Chapter 10 Business in a Global Economy

If the demand for coffee in the United States is so high, why can we not simply produce the coffee beans in the US?

Chapter 10.1 The Global Marketplace

The Global Economy  The connected economies of all countries in the world.  International trade  Fuels the global economy  The exchange of goods and services between nations.  Referred to as globalization

Multi-National Corporation  A company that conducts business in many countries and has facilities set up around the world.  Examples?

Balance of Trade  Imports are greater than exports = Deficit  Exports are greater than imports = Surplus  The difference in value between a country’s imports and exports over a period of time = Balance of Trade

 Australia = Favorable trade balance  France = Unfavorable trade balance

Specialization  Specific focus on one area  Builds and sustains a market economy  Countries specialize in producing certain goods.  Comparative Advantage – producing a product more efficiently than another country.

Currency  Money  Different countries = different currency  Foreign Exchange Market  Exchange Rate – Price at which one currency can buy another.

If you had $100 (US), how much would you have in your country? Use Google Exchange Rate

Questions?  What factors have increased the demand for U.S. ice cream in other countries?  What obstacles might an ice cream exporter encounter when doing business in other countries?

Chapter 10.2 Global Competition

Protectionism  The practice of the government putting limits on foreign trade to protect businesses at home.  Efforts to keep out foreign competitors

Reasons to restrict trade:  Lower demand for products made at home  Possible unfair foreign competition  Industries related to national defense need to be protected (aircraft, satellites, weapons)  Cheap labor in other countries can lower wages or eliminate jobs at home  Risk of becoming too dependent on countries  Environmental standards and human rights may not be the same as ours

Trade Barriers  Tariff – tax placed on imports to increase their price in the domestic market.  Quota – limit placed on the number of a product that can be imported.  Embargo – ban on the import or export of a product. Rare

Trade Alliances  Several countries merge their economies into one huge market  Free Trade System  Due to global economy  Used to reduce limits on trade  Ex’s: NAFTA (North American Free Trade Agreement) – US, Canada, & Mexico  Also, European Union and Association of Southeast Asian Nations

Free Trade  Occurs when there are few or no limits on trade between countries.  Trade Alliances formed

Extending Activity  Trade Alliance Activity  List 10 countries in this alliance  Describe any trade restrictions between these countries.  Two interesting facts about the alliance.  Girls – Research the European Union (EU)  Boys – Research the Association of Southeast Asian Nations (ASEAN)  Be prepared to share!