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Ibt Prelims

FOR BSA STUDENTS

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Erich Joy Dela Cruz
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10 views8 pages

Ibt Prelims

FOR BSA STUDENTS

Uploaded by

Erich Joy Dela Cruz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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IBT – PRELIMS

CHAPTER 1: The Rise of Globalization


GLOBALIZATION – successive waves
- Socioeconomic reform process of eliminating trade, investment,
information technology… which in turn can lead to increased
economic growth & geopolitical integration.
*The fundamental basis of globalization represents FREER
INTERNATIONAL TRADE and INVESTMENT or the FREE FLOW of GOODS
and SERVICES.
*Globalization, International Trade and Investment are INTERLINKED.
EMERGING ECONOMIES
- Countries that are implementing economic reform policies to
propel growth through more open trade and free markets.
DECOUPLING
- Fundamental global shift in which industrialized country dependent
developing economies begin to grow based on their own
underlying economic strengths
MULTIPOLAR WORLD
- It is a sustainable decoupling process, engines of growth could
compromise several major industrialized and emerging economies
INTERNATIONAL MONETARY SYSTEM
- Global system of exchange rates & international payments,
enables to purchase goods & services from one another
- Recognizes the fact that the benefits of globalization are not
without risks.
- Conceived in July 1944 after the surrender of axis powers in WWII
- Came into formal existence in December 1945
- Began operations on March 1, 1947 in Washington DC.
ECONOMIC REFORMS
- Policy changes that promote private sector development.
WORLD BANK
- Conceived at the Bretton Woods Conference in 1944
- Primary role was to aid the reconstruction of Europe after WWII
Encompasses 5 closely Associated Developmental Institutions:
1. International Bank for Reconstruction and Development (IBRD)
- Supports reconstruction and reconstructing using funds raised in
international capital markets
2. International Development Association
- Provides long term low interest social sector and infrastructure
loans to the poorest members.
3. International Finance Corporation
- Provides loans and takes equity position in private companies of
developing countries & works towards developing capital markets.
CAPITAL MARKETS – stock exchange where long term
financial instruments such as stocks and bonds can be
issued, bought and sold.
4. Multilateral Center for the Settlement on Investment Disputes
- Provides political risk coverage for private investments made in
developing countries
5. International Center for the Settlement of Investment
Disputes
- Issues related to foreign investment disputes.
LIBERALIZATION OF THE TRADING SYSTEM
- Lowering / removing trade barriers such as tariffs quotas and
subsidies.
MULTILATERAL TRADING SYSTEM
- Heart of the system, WTO’s agreements negotiated and signed by
a large majority of the world’s trading nations.
- Guarantee member countries important trade rights.
- Bind governments to keep their trade policies within agreed limits
to every member’s benefit
Fundamental Policies:
1. Trade without Discrimination – equal
2. Freer Trade – removing trade barriers
3. Predictability – confident that it will not be raised
arbitrarily
4. Promoting fair competition – discoursing unfair
practices
5. Encouraging economic reforms in developing
countries – giving more time to adjust to a free trade
environment

Several Key Challenges that require attention:


1. Democratic system of government
2. Free Markets
3. Independent Judiciary
4. Free Press
INSTITUTIONS
- Rules, enforcement mechanisms and org that support market
transactions
- Help transmit info’s, enforce contracts & property rights and
promote market competition across diverse / developed countries
3 Important Roles:
A. Channel info’s about market conditions, goods /
services and participants
B. Define property rights and contracts, determining
who gets what and when
C. Promote competition and innovation in markets
*The foundations of Globalized Business World are POLITICAL; so are the
BIGGEST THREATS to the system
*The WORLD BANK encourages political institutions and leaders to be
TRANSPARENT.
ADAPTIVE INSTITUTION
- Government org that creates strong incentives for private
investment and operate under a system of checks and balances
that function best in democratic system.
ACCOUNTABILITY
- System of responsibility in which an authority / government is
ANSWERABLE FOR ITS ACTIONS
TRANSPARENCY
- System of FULL DISCLOSURE and OPENNESS that aims to avoid
any corruption and cronyism
JUDICIAL SYSTEM
- Responsible of interpreting the laws and resolving disputes.
*Countries also need EFFECTIVE POLICIES as complements to
Globalization to encourage further opening and cross boarder
integration.

