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CHAPTER 1:
What Is Trade?
Chapter 1:
WHAT IS TRADE?
Key Terms
business
transactions
domestic business
international business
domestic market
foreign market
trade
foreign or international
trade
trading partner
duty or tariff
Chapter 1:
WHAT IS TRADE?
globalization
interdependence
primary industries
secondary industries
branch plant
tertiary industries
service sector
foreign direct
investment
portfolio investment
culture industry
Chapter Objectives
By the time you finish this chapter, you should be able to:
Describe key concepts related to international business
Explain how and why Canadas major international business
relationships have evolved over time
Demonstrate an understanding of how globalization has
affected international business
Describe ways in which international business activity
develops interdependence among nations
Evaluate the benefits and drawbacks of international trade for
Canada
Explain how the global market has affected consumer
demand
Chapter 1:
WHAT IS TRADE?
Business
The manufacturing and/or sale of goods and/or
services to satisfy the wants and needs of
consumers to make a profit.
Chapter 1:
WHAT IS TRADE?
Transaction
An exchange of things of value.
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Chapter 1:
WHAT IS TRADE?
Chapter 1:
WHAT IS TRADE?
International business
The economic system of transactions conducted
between businesses located in different countries.
Chapter 1:
WHAT IS TRADE?
Chapter 1:
WHAT IS TRADE?
Foreign market
The customers of a business who live in a different
country than the one where the business operates.
Chapter 1:
WHAT IS TRADE?
Chapter 1:
WHAT IS TRADE?
Trading partner
When a business in Canada develops a relationship
with a business in another country, that country
becomes a trading partner with Canada.
It is important to note that international trade takes
place between businesses, not countries.
Chapter 1:
WHAT IS TRADE?
Chapter 1:
WHAT IS TRADE?
Major fur trade routes used to travel between Canada and Europe
Chapter 1:
WHAT IS TRADE?
Chapter 1:
WHAT IS TRADE?
Chapter 1:
WHAT IS TRADE?
Chapter 1:
WHAT IS TRADE?
EMERGING MARKETS
India
Chapter 1:
WHAT IS TRADE?
iStockphoto.com
Africa
African imports to Canada are very low
Business opportunities limited by unstable
governments, lack of infrastructure, rural
economies
Rich in primary resources
Some countries (Morocco, South Africa) are
beginning to emerge as major trading partners
Chapter 1:
WHAT IS TRADE?
Globalization
Globalization
The process whereby national or regional economies
and cultures have become integrated through:
New global communication technologies
Foreign direct investment
International trade
Migration
New forms of transportation
Flow of money
Chapter 1:
WHAT IS TRADE?
Globalization
History of Globalization
Began after World War II with establishment of the
United Nations and fostering of trade relations
between countries
Economic ties between countries strengthenedtax
treaties were negotiated, tariffs abolished, global
corporations developed
New technology allows international business to
occur in real time, transforming the globe into one
market
Has increased interdependence of all nations,
blurring political boundaries
Chapter 1:
WHAT IS TRADE?
Interdependence
Interdependence
The reliance of two or more nations on each other for
products or services.
Three main areas of interdependence:
1. Primary industries
2. Secondary industries
3. Tertiary industries
Chapter 1:
WHAT IS TRADE?
Interdependence
Primary industries
The sector of the economy characterized by the
extraction of natural resources from the earth or sea.
Five major primary industries:
agriculture
fishing, hunting, and trapping
forestry and logging
energy
Mining
In Canada, water is sometimes included in this list as well
Chapter 1:
WHAT IS TRADE?
RESOURCES
Secondary Industries
iStockphoto.com
Interdependence
Chapter 1:
WHAT IS TRADE?
Interdependence
Branch plant
A factory owned by a company based in another
country.
Canada has a branch-plant economy, based on
businesses owned by foreign interests
National Policy of 1879, which stated that
businesses wanting to reach Canadian
consumers needed to build factories in
Canada, led to this situation
Chapter 1:
WHAT IS TRADE?
Interdependence
Interdependence
Tertiary industries (service sector)
Industries that do not make a product or extract
resources from the earth, but provide necessary
services to consumers and other businesses.
Examples include banking, construction,
communications, transportation, and retail sales.
Chapter 1:
WHAT IS TRADE?
Variety of products
New markets, more jobs
Foreign investments
New processes and technologies
Research and development: Discovering new
knowledge about products, processes, and services,
and then applying that knowledge to create new and
improved products, processes, and services that fill
market needs.
Chapter 1:
WHAT IS TRADE?
To meet our
needs
Job creation
Attract
Investment
New
technology and
materials
Diverse
products and
services
Chapter 1:
WHAT IS TRADE?
Branch plants
If foreign companies have a positive trade relationship with companies in
Canada they may build their own factories here
This creates jobs in construction for Canadian
Canadian consumers enjoy a variety of products and services from around the
world
Fundamentals of International
Business between producers of similar goods
Creates increased
competition
Copyright 2010 Thompson Educational Publishing, Inc.
This is good for consumers because it leads to lower prices and better quality
Chapter 1:
WHAT IS TRADE?
Support of nondemocratic
systems
Cultural Identity
Issues
Social Welfare
Issues
Environmental
Issues
Political Issues
Chapter 1:
WHAT IS TRADE?
From an environmental perspective, the Kyoto Protocol has not served the
international community well in meeting the real challenges of global
climate change or effectively engaging all major economies. The