The Global Economy “Its All Relative” Copyright © Texas Education Agency, All rights reserved.

OBJECTIVES : Understand the impact of global trade on the U.S. economy Explain the role of balance of trade in relation to imports and exports Compare & contrast emerging economies with existing economies Evaluate the growth of multinational companies Discuss preindustrial and postindustrial economic systems Explain the importance of finding the right mix for foreign markets Copyright © Texas Education Agency, All rights reserved.

TERMINOLOGY: NAFTA: North American Free Trade Agreement WTO: World Trade Organization EU: European Union International Trade: The sale of products/services to people in other countries Imports: Products/services purchased from another country Exports: Products/services sold to another country Indirect Exporting: Marketers with exporting experience represent the exporting company; arranges for the sale of products in other countries Direct Exporting: Company handles all responsibilities to market products in other countries Copyright © Texas Education Agency, All rights reserved.

Balance of Trade: The difference between a country’s imports and exports Foreign Production: A company owns and operates production facilities in another country Joint Venture: Two or more companies in different countries with common interests develop a relationship to join in common business activities Multinational Companies: Businesses that have operations all over the world and conduct planning for worldwide markets. Preindustrial economy: Based on agriculture & raw material development; low standard of living. Postindustrial economy: Based on mix of business and consumer products/services produced & marketed in the global marketplace Gross Domestic Product: The total $ value of all good/services produced within a country in one year Gross National Product: The total $ value of all goods/services produced Copyright © Texas Education Agency, All rights reserved.

Quota: Limits on the numbers of certain types of products foreign companies can sell in a country Tariffs: Taxes placed on imported products to increase the selling price Subsidy: Money provided to a business to help in the development and sale of products Standard of Living: A measure of the quality of life for the citizens of a country Productivity: The average output by workers for a specified period of time Purchasing Power: The amount of goods/services that can be bought with a specific $ amount of money Consumer Price Index: The variance in the cost of a specified set of goods over time Business Cycle: Consists of four stages: Prosperity, Recession, Depression and Inflation Copyright © Texas Education Agency, All rights reserved.

I. U.S. and International Trade World Interdependence –Approximately 1/3 of worldwide production is sold outside of the “home” country –The bulk of products Americans use daily are imported –U.S. exports music, movies, cars, airplanes, and food items International Trade is Changing –Raw materials once were an abundant commodity; today it makes up less than 1/3 of the world’s exports –Manufactured goods/services are most popular Copyright © Texas Education Agency, All rights reserved.

Services (communications, travel, education & financial) are most popular exchanges between countries Data is transferred via phone, fiber optics, or satellite on daily basis II. Businesses are Going Global Markets are changing –Foreign markets are enticing to domestic businesses who experience dropping sales & profit –Another way to expand competition –Increasing worldwide demand for products Benefits of international marketing –Government support is available Copyright © Texas Education Agency, All rights reserved.

Importance of International Trade U.S. economy: Over 250,000 businesses export products Accounts for over 11% of GNP 95% of U.S. exporting businesses are small to medium sized Manufacturers export over $500 billion of products Wholesalers export over $100 billion U.S. is second largest exporter Germany is #1 exporter of products U.S. is #1 importer of products Germany is #2 importer of products U.S. had 1 st trade deficit of 20 th Century in 1971 (imports exceeded exports by over $1 billion that year) Copyright © Texas Education Agency, All rights reserved.

III. 2000: Top 25 Companies ICBC (China; banking) 1 China Construction Bank (banking) 2 JP Morgan Chase (banking) 3 General Electric ( U.S. conglomerate, owns NBC and Comcast) 4 Exxon Mobile (oil & gas) 5 HSBC Holdings (UK banking) 6 Royal Dutch Shell Oil (Netherlands, oil & gas) 7 Agricultural Bank of China ( China, banking) 8 PetroChina (China, oil) 9 Berkshire Hathaway (U.S. Diversified Financial) 10 Bank of China (banking) 11 Wells Fargo (U.S. banking) 12 Chevron (U.S. oil & gas) 13 Copyright © Texas Education Agency, All rights reserved.

Continued Volkswagen Group (Germany world’s largest auto maker) 14 Apple (U.S. Tech Hardware & Equipment) 15 WalMart (U.S. retailing) 16 Gazprom (Russia oil & gas—largest producer in the world) 17 BP (U.K. Oil & Gas) 18 Citigroup (U.S. Banking) 19 Petrobras (Brazil Oil & Gas) 20 Source: Copyright © Texas Education Agency, All rights reserved.

Interpreted… Global 2000 companies study: –Include 63 countries –$38 trillion in revenues –$159 trillion in assets –Employ 87 million worldwide –Country Ranking: U.S. (543 members) Japan (251 members) China (136 members) Copyright © Texas Education Agency, All rights reserved.