International Trade and Globalization Overview

Advantages of International Trade

• Canadians have access to a wider variety of products.
• Lower wages and production costs in other countries lead to lower prices for consumers.
• Canadian businesses can enter new markets, access resources, attract investment, and share in new discoveries.
• International trade promotes cultural exchange and diversity.

Disadvantages of International Trade

• Loss of Canadian culture and identity.
• Foreign ownership issues can lead to job losses in Canada.
• Revenue drains from Canada due to expenses for home-country administration.
• Reduced exports to other markets.
• Economic instability due to global economic conditions.

Positive Effects of Globalization

• Outsourcing allows access to cheaper raw materials and labor, making companies more competitive, and offering lower prices to consumers.
• Increased competition from foreign firms forces domestic companies to become more competitive and lower their prices.
• Reduction in global poverty.
• Technological exchange fosters innovation.
• Optimal resource utilization increases productivity and improves living standards.
• Export jobs often require a high skill level and pay higher wages.
• Increased capital flow for countries with limited resources.

Negative Effects of Globalization

• Job losses due to outsourcing, potentially with lower-paying replacement jobs
• Fear of job loss due to competition from countries with lower labor costs.
• Loss of Canadian productivity due to competition from countries with cheaper labor.
• Exploitation of workers (children, prisoners, uneducated) in substandard conditions.
• Increased pollution due to companies relocating factories to countries with lax environmental regulations.
• Safety concerns due to lack of regulated manufacturing and products.
• Spread of diseases between countries (e.g., Ebola, Zika).
• Increased income gap and erosion of the middle class.
• Influence of multinational corporations on governments.

Tariffs

• Taxes or duties imposed on imported goods or services.
• Tariffs increase the cost of imports, potentially encouraging consumers to buy domestically produced goods.
• Winners of tariffs include domestic governments (increased tax revenue) and domestic producers (more competitive prices).
• Losers of tariffs include foreign producers (higher prices) and consumers (higher prices).

Trade Quotas

• Government-imposed limits on the amount of a specific product that can be imported within a certain timeframe.
• Trade quotas protect domestic producers by limiting imports.
• Trade quotas decrease foreign competition.

Trade Sanctions and Embargoes

• Trade sanctions are partial restrictions on trade, while embargoes completely ban trade between countries.
• Trade sanctions and embargoes are used to pressure foreign governments to change policies or improve human rights records.
• Domestic countries experiencing sanctions or embargoes see increased domestic supply and may need to find new markets for their products, which impacts the level of production and operations within those countries.

Factors Affecting Exchange Rates

• Inflation rates (lower inflation leads to a stronger currency).
• Employment levels (high employment generally supports a stronger currency).
• Gross Domestic Product (Higher GDP attracts investment, strengthening the currency).
• Stable economy (A stable economy generally leads to a stronger currency).
• Interest rates (high interest rates attract investment, increasing demand for the currency).

Reasons Canada Attracts Foreign Investment

• Supportive business environment.
• Geographic location.
• Infrastructure advantages.
• Quality of life.
• Cultural diversity.

Productivity

• Productivity measures how efficiently an economy converts inputs (labor, raw materials, capital, and innovation) into outputs (goods and services).
• Factors that increase productivity include improved technology, skilled workforce, entrepreneurship, and innovation.
• Higher productivity can lead to better living standards and higher tax revenue for governments.

Market Economies, Centrally Planned Economies and Mixed Economies

• Market economies prioritize efficient resource allocation, new products, economic growth, and potentially increased gaps between rich and poor.
• Centrally planned economies ensure basic necessities for all citizens but might have lower innovation and motivation to work hard.
• Mixed economies combine aspects of both market and centrally planned economies, balancing individual incentives with social programs.

Economic Freedom

• Measures the degree of economic freedom experienced by individuals within a country.
• Factors like property rights, government integrity, judicial effectiveness, labor freedom, and investment freedom are considered.

Stages of Business Cycle

• Understanding economic indicators (leading, lagging, coincident) can predict future economic performance and help businesses, investors, and governments prepare for potential changes.
• Governments use monetary and fiscal policies to regulate the economy (affecting interest rates and money supply, and taxes and government spending, respectively).

Absolute and Comparative Advantage

• Absolute advantage occurs when one country produces a good or service more efficiently than another.
• Comparative advantage occurs when a country produces a good or service at a lower opportunity cost than another.

Ways Governments Influence Trade

• Establish import/export laws.
• Set tariffs.
• Maintain memberships in trade organizations.
• Negotiate trade agreements.
• Establish immigration laws.
• Determine monetary and fiscal policies (interest rates, exchange rates, taxes, and government spending).
• Create infrastructure.
• Establish environmental policies.
• Enact orders for trade restrictions (e.g., embargoes).

Globalization Strategies

• Global strategy: Centralized decision-making at headquarters, focused on creating efficiency through economies of scale and homogenous product offerings.
• Multidomestic strategy: Decentralized decision-making to adapt strategies locally to meet specific needs and preferences.
• Transnational strategy: Tries to balance the advantages of global and multidomestic strategies by allowing flexibility and responsiveness to local needs without sacrificing global efficiencies.

Market Research

• Market research is used to understand customers' preferences and competition's strategies.
• It can be used to identify profit opportunities, detect changes in markets, observe competitions, and analyze culture, language, government regulations, and economics.
• Primary and secondary research are used to gather information about the target market.

Primary and Secondary Research

• Primary research involves collecting data directly from the market, such as through surveys or interviews.
• Secondary research involves using existing data from other sources, such as government reports or research companies.
• Primary research provides control and relevance, while secondary research provides immediacy and cost efficiency.

Marketing Strategies

• Companies can pursue different marketing strategies based on their particular need and approach to the market.
• Centralized marketing applies the same marketing strategies everywhere.
• Decentralized marketing tailors them separately to each country.
• Acquisition marketing purchases an existing company in a specific country.

Ethical Dilemmas in International Business

• Ethical dilemmas occur when there's no easy answer in a business context.
• Tools like the "test of disclosure" can help avoid ethical issues.
• Recognizing and respecting different cultures' viewpoints leads to better ethical decision making.