| Direct investment in business operations in a foreign country. The acquisition or construction of physical capital by a firm from one (source) country in another (host) country | Foreign Direct Investment (FDI) |
| International treaty that committed signatories to lowering barriers to the free flow of goods across national borders and led to the World Trade Organization (WTO) | Genetal Agreement on Tariffs and Trade (GATT) |
| refers to the shift toward a more integrated and interdependent world economy.
Trend away from distinct national economic units and toward one huge global market | Globalization |
| Moving away from an economic system in which national markets are distinct entities, isolated by trade barriers and barriers of distance, time, and culture, and toward a system in which national are merging into one global market | Globalization of markets |
| Trend by individual firms to disperse parts of their productive processes to different locations around the globe to take advantage of differences in cost and quality of factors of production. | Globalization of production |
| Any firm that engages in international trade or investment. | International Business |
| International institution set up to maintain order in the international monetary system | International Monetary Fund (IMF) |
| Occurs when a firm exports goods or services to consumers in another country | International Trade |
| The power of microprocessor technology doubles and its cost of production falls by half every 18 months | Moore's Law |
| A firm that owns business operations in more than one country | Multinational enterprise (MNE) |
| International organization made up of representatives from 193 countries. It is headquartered in New York City and was formed in 1945 to promote peace, security and cooperation | United Nations |
| International institution set up to promote general economic development in the world's poorer nations | World Bank |
| Organization that succeeded the General Agreement on Tarriffs and Trade (GATT) as a result of the succesfull completion of the Uruguay Round of GATT negotiations | World Trade Organization (WTO) |
| Ability of a country to produce a good more efficiently than any other country at producing it. | Absolute Advantage |
| Theory that a country should specialize in producing goods and services it can produce most efficiently even if this means buying goods from other countries that it could produce more efficiently itself. A country is said to have a comparative advantage in the production of such goods and services. | Comparative Advantage |
| Costs stay the same as specialization increases | Constant returns to specialization |
| Cost advantages associated with large-scale production. | Economies of scale |
| Absence of barriers to the free flow of goods and services between countries | Free Trade |
| Economic philosophy advocating that countries should simultaneously encourage exports and discourage imports. | Mercantilism |
| Situation in which all countries can benefit even if some benefit more than others | Positive-sum game |
| Situation in which an economic gain by one country results in a economic loss by another | Zero-sum game |
| National accounts that track both payments to and receipts from foreigners | Balance of payments account |
| In the balance of payments, records transactions involving the exports or import of goods and services. | Current Account |
| Argument that combining location-specific assets or resource endowments and the firm's own unique assets ofter requires FDI, it requires the firm to establish production facilities where those foreign assets or those resource endowments are located | Electic paradigm |
| Sale of products produced in one country to residence of another country | Exporting |
| Knowledge spillovers | Externalities |
| The amount of foreign direct investment undertaken over a given time period (normally one year) | Flow of FDI |
| Direct investment in business operations in a foreign country. The acquisition or construction of physical capital by a firm from one (source) country in another (host) country. | FDI |
| Establishing a new operation in a foreign country | Greenfield investment |
| Flow of foreign direct investment into a country | Inflows of FDI |
| A theory that seeks to explain why firms often prefer FDI over licensing as a strategy for entering foreign markets | Internalization Theory |
| Occurs when a firm (lincensor) lincenses the right to produce its product, use its production processes, or use its brand name or trademark to another firm (the licensee). In return for giving the licensee these rights, the licensor collects a royalty fee on every unit the licensee sells. | Licensing |
| Advantages that arise from using resource endowments or assets that are tied to a particular foreign location and that a firm finds valuable to combine with its own unique assets (such as the firm's technological, marketing, or management know-how). | Location-specific advantages |
| Asspects of a market that make transactions less efficient than they could be or that endanger the strategic advantages held by a company. | Market imperfections |
| An agreement that would make it illegal for signatory states to discriminate against foreign invesors, would have liberalized rules governing FDI between OECD states | Multilateral agreement on investment (MAI) |
| Arises when two or more enterprises encounter each other in different regional markets, national markets or industries | Multipoint competition |
| An industry composed of a limited number of large firms. | Oligopoly |
| A Paris-based intergovernmental organization of "wealthy" nations whose purpose is to provide its 35 member states with a forum in which governments can compare their experiences, discuss the problems they share and seek solutons that can then be applied within their own national contexts. | Organization for Economic Co-operation and Development (OECD) |
