BBB4M Grade 12 International – Chapter 5 Notes

Note by Peter and Tom, Thanks!

International Trade Agreements and Organizations
Key Ideas:
-Globalization
-In an economic context, is the movement of goods, services, technology, investment, ideas, and people throughout the World.

3 major types of globalization strategies (company use): Global

  1. –  Regards the world as one big market—all people want the same product and will respond to marketing in a similar way
  2. –  Product and marketing are uniform around the world
  3. –  Takes advantage of economies of scale (proportionate savings gained by producing larger quantities)
  4. –  Does not respond to individual cultures
    Multi-domestic
  5. –  Customizes products, services, and marketing for the local culture—local management is most capable of
    determining what is best for the local subsidiary
  6. –  Effective when cultural differences are prominent
  7. –  Less political and exchange-rate risk
    Transnational
     Combines the best elements of the global and multi-domestic strategies
     Respects needs of local market, while maintaining efficiencies of a global strategy
     Manufacturing takes place at least expensive source, human resources and marketing take place at the
    local level Trade agreement
    An enforceable treaty between two or more countries that involves the movement of goods and services, elimination of trade barriers, establishment of terms of trade, and encouragement of foreign investment.

 

The North American Free Trade Agreement (NAFTA) 

– Launched in January 1994 between Canada, the United States, and Mexico

  1. –  Created world’s largest free trade area
  2. –  Sets rules surrounding movement of goods, services, and investments across North America
  3. –  Eliminates tariffs and other trade barriers, and promotes fair competition

Tax Treaties: A tax treaty is created to prevent double taxation and tax evasion for people who would pay taxes in Canada and another country.
The European Union (EU): A trade agreement signed in 1993 that now encompasses twenty-seven countries in Europe and a population of almost half a billion people. It has its own flag, anthem, and currency, and common financial, security, and foreign policies.
The euro: The European currency unit adopted by the European Union and used in most EU countries.

 Trade organizations

Groups established to help with the free flow of goods and services. They may be global in scope or national organizations created by individual governments to help domestic companies expand into international markets. Example:
World Trade Organization (WTO) (Founded in 1995, has more than 150 members country)
The main purposes of the WTO are:

 To act as a forum for negotiations
 To provide a set of rules that have been negotiated and signed by the governments of member countries  To offer a forum for dispute settlement

Asia-Pacific Economic Co-operation (APEC) (Created in 1989)

 

The Group of Eight (G8)
The Group of Twenty (G20) Canada’s Place in the G8 and G20

  1. –  GDP, population : Low compare G8 and G20 countries
  2. –  Talk of replacing Canada in the G8, and placing it as a second-tier country in the G20
  3. –  Would be detrimental to Canada, as its needs, concerns, and interests would not be given the same consideration as in the past.
    Organization for Economic Co-operation and Development (OECD) (Created in 1961, 30 members country) The World Bank (186 members country) International Monetary Fund (IMF)
    The UN has four main purposes:
    1. To keep peace throughout the world
    2. To develop friendly relations among nations
    3. To work together to help poor people live better lives, to conquer hunger, disease, and illiteracy, and
      to encourage respect for each other’s rights and freedoms
    4. To be a centre for helping nations to achieve these goals
  1. UN’s Work:
    1. –  UN is responsible for organizations that influence international business, including the International Labour Organization (ILO), the International Monetary Fund (IMF), and the World Bank
    2. –  UN devotes resources to improving the standard of living, the unemployment rate, and economic conditions throughout the world
    3. –  UN Economic and Financial Committee deals with issues such as international trade, globalization, and poverty elimination