Subpart F income:

Income earned from financial transactions, such as dividends, interest, and royalties; also called passive income.

Subsidiary bank:

Separately incorporated overseas banking operation.

Subsidy

A payment by a government agency to producers of goods, intended to make prices lower than they otherwise would be.

Subsidy

Government financial assistance to a domestic producer.

Subsidy:

A bounty or grant conferred upon the production or exportation of an article or merchandise by the government in the country of origin. Foreign subsidies affecting trade are subject, under US law, to countervailing duties (CVDs).

Subsidy:

An explicit cash payment or implicit assistance from government to business or other organizations and individuals.

Subtractability:

The degree to which goods or services may be used simultaneously by many consumers without being diminished in quality or quantity.

Sunk cost:

A cost that has been incurred and cannot be reversed.

Super 301:

Under this amendment to Section 301 of the 1988 Trade Act, the USTR was required in 1989 and 1990 to designate "priority foreign countries," chosen for the "number and pervasiveness" of their "acts, policies or practices" impeding US exports, and for the US export gains that might come from the removal of these practices. The law called for retaliation if foreign action was insufficient or not forthcoming. In March 1994, President Clinton issued a so-called "Super 301" executive order targeting "priority foreign country practices." Its provisions, carrying through 1995, were codified in the Uruguay Round implementing legislation.

Super 301:

Section of U.S. trade law that requires the U.S. trade representative to publicly identify countries that flagrantly engage in unfair trade practices.

Supplemental Security Income (SSI)

Federal program that assures a minimum monthly income to especially needy people with limited income and resources who are 65 or older, blind, or disabled.

Supply-side economics:

A body of thought that emphasizes tax cuts and deregulation to promote efficient use of labor and capital. Also known as Reaganomics.

Sustainable competitive advantage

Advantage over competitors that can be sustained over time.

Swap market:

Facet of international capital market in which two firms can exchange financial obligations.

Swap transaction:

Transaction involving the simultaneous purchase and sale of foreign currency with delivery at two different points in time.

Swaps

The simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.

Switching arrangements:

Agreement under which firms may transfer their countertrade obligations to a third party.

SWOT analysis:

Analysis of a firm and its environment to determine its strengths, weaknesses, opportunities, and threats.

Synergy:

Component of strategy that answers the question "How can different elements of our business benefit each other?"

Systematic risk

Movements in a stock portfolio's value that are attributable to macroeconomic forces affecting all firms in an economy, rather than factors specific to an individual firm (unsystematic risk).

Tactics:

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Methods used by middle managers to implement strategic plans.

Targeting:

See industrial targeting.

Tariff

Tax imposed on imports. Generally, tariffs are used for the purpose of protecting domestically produced goods.

Tariff Act of 1930:

See Smoot-Hawley Act.

Tariff:

Tax placed on a good involved in international trade.

Tariff:

A tax on imports.

Tax expenditure:

An allowance by government to reduce tax liability for certain activities.

Tax haven

A country with exceptionally low, or even no, income taxes.

Tax havens:

Countries that charge low, often zero, taxes on corporate incomes and that offer an attractive business climate.

Tax treaty

An agreement specifying what items of income will be taxed by the authorities of the country where the income is earned.

Tax-equalization system:

System for ensuring than an expatriate's after-tax income in the host country is comparable to what the person's after-tax income would be in the home country.

Technology Policy:

Government action to promote the discovery and use of better technology.

Technology:

Skills, knowledge, and hardware for practical tasks, acquired through applied science or systematic thought.

Temporal method

Translating assets valued in a foreign currency into the home currency using the exchange rate that existed when the assets were originally purchased.

Temporal method:

Approach used to consolidate the financial statements of a foreign subsidiary whose functional currency is the U.S. dollar.

The Federalist

The pamphlets written under the pseudonym "Publius" produced by John Jay, Alexander Hamilton and James Madison following the constitutional Convention of 1787. The papers explained why the Constitution should be adopted.

The Poverty Line

Federal statistical measurement device used to record levels of absolute poverty in the United States. Defined as a basic food budget multiplied by three and indexed for inflation. First developed in the early 1960s.

Theocracy:

Country whose legal system is based upon religious law.

Theocratic totalitarianism

A political system in which political power is monopolized by a party, group, or individual that governs according to religious principles.

