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21-2 International Trade [CH 21

Chapter Overview
As you read this chapter on International Trade, remember that the principles of

business you have read and begun to master are the same internationally. Customers
for local businesses may only cross the street or across town; sometimes customers
reside in different states. When dealing internationally the crossing is an international
border, from one country to another, regardless if the transaction is an import or an
export. The principles of business are the same; a product is produced, contracts are

entered into, delivery documents are prepared, financing arranged along with methods
of payment upon delivery. Yes, it can be exciting to do business with people who
speak a native language other than English, but know that the language of International
trade is English. Seventy years prior it was thought that French would the language of
trade as it was for diplomacy. In those days, the languages of science were German

and Russian. When the Japanese electronics market and trade picked up then the
language to learn was Japanese though English for trade was taking hold strongly as
the International Business language. Suddenly the marketing talk was “the Pacific
Rim” which include Japan, China, Malaysia, Australia and the West Coast of the

de jur: Made for a particular North America, Central America and South America. As China has become a strong
day. Popular, fashionable, manufacturing nation, now Mandarin and Cantonese have become the language de jur.
or prominent at a particular Still the language of business is English, around the world. The Chinese have worked
time diligently to gain access to the American market for trade and are doing business
around the world, in languages that include Russian, German, French and Spanish, the

language of business has strongly moved toward English.
So, customers can program their video devices, televisions, and even computers,
the instructions booklets will be written in English, French, Portuguese, Spanish,
Japanese, Chinese, Maylay, and Vietnamese. The reason is that the manufacturing/

assembly plants being in the orient, their products are shipped worldwide, and to many
different countries where their people may not be literate in English.
Regardless of the nation and its national laws, the principles of business are the
same worldwide, and differences are a matter of contracts; and the international

business language is English.
International business can be divided into exporting (selling goods and services
exporting abroad), importing (purchasing foreign goods and services for use at home), and
Selling domestic goods foreign production (making goods and supplying services in a foreign country for
abroad.
sales there and other countries). The United States leads the world in all three
Importing categories; because of its resources and internal market, it is not as dependent on
Buying foreign goods and foreign trade and production as other countries, such as Great Britain, the Netherlands,
raw materials. or Japan.

foreign production At one time, the international aspects of business mattered only to a few American
Making goods and firms that needed to import raw materials. A number of companies were interested in
supplying services in a exports, but hardly any cared about producing abroad. Producing abroad changed as
foreign country for sales Congress passed numerous laws that made manufacturing in the United States
there or in other countries.
burdensomely regulated and levied taxes that have made overseas production
economically advantageous. At the time for most, the U.S. domestic market was all
they needed. Today, the various national economies of the world have grown so near
that businesses are no longer ignoring the global marketplace. Foreign markets are an

attractive target for U.S. companies. Moreover, the domestic American market shows
little consumer resistance to foreign products. In many instances, foreign products are
favored by U.S. consumers, especially for their competitive pricing, and as the quality
of their products have risen.

Besides these strategic considerations, world business is important for other
reasons. Production for larger markets means there is more opportunity for achieving
economies of scale in production or marketing. The International Trade Association
(ITA) reports that exports of goods and services supported an estimated 10.7 million

U.S. jobs. There is the bottom line to consider: 13 of the top 100 U.S. multinational
firms derive more than half of their sales from foreign markets (led by Exxon with
75.1 percent), while many others earn over half of their profits abroad.

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