GOOD GOVERNANCE
- Government actions are fully disclosed and discussed before they
are implemented, make it very attractive to domestic and foreign
investors.
ANTITRUST LAWS
- Aimed at maintaining competition in all sectors of the economy
and PREVENTING MONOPOLISTIC BEHAVIOR of firms.
- Encourage competition and prevent problems like “too big to fail”
PROPERTY RIGHTS
- This protection enables buyers and sellers to conduct transactions
with a high degree of trust.
ANTICORRUPTION POLICIES
- Less likely to tolerate corruption.
INFORMATION TECHNOLOGY
- Fundamentally changed everything people do in daily life.
DIGITAL ERA
- Period of transformation that adjust lifestyles to make the internet
and wireless technology a part of everyday life
BANDWIDTH
- The amount of data and other information that can be transferred
in a second via internet
THE WEB
- The world wide web, is a system of interlinked documents
contained and accessed via the internet.
*Internet related technologies help reduce corporate and societal
hierarchies because of greater access to info’s for everyone concerned.
DIGITAL DEVIDE
- Perceived economic gap between countries / people with easy
access to digital & information technology
SUSTAINABLE DEVELOPEMNT
- First used around 1983 by the Brundtland Commission
- Meets the needs of the present generation without compromising
the ability of future generations to meet their own needs
- Set up by UN to address growing concerns about the “accelerating
deterioration of the human environment and natural resources”.
*Globalization debate should center on how to best manage the
globalization process at both national and international levels

CHAPTER 2: The Evolution of International Business


TRADE
- Two way flow of exports and imports of goods and services
International Trade Benefits all consumers by:
- Greater amount of choice in the availability of goods/services
- Lower prices for goods/services
- Higher living standards
INTERNATIONAL BUSINESS
- All commercial transactions both private and public, between
nations of the world.
FOREIGN DIRECT INVESTMENT
- Inflows of capital from abroad for investing in domestic plant and
equipment for production of goods / services
OUTSOURCING
- The corporate practice of acquiring or producing quality
goods/services abroad at a lower cost, eliminating domestic
production.

Major Theories of International Trade:


MERCANTILISM
- Supports the premise that a nation could only gain from trade if it
had a trade surplus, more exporting than importing.
- Oldest form of trade theory
- Believes that a nation to become wealthy, country must export as
much as possible and import as little as possible.
TRADE SURPLUS
- When the value of exports exceeds the value of imports
- Exports generate income, causing gold or silver to flow into
country

FACTORS OF PRODUCTION
- endownment used to produce goods/services
ADAM SMITH
- Father of “FREE MARKET” and “OPEN TRADE SYSTEMS”, recognized
the absurdity of mercantilism
- He argued and proved that free trade without restrictions would
increase the wealth in terms of rising real income
THEORY OF ABSOLUTE ADVANTAGE
- ability of one country to produce good/service more efficiently
than another
THEORY OF COMPARATIVE ADVANTAGE
- has an absolute advantage in the production of two or more
goods/services
FACTOR ENDOWNMENT
- The quantity and quality of factors of production
HECKSHER – OHLIN THEORY (HO)
- Attributes comparative advantage of a nation to its factor
endownment, helps explain why the export of manufactured goods
is china’s competitive advantage
FACTOR PRIZE EQUALIZATION THEORY
- Attributed to Paul A. Samuelson
- When factors of production are allowed to move freely among
nations as a result of international trade
TRADE THEORY
- Shows open trade has had a positive effect on the economic well-
being of all trading partners, achieved through improvements in
the living standards of people in those countries due to greater
amount of choice in goods.
TRADE POLICY
- All government actions that seek to alter the size of merchandise /
service flows from and to a country
TARIFFS
- Taxes on imports
- Also known as “CUSTOM DUTIES”
- Generate revenues for governments
SPECIFIC TARIFF AD VALOREM TARIFF
- assigns a fixed dollar - levied as a constant
amount per physical unit percentage of the
monetary value of one unit
PREFERENTIAL DUTIES
- Low tariff rates applied to specific imports coming from certain
countries and not applied the same goods
GENERALIZED SYSTEM OF PREFERENCES (GSP)
- Agreement of large numbers of developed countries permit duty
free imports of a selected list of products (exception of tariffs)
EXPORT SUBSIDY
- Negative tariff aimed at boosting exports, encourage to export (ex:
tax exception)
EXPORT TAXES
- Taxes meant to raise export cost and divert production for home
consumption (bumababa ang exportation)
MOST FAVORED NATION
- Agreement among WTO countries in which any tariff concession
granted by one member will automatically be extended (applied
only if you’re a member of UN)
IMPORT QUOTAS
- Known as “QUANTITATIVE RESTRICTIONS” , regulations that limit
the amount of units of products that can be imported to a country
VOLUNTARY EXPORT RESTRAINT
- Non tariff barrier, an efficient exporting nation agrees to limit
exports of a product for a temporary period.
SOCIOECONOMIC
- The relationship between business/ economic activity and the
social life of residents in a nation
DOMESTIC CONTENT PROVISIONS
- Regulations requiring that a certain percentage of the value of
imports be sourced domestically
MANAGED / LIMITED TRADE
- Intervene the government to control, aiming to achieved a certain
trade
COUNTERTRADE
- Agreement in which an exporter of goods/services to another
country commits to import goods/services of a corresponding
value
EXPORT CARTELS
- Group of countries that could effectively control the export prices,
revenues and economic growth stable or high
INFANT INDUSTRY ARGUMENT
- Temporary provision of protection to nascent industries that have a
good prospect of becoming globally competitive
EMBARGOES
- Trade sanctions that are imposed upon a nation to restrict trade
with that country

CHAPTER 3: Regional Economic Integration

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