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Learning Objectives
Appreciate the magnitude of international trade Identify the direction of trade, or who trades with whom Explain the size, growth, and direction of U.S. foreign direct investment, worldwide and in the U.S. Identify who invests and how much is invested in U.S. Understand the reasons for entering foreign markets Comprehend that globalization of international firm occurs over seven dimensions and that a company can be partially global in some dimensions and completely global in others
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Note: Foreign sales refers to sales outside the home country of the company. All figures are based on 2005 fiscal year, as reported in 2006, except for Wal-Mart Stores, whose fiscal year ended January 31, 2006. This list excludes BP, which was ranked the 4th largest, because the companys annual report did not provide information on either foreign sales or net income from foreign operations. information not provided in company annual report. Source: Company annual reports, Fortune magazines 2006 Global 500 listing of worlds largest companies, http://money.cnn.com/magazines/fortune/global500/2006/full_list (July 14, 2006).
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International Trade
Increase in volume of trade
Source: Monthly Bulletin of Statistics (New York: United Nations, June 1997), pp. 92102 and 26671; Monthly Bulletin of Statistics (New York: United Nations, August 2000), pp. 92111 and 122; World Merchandise Exports by Region and Selected Economy, 1980, 1985, 1990, 1995 and 19992001, World Trade Organization, Statistics Division, www.wto.org/english/res_e/statis_e/statis_e.htm (June 30, 2002); World Exports of Commercial Services by Selected Region and Economy, 19802001, World Trade Organization, Statistics Division, www.wto.org/english/res_e/statis_e/statis_e.htm (June 5, 2002); World Service Exports by Region and Selected Economy, 199202, International Trade Statistics 2003 (Geneva: World Trade Organization, 2003), pp. 17174, 17981; and Growth in the Value of World Merchandise Trade by Region, 2004, International Trade Statistics 2005 (Geneva: World Trade Organization, 2005) pp. 20, 23.
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International Trade
Location of Worldwide Manufacturing Value-Added for Selected Regions (percentage of value added at current prices)
n.a. data not available. * 1980 data are actually for 1981, but listed at constant 1980 prices. Source: Foreign Direct Investment: Foreign Direct Investment Flows, United Nations Conference on Trade and Development, http://globstat.unctad.org/html/index.html (July 14, 2006).
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International Trade
Note: Rankings are based on trade data for 2004. Source: World Trade Organization, International Trade Statistics 2005 (Geneva: World Trade Organization, 2005), pp. 21, 23.
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Direction of Trade
Increasing Regionalization of Trade
Source: Monthly Bulletin of Statistics (New York: United Nations), July 2001, pp. 26671, July 2000, pp. 25861, June 1997, pp. 25562, June 1993, pp. 26671; Statistical Yearbook (New York: United Nations, 1969), pp. 37683; and International TradeWorld Exports by Provenance and Destination, http://unstats.un.org/unsd/mbs/t41-July05-online.pdf (July 14, 2006).
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Source: U.S. Aggregate Foreign Trade Data, 1999 and Prior Years, U.S. Foreign Trade Highlights, tables 10 and 11, U.S. Department of Commerce International Trade Administration, www.ita.doc.gov/td/industry/otea/usfth/aggregate/H99t10.txt, www.ita.doc.gov/td/industry/otea/usfth/aggregate/H99t.11.txt Table 11: Top 50 Suppliers of U.S. Imports in 2004, U.S. Department of Commerce International Trade Administration, www.ita.doc.gov/td/industry/otea/usfth/tabcon.html (July 14, 2006); Table 10: Top 50 Purchasers of U.S. Exports in 2004, U.S. Department of Commerce International Trade Administration, www.ita.doc.gov/td/industry/otea/usfth/tabcon.html (July 14, 2006).
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Foreign Investment
Divided into two parts
Portfolio investment The purchase of stocks and bonds to obtain a return on the funds invested Direct investment The purchase of sufficient stock in a firm to obtain significant management control
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Foreign Investment
FDI
Volume Outstanding Stock of FDI
The book value of all foreign direct investment
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Source: Various Country Fact Sheets, World Investment Report 2001, United Nations Conference on Trade and Development, Geneva, October 2001, and World Investment Report 2005, United Nations Conference on Trade and Development, Geneva, September 2005.
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Foreign Investment
Annual inflows of FDI
Where countries are investments being made and where do investments come from (Table 2.5)
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Table 2.5 Direction of Foreign Direct Investment (Annual Flows) for Selected Regions and Countries, 1985-2004 ($ billions)
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Table 2.5 Direction of Foreign Direct Investment (Annual Flows) for Selected Regions and Countries, 1985-2004 ($ billions)
Note: Because of rounding, values may not equal 100%. Source: Various Country Fact Sheets, World Investment Report 2001, United Nations Conference on Trade and Development, Geneva, October 2001, and World Investment Report 2005, United Nations Conference on Trade and Development, Geneva, September 2005.
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Foreign Investment
Level and Direction of FDI Can only get an idea of the rate and amounts of such investments and of the places in which they are being made Trade Leads to FDI Foreign trade is typically less costly and less risky than making a direct investment into foreign markets
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Foreign Investment
U.S. Foreign Direct Investment Abroad (figure 2.4a) Foreign Direct Investment in the United States (figure 2.4b)
Acquire Going Companies or Build Ones? (figure 2.5)
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Figure 2.4
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Figure 2.5 International Investment Position of the United States, 1976-2005 (billions of dollars)
Note: Figures are based on current cost. 2002 figures are preliminary. Source: Elena L. Nguyen, The International Investment Position of the United States at Year-End 2002, Survey of Current Business, July 2003, pp. 2021;
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Obtain Greater Profits Greater Revenue Lower Cost of Goods Sold Higher Overseas Profits as an Investment Motive
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