International Business UNIT 1 Test Notes

Business Trade & the EconomyDefinition of International Business:Purchase & sale of goods & services between different countries. Most important way in which a country connects w/ its neighbours. What is Globalization?Buzzword describing International TradeChanges over 20 Years in Business:Reduction in trade barriersEU 1993NAFTAWTOTrade Triangle:Canada, US, China Changes of Globalization over 25 Years:New & improved telecommunicationsMore efficient transportation Creation of new free-market economiesOpportunities for Canada:Cheaper imports from emerging market countries Overseas investmentRapid technological change Why do Countries TRADE?To buy goods or services they can't produce themselves Very few countries can make everything they meet to satisfy needs & wantsCountries can sell goods they produce but don't need themselves: INTERDEPENDENCEThreats to Canadian EconomyThreats to:Manufacturing industriesJobs in service sector industriesStructural unemploymentWidening of rich-poor divideThreats to global env. World Oil DemandU.S has largest world oil demand

Domestic VS InternationalBusiness Definition:The manufacturing and/or sale of goods &/or services to satisfy the wants & needs of consumers & to make a profitDomestic Business:A business that makes most of its transactions within the borders of the country in which it's basedInternational Business/International Trade:The economic system of transactions conducted between businesses located in different countries5 Main Ways for a business to be considered International: Own a retail or distribution outlet in another country Own a manufacturing plant in another country Export to businesses in another country Import from businesses in another country Invest in businesses in another country Transaction:An exchange of things of value (goods/money/services) for other goods/money/servicesExporting:Sending goods or services to another country, especially for sale (going out)Importing:Bringing products or services into a country, for use by another business or for resale (coming in)

History of Canadian TradeTrade with Mexico:Very recently developedAs a result of NAFTA goods made in Mexico & US can enter Canada duty-freeMexican goods are bargain to Canadian businessesImports from Mexico have greatly increased since NAFTA was signed 1993Become one of Canada's top 5 trading partners in last 5 yearsOur top 5 imports from Mexico: Electrical machinery, Vehicles, Minerals, Fuel, Oil, Furniture/Bedding, Other machineryCanada's top 5 exports to Mexico: Vehicles, Electrical Machinery, Grain/Seed/Fruit, other Machinery, Iron/SteelTrade with U.S:Late 1700's - Declared independence from Britain, revolutionary war - USA becoming self-sufficient (manufactured goods/industrial rev.)1775 - James Watt invented steam engine - Created cheap power for machines1794 - Eli Whitney invented Cotton Gin - separated cotton seed from raw cotton - Increased production of clean, raw,cotton - Cotton industry became the profitable backboneMid to late 1800's - Huge population growth - Industrial jobs growing - manufactured based, while Canada was resource based (supplying)2008 - Canada's exports to US: $375B - Canada's imports from US $227BTrade with Middle EastCentered on oilProblem - No-arable desert & resulting countries in these locations are not yet industrializedDue to Anti-American feelings, conservative religious leadership & recent Iraq war M.E seen as politically unstableOil Trade - non sustainable which prevents countries in M.E from becoming long-term economic leadersWorld i smoking away from oil - result is countries like Saudi Arabia and Iraq will have no other established industries to fall back onDubai, Israel, Egypt have gotten away from depending mainly on Oil & established long term trading relationshipsOver 1.4 billion Canadian exports reached Dubai in 20082008 Financial Crisis burst real-estate bubble & caused Dubai to post-pone their repayment of 26B in foreign debtIsrael & Canada signed over 1.2B worth of medicine, diamonds, engines, shoes & numerous other products to Canada 2008Dubai, Egypt & Israel established trading relationship with CanadaEuropean Trade1700s trade grew quickly after settlements were establishedMost goods traded were raw materials (i.e. Fur Trade in exchange for finished goods)Historical connection to Britain = built up during this timeEarly settlers settled near water - made sure most major Canadian cities have port access (all goods came by ship)Trade with AfricaAccounts for 1/2 of 1% of Canadian exportsAccounts for 3% of imports - most African nations have major infrastructure problemsProduces abundance of raw materials European colonists & other business interests have exploited Africa's raw materials & its peopleIndividual African nations did not have self-ruleRiches of each country were sent back to its ruling nationTrade with AsiaCanada frist started to trade with Asia after WW2 in late 1940s specifically JapanJapans modern factories began producing high-quality electronics like radios, televisions, cameras, computersBy end of 20th century Japan became known for its automobiles & high-tech equipmentOne of Canada's top 5 trading partnersWithin past 30 years Chinas cheap & abundant labour has encouraged businesses from West to develop partnerships with chances firms2/3 Chinas exports are from factories that foreign investors own - either outright or in partnerships with Chinese firmsChinese products = very popular with North American retailers ex. Walmart buys $15 B worth of goods from ChinaToday - China is one of Canada's top 5 trading partners - over $42B in imports & $10B exports 2008Trade with IndiaIndia = second biggest of population in worldGood at outsourcing services & manufacturingLabor force of India is young & education is wellExports of India increases slowly - Imports of India increases sharply From Canada India gets: diamonds, linen, clothing, riceIndia usually sells: vegetables, newsprint, copperIndia not good at telecommunication servicesReliable electrical power makes India's business increases slowlyHigh taxes is one of biggest problems in India