| Flow of foreign direct investment out of a country | Outflows of FDI |
| The total accumulated value of foreign - owned assets at a given time. | Stock of foreign direct investment |
| Tariff levied as a proportion of the value of an imported good | Ad valorem tariff |
| Bureaucratic rules adopted by governments used to restrict imports or boost exports | Administrative trade policies |
| Policies to design to punish foreign firms that engage in dumping and thus protects domestic producers from unfair foreign competition | Antidumping policies |
| Antidumping duties | Countervailing duties |
| Act passed in 1996, similar to the Helmes-Burton Act, aimed at Libya and Iran | D'Amato Act |
| Selling goods in a foreign market for less than their cost of production or below their "fair" market value | Dumping |
| Act passed in 1996 that allowed Americans to sue foreign firms that use Cuban property confiscated from them after the 1959 revolution. | Helms-Burton Act |
| Direct restriction on the quantity of a good that can be imported into a country. | Import quota |
| Demand that some specific fraction will be produced domestically | Local content requirement |
| Tariff levied as a fixed charge for each unit of good imported | Specific tariff |
| Government financial assistence to a domestic producer | Subsidy |
| Tax levied on imports | Tariff |
| Quota on trade imposed from the exporting country's side, instead of the importer's: usually imposed at the request of the importing country's government | Voluntary export restraint (VER) |
| 1969 Agreement among Bolovia, Chile, Ecuador, Columbia and Peru to establish a customs union | Andean Pact |
| An attempt to establish a free trade area among Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, the Philippines, Thailand and Vietnam | Association of Southeast Asian Nations (ASEAN) |
| Unites six CARICOM members in agreeing to lower trade barriers and harmonize mocroeconomic and monetary policies | Carribean Single market and economy (CSME) |
| An association of English-speaking Caribbean states that are attempting to establish a customs union | CARICOM |
| The agreement of the member states of the Central American Common Market joined by the Dominican Republic to trade freely with the United States | Central America free trade agreement (CAFTA) |
| A trade pact among Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, which began in the early 1960s but collapsed in 1969 due to war | Central American Common Market |
| A group of countries committed to 1, removing all barriers to the free flow of goods, services, and factors of production between each other 2, pursuing a common external trade policy and 3, allowing factors of productions to move freely among members | Common Market |
| Group of countries committed to 1, removing all barriers to the free flow of goods and services between each other and 2, pursuit of a common external trade policy | Customs union |
| Group of countries committed to 1, removing all barriers to the free flow of goods, services, and factors of production between each other 2, the adoption of a common currency 3, the harmonization of tax rates 4, the pursuit of a common external trade policy | Economic union |
| A free trade association including Norway, Iceland, Liechtenstein, and Switzerland | European Free Trade Assiciation (EFTA) |
| A group of countries committed to removing all barriers to the free flow of goods and services between each other, but pursuing independent external trade policies | Free trade area |
| Treaty agreed to in 1991, but not ratified until January 1st 1994, that committed the 12 member-states of the European Community to adopt a common currency | Maastricht Treaty |
| NAFTA-related Mexican work zones of cheap labour that are commonly found along the Texas-Mexican borders | Maquilladoras |
| A group of countries where similarities among the economic structures of countries make it feasible to adopt a single currency | Optimal currency area |
| A central political apparatus that coordinates economic, social and foreign policy | Political union |
| Agreements among countries in a geographic region to reduce and ultimately remove tariff and nontariff barriers to the free flow of goods services and factors of production between each other | Regional economic integration |
| Trade created due to regional economic integration, occurs when high-cost domestic producers are replaced by low-cost foreign producers in a free trade area | Trade creation |
| Trade diverted due to regional economic integration, occurs when low-cost foreign suppliers outside a free trade area are replaced by higher-cost foreign suppliers in a free trade area | Trade diversion |
| The purchase of securities in one market for immediate resale in another to profit from a price discrepancy | Arbitrage |
| Residence convert domestic currency into a foreign currency | Capital flight |
| Trade of goods and services for other goods and services | Countertrade |
| Involves short-term movement of funds from one currency to another in hopes of profiting from shifts in exchange rates | Currency speculation |
| Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates | Currency swop |
| A market where prices reflect all available information | Efficient market |
| The rate at which one currency is converted into another | Exchange rate |
| Nonresidents can convert their holdings of domestic currency into foreign currency, but the ability of residents to convert the currency is limited in some way | Externally convertible currency |
| A market for converting the currency of one country into that of another country | Foreign exchange market |
