copyright © cengage learning. all rights reserved. 3 | 1 the extent of international business...

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The Extent of International Business

• Although the worldwide recessions of 1991, 2001-2002, and 2008 slowed the rate of growth, globalization is a reality of our time

• In the U.S., international trade accounts for over ¼ of GDP

• Trade barriers are decreasing, more competitors are entering the global marketplace, creating more choices for consumers and new job opportunities

• International business will grow with the expansion of commercial use of the Internet

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The World Economic Outlook for Trade

• Economic performance among nations is not equal; growth in advanced countries has slowed, while emerging and developing economies continue to grow rapidly

• At the current rate of global economic growth, world production of goods and services will double by 2025.

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Global Growth Remains Strong

Source: International Monetary Fund: World Economic Outlook by International Monetary Fund. Copyright 2008 by International Monetary Fund. Reproduced with permission of International Monetary Fund via Copyright Clearance Center.

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U.S. Goods Export and Import Shares in 2007

Source: Federal Reserve Bank of St. Louis, National Economic Trends, September 2008, p. 18.

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Value of U.S. Merchandise Exports and Imports, 2007

Source: U.S. Department of Commerce, International Trade Administration, http://www.census.gov/foreign-trade/statistics/highlights/top/top0712.html, accessed September 22, 2008.

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Ten Largest Foreign and U.S. Multinational Corporations

Source: Fortune Global 500, July 1, 2008, p. 165. Copyright © 2006 Time, Inc., www.fortune.com. All rights reserved.

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The General Agreement on Tariffs and Trade and the World Trade Organization

• General Agreement on Tariffs and Trade (GATT)– International organization of 153 nations dedicated to

reducing or eliminating tariffs and other trade barriers

– Most-favored-nation status (MFN)—Each member of GATT was to be treated equally by all other members

– Kennedy Round, Tokyo Round, Uruguay Round, Doha Round

• World Trade Organization (WTO)– Created in the Uruguay Round of GATT negotiation as

a successor to GATT

– WTO oversees GATT provisions, has judicial powers to meditate trade disputes arising from GATT rules and exerts more binding authority than GATT

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International Economic Organizations Working to Foster Trade

• Economic community– An organization of nations formed to promote

the free movement of resources and products among its members and to create common economic policies

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The Evolving European Union

Source: http://europa.eu/abc/european_countries/index_en.htm, accessed November 29, 2008.

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International Economic Organizations Working to Foster Trade (cont’d)

North American Free Trade Agreement (NAFTA)

United States

Canada

Mexico

Chile is expected

to become the 4th

member

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International Economic Organizations Working to Foster Trade (cont’d)

Central American Free Trade Agreement (CAFTA)

El Salvador

Guatemala

Honduras

Nicaragua

3 | 12

International Economic Organizations Working to Foster Trade (cont’d)

Association of Southeast Asian Nations (ASEAN)

Brunei

Myanmar

Cambodia

Indonesia

Laos

Malaysia

Philippines

Singapore

Thailand

Vietnam

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