International Trade &

Globalization

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 What is Globalization?

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Education, Inc. publishing
•International Business 5e •Chapter 5-2
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 Globalization
•The expansion
of economic,
political, and
cultural
processes to the
point that they
become global in
scale and impact.

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Education, Inc. publishing
•International Business 5e •Chapter 5-3
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•Imports – Bringing goods or services into a
country for sale.
•Exports – Sending goods or services to
another country for sale.
•Exchange rates – The price of a nation’s
currency in terms of another nation’s
currency.
•Balance of Trade – The difference in value
between a country’s imports and exports.
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 International Trade

Purchase, sale, or exchange of goods and

services across national borders

 People have larger selection of products

 Important engine for job creation

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 •A
consequence of specialization
or the division of labor. The
participants in any economic
system must be part of a trading
network to obtain the products
they cannot produce efficiently for
themselves.

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 Trade and World Output

• World trade
• 80% merchandise
• 20% services

• World output impacts trade

• Growing output = growing trade
• Sluggish output = sluggish trade

• World trade grows faster

than world output

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•Free Trade – International trade left to
its natural course without tariffs, quotas,
or other restrictions.
•Tariff – Tax on imported goods or
services.
•Quota – A numerical limit on imports or
exports.

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 •Sanction – A trade penalty imposed by one
nation onto one or more other nations.

•Embargo – The partial or complete

prohibition of commerce and trade with a
particular country or a group of countries.

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 World’s Top Exporters

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 Trade Patterns

Merchandise trade among: Western European

Low- and trade is mostly intra-
middle-income regional trade
nations High-income
6% nations
60%

North America
34% imports twice as
High-income and low- and much from Asia as it
middle-income nations exports to Asia

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 Who Trades with Whom?

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 Trade and the
Dependent Nation
Total Total
dependence independence

Potential effects of dependence:

+ Infuses needed capital
+ Creates jobs and raises wages
+ Imports technology and skills
– Economic problems transferred
– Political turmoil can spill over

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 Absolute Advantage

Ability of a nation to produce a good more efficiently than any

other nation (greater output using same or fewer resources)

Riceland Tealand

1 resource unit = 1 ton rice or 1 resource unit = 1/6 ton rice or

1/5 ton tea 1/3 ton tea

Specialization and trade allows each to

produce and consume more
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 Trade Gains:
Absolute Advantage

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 Comparative Advantage
Inability of a nation to produce a good more efficiently than
other nations, but an ability to produce that good more
efficiently than it does any other good

Riceland Tealand

1 resource unit = 1 ton rice or 1 resource unit = 1/6 ton rice or

1/2 ton tea 1/3 ton tea

Specialization and trade allow each to

produce and consume more
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 Trade Gains:
Comparative Advantage

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 U.S. Imports

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•International Business 5e •Chapter 5 - 18
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 U.S. Exports

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 U.S. Trading Partners

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 U.S. Trade Balance

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 NAFTA

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 NAFTA

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 Mapping U.S. Clusters

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 http://www.netstate.com/economy/nc_economy.htm

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 Research Triangle Park

7000 acres
Largest research park in the U.S.
170+ companies
39,000+ high-tech workers
22.5 million sq. ft. of built space
1,800 start-up companies created since
1970

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Copyright © 2010 Pearson Education, International Business 5e Chapter 5 - 28
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