Business Management Agenda Journal Entry Chapter 7 Notes Export/Import Activity

1. Why is it important to import and export products? 2. Why do we trade with other countries? 3. Can you think of any products that the US imports and exports? Pick 2 to write about!

What is international business? International Business: all business activities needed to create, ship, and sell goods and services across national boarders. Also called: global business, international trade, and foreign trade. Domestic Business : making, buying, and selling goods within a country

International Trade Exchange of goods and services by different countries We purchase chocolate from Belgium and blue jeans from China

Why we trade One country might not be able to produce a good it wants Some countries have an advantage over other countries in producing particular goods and services E.g. France cannot produce oil because it has no oil fields

Advantages Absolute Advantage Ability to produce more of a good than another producer with the same quantity of inputs Different countries are endowed with different resources Comparative Advantage Producers should produce goods they are most efficient at producing Purchase from others goods they are less efficient at producing

Fundamentals of International Trade Imports: products bought from businesses in other countries Exports: products sold in other countries Trade Barriers: restrictions that reduce free trade among countries

How the Government Discourages International Business  Tariffs: a tax placed on products that are traded internationally  Quotas: limit on the quantity, or monetary amount of a product that can be imported from a given country  Embargos: total ban on the import of a good from a particular country (e.g. US embargo on Cuba)  Licensing Requirements: controlling imports by requiring that certain countries have a government import license

How the Government Encourages International Business  Free trade zone: designated area, usually around a where products can be imported duty-free, and then stored, assembled, and then used during manufacturing. Only when the product leaves the zone does the importer pay duty.  Most favored nation: allows a country to export into the granting country under the lowest country duty rates.  Free trade agreements: member countries agree to eliminate duties and trade barriers on products traded among members.  Common markets: members eliminate duties and other trade barriers, allow companies to invest freely in each member’s country, and allow countries to move freely across borders.

Today’s Activity: Create a Map of Imports and Exports Create a map of the world and show the US’s major trading partners Identify 4 countries that account for greatest imports and exports Use one color line to designate imports and one to designate exports For each country draw a picture of the product being imported and exported

Examples of I and E Imports agricultural products 4.9%, industrial supplies 32.9% (crude oil 8.2%), capital goods 30.4% (computers, telecommunications equipment, motor vehicle parts, office machines, electric power machinery), consumer goods 31.8% (automobiles, clothing, medicines, furniture, toys) (2003) Exports agricultural products (soybeans, fruit, corn) 9.2%, industrial supplies (organic chemicals) 26.8%, capital goods (transistors, aircraft, motor vehicle parts, computers, telecommunications equipment) 49.0%, consumer goods (automobiles, medicines) 15.0% (2003)