Part 1.

C: International - Exploring Global Business

 Learning Outcomes

• Show how global trade is important to Saskatchewan and to

Canada and how it is measured.
• Explain why nations trade, and list some of the international
economic communities.
• Discuss the impact of currency rate changes on trade.
• Explain how companies can participate in the global
marketplace.
• Describe how imposing trade restrictions impact a country.
• Explain the impact of globalization and some of the threats to
the global marketplace.
• Examine some of the trends in the global marketplace.
United Nations World Population Estimates
 Importance of Global Business to Canada

• Economies of scale in production and marketing.

• Ease of transfer of experience, technology.
• Global recognition of products and brand names.
• Possibility of uniform global image for the companies.
• Enhances the quality of Canadian life
• Canada exports approximately 45% of what it produces
• Approximately 1/5 of all jobs in Canada are related to international trade
Canadian Trade
 Why Do Countries Trade?

• No one country can produce all the products that its people want and
need.
• Nations who cannot produce what they want and need will want to
trade with countries who can and have a surplus (ex. fruit in Canada).
• Some countries have an abundance of natural resources but lack the
technological know-how to retrieve them.
• Other countries have the technology but lack the natural resources.
• Example:
• Russia: abundant natural resources but low-tech
• Taiwan: high-tech but minimal natural resources
• Free trade is the movement of goods and services among nations
without political or economic trade barriers.
 Why Nations Trade

Absolute Advantage
• the ability to produce a specific product more efficiently than
any other nation
• Or, a country is the only provider of a product

Comparative Advantage
• the ability to produce a specific product more efficiently than any
other product
• The concept that a country should specialize in the products that it
can produce most readily and cheaply, and trade these for goods
that foreign countries can produce most readily and cheaply
 The Global Marketplace

Earn Possess
Potential
additional exclusive
for cost
profits market
savings
Why “Go information

Global?” Leverage a Saturated

unique product domestic
or technological markets and
advantage excess
capacity
 International Trade Key Terms

Exports: Goods and services made in one country and sold to others

Imports: Goods and services that are bought from other countries

Balance of Trade: The difference between the value of a country's exports

and the value of its imports during a certain time

Trade Surplus: A favourable balance of trade that occurs when a country

exports more than it imports

Trade Deficit: An unfavourable balance of trade that occurs when a country

imports more than it exports

Balance of Payments: The difference between money coming into the

country and money leaving the country
 Currency Valuations

Currency exchange rate: Value of one currency in

relation to another
•Economic factors impact exchange-rate fluctuations
•Interest rates
•Inflation and economic strength
•Balance of trade and trade flow
What are the impacts on Canada?
 The Global Marketplace

Exporting Sell domestically produced goods to buyers in other countries

The legal process allowing a company use a manufacturing process,

Licensing franchise, trademark, patent, trade secret, or knowledge

Contract A foreign company manufacturers private label goods under a

Manufacturing domestic company’s brand

Two or more businesses combine for a specific project or

Joint Ventures business venture

Direct Foreign Active ownership of a foreign

Investment company/manufacturing/marketing facility
 Fostering Global Trade

Antidumping laws

World Trade Organization (WTO)

World Bank

International Monetary Fund (IMF)

 International Economic Communities

Economic Community
Organization of countries formed to promote free movement of
resources and products among member nations (also referred to
as regional economic integration)
Also known as economic integration:
• European Union (EU)
• United States-Mexico-Canada Agreement (USMCA)
• Asia-Pacific Economic Cooperation (APEC)
 Goals of Economic Communities

Reduce trade barriers

Increase flow of international trade

Promote peaceful relationships between countries

Provide increased prosperity for the citizens of each member country

 Barriers to International Trade

Political Considerations
• Nationalism
• Mistrust
Economic Environment
• Infrastructure
Natural Barriers
• Language differences
• Cultural differences
• Legal and Regulatory differences
 Tariff Barriers

Tariff A tax imposed on imported goods

Protect
-ive Make imports less attractive to buyers than domestic products
Tariffs
 Non-tariff Barriers

Import
Limit on the quantity of a certain good that can be imported
Quota

Embargo A complete ban on imports or exports of a product

Laws that require a company earning foreign exchange

Exchange
Controls from its exports to sell the foreign exchange to a control
agency

Customs Regulations on products that are different from

Regulati- generally accepted international standards
ons
 The Reality of Trade

►If trade makes economic sense and global security sense, then why do we need
international trade rules?

►Because while trade is beneficial globally …

►It creates winners and losers domestically (locally, regionally, nationally)
►This creates political pressure to “protect” from trade/globalization.
►Thus national rivalries, economic instability and lack of economic development.
 Fear of Trade and Globalization

• Canadians have lost jobs because of imports/production

shifts
• Others fear losing their jobs
• Employers often threaten to export jobs when facing
labour disputes with employees
• Service and white-collar workers are increasingly seeing
their operations moving offshore
• Competition is beneficial for consumers but can hurt
producers
• Global Political/Economic Unrest: We are interconnected
Benefits of Globalization

• Productivity grows faster with a

comparative advantage
• Global competition keeps prices
down, less likely to face inflation
• Open economy spurs innovation
• Export jobs often pay more than
other jobs available
 The Future of The Global Marketplace

• Canada – Exporting our technologies

• Canada – Seeking new markets
• Resources, stable banking, business friendly
• The Emergence of BRICS Economic Power
• Currency Fluctuations
• Global Competition
• Global Political/Economic Unrest