International Trade &
Globalization
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
What is Globalization?
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© 2010 Pearson
Education, Inc. publishing
as Prentice Hall
•International
Business 5e
•Chapter
5-2
Globalization
•The
expansion
of economic,
political, and
cultural
processes to the
point that they
become global in
scale and impact.
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© 2010 Pearson
Education, Inc. publishing
as Prentice Hall
•International
Business 5e
•Chapter
5-3
– 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.
•Imports
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 4
International Trade
Purchase, sale, or exchange of goods and
services across national borders
 People have larger selection of products
 Important engine for job creation
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 5
•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.
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 6
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
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 7
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.
•Free
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 8
– A trade penalty imposed by one
nation onto one or more other nations.
•Sanction
– The partial or complete
prohibition of commerce and trade with a
particular country or a group of countries.
•Embargo
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Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 9
World’s Top Exporters
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 10
Trade Patterns
Merchandise trade among:
Low- and
middle-income
nations
6%
Western European
trade is mostly intraregional trade
High-income
nations
60%
34%
High-income and low- and
middle-income nations
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
North America
imports twice as
much from Asia as it
exports to Asia
International Business 5e
Chapter 5 - 11
Who Trades with Whom?
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 12
Trade and the
Dependent Nation
Total
dependence
Total
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
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 13
Absolute Advantage
Ability of a nation to produce a good more efficiently than any
other nation (greater output using same or fewer resources)
Riceland
1 resource unit = 1 ton rice or
1/5 ton tea
Tealand
1 resource unit = 1/6 ton rice or
1/3 ton tea
Specialization and trade allows each to
produce and consume more
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 14
Trade Gains:
Absolute Advantage
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 15
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
1 resource unit = 1 ton rice or
1/2 ton tea
Tealand
1 resource unit = 1/6 ton rice or
1/3 ton tea
Specialization and trade allow each to
produce and consume more
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 16
Trade Gains:
Comparative Advantage
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 17
U.S. Imports
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Education, Inc. publishing as
Prentice Hall
•International
Business 5e
•Chapter
5 - 18
U.S. Exports
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Education, Inc. publishing as
Prentice Hall
•International
Business 5e
•Chapter
5 - 19
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© 2010 Pearson
Education, Inc. publishing as
Prentice Hall
•International
Business 5e
•Chapter
5 - 20
U.S. Trading Partners
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© 2010 Pearson
Education, Inc. publishing as
Prentice Hall
•International
Business 5e
•Chapter
5 - 21
U.S. Trade Balance
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© 2010 Pearson
Education, Inc. publishing as
Prentice Hall
•International
Business 5e
•Chapter
5 - 22
NAFTA
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 23
NAFTA
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 24
Mapping U.S. Clusters
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Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 25
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
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 26
Copyright © 2010 Pearson Education,
Inc. publishing as Prentice Hall
International Business 5e
Chapter 5 - 27