(See related pages)
Below are the key terms featured in this chapter. Clicking on a term will reveal its definition. The textbook's full glossary is also available for online searching.
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| Absolute advantage | 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 (See page(s) 64) |
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| Balance of payments | 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 (See page(s) 67) |
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| Balance of trade | A nation’s ratio of exports to imports (See page(s) 67) |
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| Common market | 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 (See page(s) 85) |
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| Comparative advantage theory | 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 (See page(s) 64) |
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| Contract manufacturing | A foreign country’s production of private-label goods to which a domestic company then attaches its brand name or trademark; also called outsourcing (See page(s) 74) |
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| Counter-trading | A complex form of bartering in which several countries may be involved, each trading goods for goods or services for services (See page(s) 81) |
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| Dumping | Selling products in a foreign country at lower prices than those charged in the producing country (See page(s) 71) |
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| Embargo | A complete ban on the import or export of a certain product (See page(s) 83) |
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| Exchange rate | The value of one nation’s currency relative to the currencies of other countries (See page(s) 80) |
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| Exporting | Selling products to another country (See page(s) 63) |
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| Foreign direct investment | The buying of permanent property and businesses in foreign nations (See page(s) 70) |
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| Foreign subsidiary | A company owned in a foreign country by another company (called the parent company) (See page(s) 76) |
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| Free trade | The movement of goods and services among nations without political or economic obstruction (See page(s) 63) |
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| General Agreement on Tariffs and Trade (GATT) | A 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions (See page(s) 83) |
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| Import quota | A limit on the number of products in certain categories that a nation can import (See page(s) 83) |
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| Importing | Buying products from another country (See page(s) 63) |
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| International Monetary Fund (IMF) | An international bank that makes short-term loans to countries experiencing problems with their balance of trade (See page(s) 84) |
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| Joint venture | A partnership in which two or more companies (often from different countries) join to undertake a major project or to form a new company (See page(s) 74) |
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| Licensing | 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) (See page(s) 72) |
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| Multinational corporation | An organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management (See page(s) 77) |
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| North American Free Trade Agreement (NAFTA) | Agreement that created a free-trade area among Canada, the United States, and Mexico. (See page(s) 87) |
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| Producers’ cartels | Organizations of commodity-producing countries that are formed to stabilize or increase prices to optimize overall profits in the long run. (An example is OPEC, the Organization of Petroleum Exporting Countries.) (See page(s) 85) |
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| Strategic alliance | A long-term partnership between two or more companies established to help each company build competitive market advantages (See page(s) 75) |
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| Tariff | A tax imposed on imports (See page(s) 83) |
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| Trade deficit | An unfavourable balance of trade; occurs when the value of a country’s imports exceeds that of its exports (See page(s) 67) |
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| Trade protectionism | The use of government regulations to limit the import of goods and services. Advocates of trade protectionism believe that it allows domestic producers to survive and grow, producing more jobs. (See page(s) 82) |
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| World Bank | An autonomous United Nations agency that borrows money from the more prosperous countries and lends it to less-developed countries to develop their infrastructure (See page(s) 85) |
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| World Trade Organization (WTO) | The international organization that replaced the General Agreement on Tariffs and Trade, and was assigned the duty to mediate trade disputes among nations (See page(s) 83) |