Theory of absolute advantage:

See absolute advantage, theory of.

Theory of comparative advantage:

See comparative advantage, theory of.

Theory of national competitive advantage:

See national competitive advantage, theory of.

Theory of purchasing power parity:

See purchasing power parity (PPP).

Theory of relative factor endowments:

See relative factor endowments, theory of.

Third World:

A loose term for all else developed countries.

Third-country nationals (TCNs):

Employees of an international business who are not citizens of the firm's home or host country.

Three-point arbitrage

Arbitrage based upon exploiting differences between the direct rate of exchange between two currencies and their cross-rate of exchange using a third currency.

Time draft

A promise to pay by the accepting party at some future date.

Time draft:

Draft that requires payment at some specified time after the transfer of goods to the buyer.

Time orientation:

Cultural beliefs regarding long-term versus short-term outlooks on work, live, and other aspects of society.

Time-based competition

Competing on the basis of speed in responding to customer demands and developing new products.

Tokyo Round:

The GATT negotiations formally initiated by the Tokyo Declaration in 1973 and completed in 1979. The Tokyo Round, also called the multilateral trade negotiations (MTN), differed from previous GATT rounds in its primary focus, which was reducing and regulating nontariff barriers (NTBs). It yielded a number of multilateral codes covering, among other subjects, subsidies and countervailing measures, antidumping, customs valuation, government procurement, and technical barriers to trade. Participating nations also agreed to a substantial further reduction in tariff rates.

Tort law:

Laws covering wrongful acts, damages, and injuries.

Tort:

An intentional or negligent wrong against an individual.

Total factor productivity:

See overall productivity.

Total liability:

A legal principle that holds producers liable for any injury associated with a product.

Total Quality Management (TQM)

A management system that focuses on improving the overall quality of a good or service produced by an organization.

Total quality management (TQM):

Integrated effort to systematically and continuously improve the quality of an organization's products and/or services.

Trade acceptance:

Time draft that has been signed by the buyer signifying a promise to honor the payment terms.

Trade Act of 1974:

Legislation signed into law on 3 January 1975 which granted the president authority to enter the Tokyo Round and negotiate international agreements to reduce tariffs and NTBs. (See also fast-track procedures.) the act also amended US law governing the escape clause, antidumping, and countervailing duties; expanded trade adjustment assistance; established guidelines for granting MFN status to East bloc states; and granted limited trade preferences (GSP) to less developed countries.

Trade Adjustment Assistance (TAA):

Originated under the Trade Expansion Act of 1962 and expanded under the Trade Act of 1974, this is a program designed to provide retraining and financial benefits to workers and firms that are injured as a result of increased imports. TAA eligibility and funding have been cut back sharply since 1981.

Trade Agreements Act of 1979:

Legislation, adopted under the fast-track procedures, that approved and implemented the trade agreements negotiated during the Tokyo Round. It made US law consistent with the MTN agreements, while at the same time rewriting the countervailing duty and antidumping laws, extending the president's authority to negotiate NTB agreements, and requiring the president to reorganize executive branch trade functions.

Trade and Tariff Act of 1984:

An omnibus trade bill whose provisions included extension of the president's authority to grant trade preferences, authorization for negotiating bilateral free trade agreements, and authority to enforce export restraint agreements on steel.

Trade association:

A nonprofit organization of companies in a common trade or industry that purports to serve the common interest of its members.

Trade balance:

The total value of a nation's merchandise exports minus the value of its merchandise imports, globally or vis-à-vis specific countries or regions. A "negative" trade balance is one in which imports exceed exports.

Trade creation

Trade created due to regional economic integration; occurs when high-cost domestic producers are replaced by low-cost foreign producers in a free trade area.

Trade creation:

Shifting of production from high-cost producers to low-cost producers within a regional trading bloc.

Trade deficit

The money total by which imports exceed the money total of exports.

Trade deficit

See current account deficit.

Trade deflection:

Rerouting of exported goods to the member of a free trade area with the lowest barriers to imports from nonmember countries.

Trade diversion

Trade diverted due to regional economic integration; occurs when low-cost foreign suppliers outside a free trade area are replaced by higher-cost foreign suppliers in a free trade area.

Trade diversion:

Shifting of production to higher-cost producers located within a regional trading bloc from lower-cost producers located outside the trading bloc.

