in the “Republic”
In modern times, the Socialists advocate collectivism
Socialism: a form of collectivism
Trace intellectual roots to Karl Marx (1818-1883)
Who argued that the pay of workers does not reflect the full value of their labor - unfair
Solution for the mais valia: dvocated state ownership of production, distribution, and
exchange (businesses), thereby ensuring that workers were fully compensated for their
labor
Two approaches:
Communists: socialism is achieved through violent revolution
Proved to be ineffective causing economic development
Social Democrats: socialism is achieved through democratic means
Individualism
The belief in the importance of the individual and the virtue of self-reliance and personal
independence
Individualism is social and economic affairs: free competition
An individual who intends his own gain is “led by an invisible hand to promote an end which
was no part of his intention. Nor is it always worse for the society that it was no part of it. By
pursuing his own interest, he frequently promotes that of the society more effectually than
when he really intends to promote it. I have never known much good done by those who
effect to trade for the public good.” – Adam Smith
Very American – different than Europe or japan, which are much more collectivist and protect
more worker’s rights (severance packages for EVERYONE)
Individualism and Economics
Leads to more competition
Two tenets of individualism
Tenets of Individualism:
An emphasis on the importance of guaranteeing individual freedom and self-expression
find more resources at oneclass.com
find more resources at oneclass.com
Unlock document

This preview shows pages 1-3 of the document.
Unlock all 15 pages and 3 million more documents.

Already have an account? Log in

Get OneClass Grade+

Unlimited access to all notes and study guides.

Grade+All Inclusive
$10 USD/m
You will be charged $120 USD upfront and auto renewed at the end of each cycle. You may cancel anytime under Payment Settings. For more information, see our Terms and Privacy.
Payments are encrypted using 256-bit SSL. Powered by Stripe.