Free Trade & GlobalizationWhat is Free Trade?The unrestricted purchase & sale of goods & services between countries without the imposition of constraints such as tariffs, duties, & quotas.Bilateral AgreementA promise made by one party in exchange for performance of some act by the other partyBoth parties are bound by their exchange of promises"If you do this, I will do this" Examples of Free Trade Agreements:NAFTA-North American Free Trade Agreement (Canada, US, Mexico)TPP- Trans Pacific PartnershipWhat is Globalization?The growing integration of national&regional economies & cultures, & trade due to new: Global communication technology Foreign direct investment International trade Migration Transportation

Trade Agreements - NAFTA & TPPNAFTA 1994Canada, US, MexicoElimination of duties on thousands of goods crossing borders within North AmericaEasier access for business professionals & hundreds of different professions so they can travel for business throughout continentCreated to eliminate tariff barriers to agricultural, manufacturing & services - to remove investment restrictions & protect intellectual property rights Access to gov. procurement opportunities at federal level in Canada, US, MexicoCreated one of world's largest free trade zonesBuilding foundations for strong economic growth & rising prosperity for Canada, US, MexicoTariffs on virtually all origination goods traded between Canada&Mexico were eliminated in 2008 - exemption of Canadian agricultural goods in dairy, poultry, egg, and sugar sectors (exempt from tariff elimination)Use world banks international centre for settlement of investment disputes (ICSID) & used settle disputes of international trade lawSoftwood lumber dispute is one of largest & enduring trade disputes between both nations (Can &US) - conflict given rise in early 1980s & effects still seen todayUse rules of united nations commission for international trade lawTPPTrans Pacific PartnershipTrade agreement among 12 Pacific Rim countries: ex. Australia, Canada, Chile, Japan, Mexico, Peru, NewZealand, USA, VietnamAgreement reached Oct 5 2015 after 7 years of negotiations Benefits: Economic agreement will increase Canada's foothold in the Asia-Pacific, makes it easier for trade to happenCanadian sectors it will help: Agricultural & Agri-food products, Fish & seafood, Forestry&Value added wood products, Services & Financial servicesIndustrial goods&consumer productsProtests: Dairy farmers, How secretive agreement is to public, Benefits big corporations at expense of public, Any trade agreements that is confidential

Canadian Owned CompaniesLoblawsRBCCanadian TireShoppers Drug MartRootsBMOMcCainMultinational CorporationMNC is a corporation that has its facilities & other assets in at least one country other than its home country. SSuch companies have offices &/or factories in different countries & usually have a centralized head office where they coordinate global managementPrimary/Secondary/Tertiary IndustriesThree levels of interdependence in trade:Around the room are posted church paper with a level of industry: Primary Industry - the sector of economy characterized by the extraction of natural resources Secondary Industry - industries that create a finished, usable product Tertiary Industry - industries that do not make product necessary services to consumers & other businesses Value AddedThe amount of worth that is added to a product as it is processed; the difference between the cost of raw materials & the cost of the finished goodsTrade BarriersStandardsTariffsForeign Investment RestrictionsOther trade barriersTrade EmbargoesTrade Quotas