Trade Expansion Act of 1962 (TEA):

Legislation authorizing the Kennedy Round of trade negotiations, which also amended US escape clause procedures and established the Trade Adjustment Assistance (TAA) program.

Trade in invisibles:

British term denoting trade in services.

Trade in visibles:

British term referring to merchandise trade.

Trade surplus

See current account surplus.

Trade-related intellectual property rights (TRIPs):

Issues involving the treatment of intellectual property owned by foreigners. The United States has focused on preventing the piracy of intellectual property in foreign nations. Improved protection of intellectual property has been an objective of the United States in Section 301 cases and in the Uruguay Round. Specific areas covered by the Uruguay Round agreement on TRIPs include copyrights, patents, trademarks, industrial designs, design of integrated circuits, and anticompetitive practices in licensing.

Trade-related investment measures (TRIMs):

Issues involving restrictions on the operations of foreign firms-requiring, for example, foreign firms to produce a certain percentage of the final product locally or export a certain percentage of their output. Although the TRIMs agreement was less ambitious than the TRIPs agreement, the Uruguay Round did produce the first GATT agreement on investment measures. The Uruguay Round agreement on TRIMs focused on providing national treatment and eliminating quantitative restrictions.

Trade-remedy procedures:

See Quasi-judicial procedures; Section 301.

Trade:

Voluntary exchange of goods, services, or assets between one person or organization and another.

Tragedy of the commons:

The degradation that occurs when many individuals use a scarce resource in common.

Training:

Instruction directed at enhancing job-related skills and abilities.

Transaction cost:

The cost, often substantial, that arises from transferring the ownership of goods and services.

Transaction costs

The costs of exchange.

Transaction currency:

Currency in which an international transaction is denominated.

Transaction exposure

The extent to which income from individual transactions is affected by fluctuations in foreign exchange values.

Transaction exposure:

Financial risks that occur because the financial benefits and costs of an international transaction may be affected by exchange rate movements occurring after the firm is legally obligated to the transaction.

Transactions costs:

Costs of negotiating, monitoring, and enforcing a contract.

Transfer Payment:

Government payments to individuals and firms not in exchange for goods and services.

Transfer payments

Payments by government made to individuals who provide no goods or services in return.

Transfer price

The price at which goods and services are transferred between subsidiary companies of a corporation.

Transfer pricing:

Prices that one branch or subsidiary of a parent firm charges for goods, services, or property sold to a second branch or subsidiary of the same parent firm.

Transit tariff:

Tax levied on goods as they pass though one country bound for another.

Translation:

Process of transforming the accounting statements of a foreign subsidiary into the home country's currency using the home country's accounting procedures.

Translation exposure

The extent to which the reported consolidated results and balance sheets of a corporation are affected by fluctuations in foreign exchange values.

Translation exposure:

Impact on a firm's consolidated financial statements of fluctuations in foreign exchange rates that change the value of foreign subsidiaries as measured in the parent's currency.

Transnational corporation

A firm that tries to simultaneously realize gains from experience curve economies, location economies, and global learning, while remaining locally responsive.

Transnational corporation:

Organization that seeks to combine the benefits of global-scale efficiencies with the benefits of local responsiveness.

Transnational financial reporting

The need for a firm headquartered in one country to report its results to citizens of another country.

Treasury management:

Management of financial flows and their associated currency and interest-rate risks.

Treaty of Rome

The 1957 treaty that established the European Community.

Treaty of Rome:

Treaty signed 1957 that established the European Economic Community; its original six signatories have expanded to 15 over time.

Treaty on European Union:

Treaty signed in 1992 that came into force on November 1, 1993, furthering economic and political integration of the EC's members; important provisions include the creation of an economic and monetary union, a cohesion fund, a pledge to cooperate on foreign and defense policies, and the renaming of the EC as the European Union; commonly known as the Maastricht Treaty.

Triad:

Grouping of countries that dominate the world economy, consisting of the European Union, Japan, and the United States.

Tribal totalitarianism

A political system in which a party, group, or individual that represents the interests of a particular tribe (ethnic group) monopolizes political power.

Triffin paradox:

Paradox that resulted from reliance on the U.S. dollar as the primary source of liquidity in the Bretton Woods system; for trade to grow, foreigners needed to hold more dollars; the more dollars they held, however, the less faith they had in the U.S. dollar, thereby undermining the Bretton Woods system.

