International Trade: Integration, Agreements, and Concepts
Stages of Economic Integration
- Free Trade Area (FTA): Members eliminate tariffs and quotas among themselves but maintain independent trade policies with non-member countries.
- Customs Union (CU): Members eliminate internal barriers and adopt a common external tariff (CET) against non-member countries.
- Common Market: Builds on a Customs Union by allowing free movement of labor and capital among member countries.
- Economic Union: Extends a Common Market by harmonizing economic policies (e.g., monetary,
Foundations of International Business: Trade, Strategy, and Markets
International Trade Theories Explained
Global business functions because countries engage in trade with one another. This section discusses three important international trade theories: comparative advantage, the Heckscher-Ohlin theory, and the new trade theory. These theories originated in different times and contexts, but they collectively help explain the workings of global business. We will examine these theories closely, discussing their relevance for today’s international business activities
Read MoreCountervailing Duties, Dumping, and Trade Agreements
Countervailing Duties
Countervailing duties (CVDs) are tariffs levied on imported goods to offset subsidies made to producers of these goods in the exporting country. CVDs are meant to level the playing field between domestic producers and foreign producers who can sell at a lower price due to government subsidies. Unchecked subsidized imports can severely affect domestic industries, leading to factory closures and job losses. The World Trade Organization (WTO) has procedures to determine when countervailing
Read MoreComparative Advantages and International Trade Dynamics
Comparative Advantages and International Trade
Gains from Trade: Trade is based on comparative advantages, rather than absolute advantages.
World Development and Globalization
The world has been evolving towards a more liberalized global market, reducing protectionism and creating free trade areas. Tariffs and restrictions have been reduced, leading to the “vertical disintegration” of production. Nowadays, a product may be “produced” in several countries. For example, some parts may be made
Read MoreGlobalization and International Business Strategy
Globalization: An In-Depth Look
Globalization can be viewed from several perspectives:
World Scale
- Shift from national economies with borders (autarchies).
- Convergence of economic dimensions and variables across many countries (consumer preferences, standardized products, new markets, economic policies, etc.).
Country Level
The intensity of an economy’s interactions with the rest of the world:
- Exports + Imports as a percentage of GNP.
- Inflows and outflows of Foreign Direct Investment (FDI).
Industry Level
- Industries
Understanding Free Trade Agreements, Customs Unions, and Trade Dynamics
Understanding Free Trade Agreements and Trade Dynamics
Free Trade Agreement (FTA) or Area: An agreement among several countries to eliminate internal barriers to trade but to maintain existing barriers against nonmember countries. Tariffs (taxes on imported goods) between members are eliminated. Each member country maintains its own tariffs with respect to nonmembers. Such agreements usually do not free all trade immediately; rather, there are typically a number of products for which tariffs are
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