| The risk that changes in exchange rates will hurt the profitability of a business deal | Foreign exchange risk |
| When two parties agree to exchange currency and execute a deal at some specific date in the future | Forward exchange |
| The exchange rates governing forward exchange transaction | Forward exchange rate |
| A country's currency is freely convertible when the government of that country allows both residents and nonresidents to purchase unlimited amounts of foreign currency with the domestic currency | Freely convertible currency |
| Draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements | Fundamental analysis |
| A market in which prices do not reflect all available information | Inefficient market |
| For any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between countries | International Fisher Effect |
| In competitive markets free of transportation costs and barriers to trade, identical products sold in different countries must sell for the same price when their price is expressed in the same currency | Law of one price |
| A currency is not convertible when both residents and nonresidents are prohibited from converting their holdings of that currency into another currency | Nonconvertible currency |
| One in which few impediments to international trade and investment exist (prekazka = impediments) | Relatively efficient markets |
| The exchange rate at which a foreign exchange dealer will convert one currency into another that particular day | Spot exchange rate |
| Uses price and volume data to determine past trends, which are expected to continue into the future | Technical analysis |
| A loss of confidence in the banking system that leads to a run on banks as individuals and companies withdraw their deposits | Banking crises |
| The generic name given to country's primary monetary authority. It usually has the responsibility for issuing currency, administering monetary policy, holding member banks' deposits and facilitating the nation's banking industry. | Central bank |
| Means of controlling a country's currency by holding reserves of a foreign currency equal at a fixed exchange rate to at least 100 percent of the domestic currency issued | Currency board |
| Occurs when a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of the currency or forces authorities to expend large volumes of international currency reserves and sharply increase interest rates to defend the prevailing exchange rate | Currency crises |
| Occurs when a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of the currency or forces authorities to expend large volumes of international currency reserves and sharply increase interest rates to defend the prevailing exchange rate | Currency crises |
| A system under which a country's currency is nominally allowed to float freely against other currencies, but in which the government will intervene, buying and selling currency, if it believes that the currency has deviated too far from its fair value | Dirty float system |
| A system under which the exchange rate for converting one currency into another is fixed | Fixed exchange rates |
| A system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand | Floating exchange rates |
| Situation in which a country cannot service its foreign debt obligations, whether private-sector or government debt | Foreign debt crises |
| The practice of pegging currencies to gold and guaranteeing convertibility | Gold Standard |
| Institutional arrangements countries adopt to govern exchange rates. | International monetary system |
| Arises when people behave reclessly because they know they will be saved if things go wrong | Moral hazard |
| Currency value is fixed relative to a reference currency | Pegged exchange rate |
| The direct exchange of goods and services between two parties without a cash transaction | Barter |
| Order written by an exporter instructing an importer, or an importer's agent to pay a specified amount of money at speciefied time, also called DRAFT | Bill of exchange |
| Document issued to an exporter by a common carrier transporting merchandise. It serves as a receipt, a contract, and a document of title | Bill of landing |
| When a firm builds a plant in a country and agrees to take a certain percentage of the plant's output as partial payment of the contract | Buyback |
| Reciprocal buying agreement | Counterpurchase |
| Trade of goods and services for another goods and services | Countertrade |
| Order written by an exporter instructing an importer, or an importer's agent to pay a specified amount of money at speciefied time, also called the Bill of exchange | Draft |
| Export specialists who act as an export marketing department for client firm | Export Management Company (EMC) |
| Set of international tradingrules that determine the rights and obligations of buyers and sellers in international trade | Incoterms |
| Issued by a bank, a document indicating that the bank will make payments under specific circumstances. | Letter of credit |
| Buying agreement, similar to counter-purchase, but the exporter can then fulfill the agreement with any firm in the country to which the sale is being made. | Offset |
| Bill of exchange payable on presentation to the drawee | Sight draft |
| Large, vertically integrated Japanese trading houses who affiliates offer a wide range of products and materials. The size and breadth of the organizations allow them to generate captive supply and demand and to provide risk management, financial, and export services to their affiliates | Sogo Shosha |
| Using of a specialized third-party trading house in a counter-trade arrangement | Switch trading |
| Promise to pay by the accepting party at some future date | Time draft |