Trigger price mechanism (TPM):

A system, developed and enforced during the Carter administration, of restraining steel imports by monitoring them for possible dumping. Under the TPM, an antidumping investigation was to be "triggered" if the price of an imported steel product was below the production costs of the world's most efficient producer of that product.

Tuna-dolphin cases:

GATT disputes over whether the United States can use a tuna import prohibition to enforce limits on the killing of dolphins during tuna harvesting. In 199 1, a GATT dispute between the United States and Mexico over Mexican tuna fishing practices led to a GATT panel finding that the US Marine Mammal Protection Act (MMPA) violated US obligations under the GATT. Among other things, the panel concluded that the United States could not impose import restrictions to protect animal life or natural resources outside the United States. However, Mexico declined to have the decision adopted by the GATT Council. Thus, the decision is not considered a formal part of GATT law or precedent. In 1994, the European Union challenged the MMPA's embargo on tuna imported from countries that trade in tuna with Mexico. A second panel found that the United States had violated its GATT obligations by acting unilaterally.

Turnkey project

A project in which a firm agrees to set up an operating plant for a foreign client and hand over the "key" when the plant is fully operational.

Turnkey project

Contract under which a firm. agrees to fully design, construct, and equip a facility and then turn the project over to the purchaser when it is ready for operation.

Turnover:

Rate at which people leave an organization.

Two-point arbitrage:

Riskless purchase of a product in one geographic market for immediate resale in a second geographic market in order to profit from price difference between the markets; also called geographic arbitrage.

Two-tiered pricing policy:

Pricing policy under which a firm sets one price for all its domestic sales and second price for all its international sales.

Two-transaction approach:

Approach used by U.S. firms to account on their income statements for transactions denominated in foreign currencies.

Type I error

An inferential error that occurs when attempting to generalize about reality based on examination of sample evidence or data. In statistics, the type I case involves a false-positive judgment meaning that test results suggest significant association among variables where none in fact exists; thus, the researcher incorrectly accept the false research hypothesis and rejects a true null hypothesis of no predictive association among variables. In practical terms, the type I error occurs whenever an innocent person in erroneously judged to be guilty and punished or when a patient tests positive and is treated for an illness he or she does not have. Attempts to reduce type I errors often increase type II errors.

Type II error

An inferential error that occurs when attempting to generalize about reality based on examination of sample evidence or data. In statistics, the type II case involves a false-negative result, meaning that test results suggest insignificant association among variables where a significant association does in fact exist; thus, the researcher incorrectly rejects the true research hypothesis and accepts the false null hypothesis of no predictive association among variables. In practical terms, the type II error occurs whenever a guilty person is erroneously judged to be innocent and is set free or whenever a sick patient is erroneously judged free of disease based on test results and not treated. Attempts to reduce type II errors often increase type I errors.

U.S. Agency for International Development (USAID)


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Unit of the U.S. government that carries out assistance programs designed to help the people of less developed countries develop their human and economic resources, increase productive capacities, and improve the quality of life.

U.S. Department of Commerce (DOC)

Cabinet level department of the federal government that encourages, serves, and promotes the nation's economic development and technological advancement.

U.S. Department of Defense (DOD)

Federal agency responsible for providing the military forces needed to deter war and protect U.S. security.

U.S. Department of Health and Human Services (DHHS)

Cabinet level department of the federal government most concerned with health, welfare, and income security plans, policies and programs. Formerly titled the Department of health, Education and Welfare.

U.S. Department of Housing and Urban Development (HUD)

Main federal agency responsible for programs concerned with housing needs and improving and developing the nation's communities.

U.S. Department of Justice (DOJ)

Cabinet level department of the U.S. federal government that represents the citizens of the United States in enforcing the law in the public interest.

U.S. Department of labor (DOL)

Federal agency whose purpose is to foster, promote, and develop the welfare of the workforce of the United States, to improve their working conditions, and to advance their opportunities for profitable employment.

U.S. Department of Transportation (DOT)

Cabinet level department of the federal government that establishes the nation's overall transportation policies.

U-form organization:

Form of organization design based on global functional design.

UN Conference on Trade and Development (UNCTAD)

A quasi-autonomous body within the United Nations system, intended to focus special attention on measures that might be taken to accelerate the pace of economic development in the developing countries. The conference was first convened in Geneva in 1964, and has met quadrennially since that date.

