International Trade and Multinational Corporations

• International trade involves the exchange of goods and services across international borders.

Why Countries Trade

• A country may trade because its domestic production level is insufficient.

• A country may import goods even if it is capable of producing them.

• Imported goods might be cheaper than those produced domestically.

• Imports enable access to a wider variety of goods.

• Imported goods may offer superior quality, design, status, or technical features compared to domestic products.

• Collaborative arrangements are contractual agreements involving active participation of two or more parties in a joint operating activity.

• A strategic alliance refers to an agreement important to one partner, involving joint work but separate identities.

• Multinational corporations own and control the production of goods or services in at least one country other than their home country.

• Absolute advantage in economics is based on productive efficiency, where a country can produce more with the same or fewer resources.

• Mercantilism helps in understanding trade in manufactured goods and exchange between developed countries with similar income levels.

• Global Strategy Rival Theory focuses on multinational corporations' efforts to gain a competitive advantage against other global firms in their industry.

• Porter Theory Competitive allows a firm to outperform its rivals and achieve superior profitability.

• Product life cycle is the time from a product's introduction to consumers until its removal from the market.

• The theory of Competitive Advantage explains how unique qualities make a business or country stand out from competitors.

• The Heckscher-Ohlin Theory, also known as the factor endowment theory, emphasizes the role of factor endowments (labor and capital) in shaping a country's comparative advantage and influencing trade patterns.

• Country Similarity Theory suggests that companies initially produce for domestic consumption, then explore exporting to markets with similar customer preferences.

• Custom duty is an indirect tax levied on goods of international trade.

• The primary purpose of customs duty is to raise revenue, safeguard domestic business, jobs, the environment, and industries, and reduce fraudulent activities and circulation of black money.

• Goods cleared for home consumption occur when goods reach customs barriers and a bill of entry for home consumption is filed.

• Goods cleared for warehousing refers to when import takes place after goods are cleared from a warehouse.

• Prohibited goods are not allowed to cross the border either in or out of the country.

• Regulated goods, also known as restricted goods, are controlled by an import or export permit.

• Second-hand goods, including refurbished items, require an import permit for importation.

• Customs valuation is a procedure to determine the customs value of imported goods.

• Transaction value is the total payment made by the buyer to the seller for imported goods, including payments made as a condition of the sale.

• The transaction value of identical goods applies when the goods must be sold for export to the same country of importation as the goods being valued.

• The transaction value of similar goods applies when the goods must be sold to the same country of importation as the goods being valued.

• Deductive value is used when customs value cannot be determined based on transaction values; it relies on the unit price at which imported goods are sold to an unrelated buyer in the greatest aggregate quantity.

• Computed value determines customs value based on the cost of production, plus an amount for profit and general expenses.

• Calculation of customs duties involves determining the dutiable value of goods and applying the relevant duty rate.

• Tariff classification involves classifying goods under specific tariff codes known as Harmonized System (HS) codes.

• Country of Origin refers to how customs duties can vary based on where the goods came from.

• Trade agreements can lead to exemptions or reductions in customs duties.

• Value of goods plays a crucial role in customs duty calculation.

• Product Specific Regulations means some goods may be subject to specific regulations or restrictions.

• Assistance policies are a types of insurance that provides protection and support in emergency situations.

• Licenses protect the local economy by restricting the entry of certain products to avoid unfair competitive practices.

• Non-protectionist barriers are economic policies that promote free trade by reducing or eliminating barriers to international commerce

• Quotas refer to an amount of money that must be paid on a regular basis.

• Embargo is a restriction imposed by a government on the trade of certain products, goods, or services.

• Import deposit is a practice used in international trade to ensure that imported products comply with the regulations and standards of the receiving country before they are released for distribution or sale.

• Non-tariff barriers are regulations, norms, and restrictions imposed by governments to control international trade without using direct taxes or tariffs.

• Protectionist barriers are measures implemented by governments to limit international trade.