Unbundling

Relying on more than one financial technique to transfer funds across borders.

Uncertainty acceptance:

Cultural belief that uncertainty and ambiguity are stimulating and present new opportunities.

Uncertainty avoidance:

Cultural belief that uncertainty and ambiguity are unpleasant and should be avoided.

Uncertainty orientation:

Cultural beliefs about uncertainty and ambiguity.

Unemployment Insurance (UI)

Federal legislation that established programs designed to provide cash benefits to once regularly employed members of the labor force who become involuntarily unemployed and who are able and willing to accept suitable jobs. Created by the Social Security Act of 1935.

Unilateral transfers:

Gifts made by residents of one country to resident of another country.

United Nations (UN)

An association of independent countries from all over the world with the aim of promoting international peace, security, and cooperation.

United States Tariff Commission:

See US International Trade Commission.

Unrelated diversification:

Corporate-level strategy that calls for a firm to operate in several unrelated businesses, industries, or markets.

Uruguay Round:

The comprehensive GATT negotiations initiated by the Punta del Este agreement of September 1986. The negotiations were originally to be completed by the end of 1990; however, a final agreement was not reached until December 1993, with the formal signing in April 1994. Substantial new agreements were reached on general tariff reduction, agricultural subsidies and quotas, textiles, safeguards, antidumping and countervailing duties, trade-related investment measures (TRIMs), rules of origin, standards, services, trade-related intellectual property rights (TRIPs), and government procurement. An unprecedented number of nations adhered to the major Uruguay Round accords--123 as of mid-1994. The Uruguay Round also created the World Trade Organization (WTO) to supersede the GATT structure and modified dispute-settlement procedures so a single country can no longer block the adoption of a panel report, although panel findings can be appealed.

Uruguay Round:

GATT negotiations (1986-1994) that created the World Trade Organization, slashed tariff rates, and strengthened enforcement of intellectual property rights.

US International Trade Commission (USITC):

An independent US fact-finding and regulatory agency whose six members make determinations of injury and recommendations for relief for industries or workers seeking relief from increasing import competition. In addition, upon the request of Congress or the president, or on -its own initiative, the USITC conducts comprehensive studies of specific industries and trade problems, and the probable impact on specific US industries of proposed reductions in US tariffs and nontariff trade barriers. The USITC was created by the Trade Act of 1974 as the successor agency to the US Tariff Commission, which was created in 1916.

US Trade Representative (USTR):

An official in the Executive Office of the President, with cabinet-level and ambassadorial rank, charged with advising the president, working with Congress, and leading and coordinating the US government on international trade negotiations. (USTR also designates the White House office that the representative heads.) Established by the Carter administration in 1980, the USTR was given increased authority in the Omnibus Act of 1988. It succeeded the Special Trade Representative (STR), created (at congressional insistence) in the Trade Expansion Act of 1962, and whose status and authority were strengthened in the Trade Act of 1974.

User fee:

A payment made by those who use a specific good or service provided by government.

Utilitarianism:

A system of ethics based on the maxim that people should act in a way that results in the greatest net social good.

Utility maximizer:

The idea that people act so that, if faced with the same item at different prices, they will buy the lower priced one.

Value chain:

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Technique for assessing a firm's strengths and weaknesses by identifying its most important activities.

Value creation

Performing activities that increase the value of goods or services to consumers.

Values

Abstract ideas about what a society believes to be good, right, and desirable.

VAT (value added tax):

A tax that accumulates on goods as they move from raw material through the production and distribution process.

Vehicle currency

A currency that plays a central role in the foreign exchange market (e.g., the U.S. dollar and Japanese yen).

Vertical differentiation

The centralization and decentralization of decision-making responsibilities.

Vertical foreign direct investment

Foreign direct investment in an industry abroad that provides inputs into a firm's domestic operations, or foreign direct investment into an industry abroad that sells the outputs of a firm's domestic operations.

Vertical integration

Extension of a firm's activities into adjacent stages of productions (i.e., those providing the firm's inputs or those that purchase the firm's outputs).

Vertical integration:

Extent to which a firm either provides its own resources or obtains them from other sources.

Vertical merger:

A merger between two companies in the vertical chain of production or distribution.

Voluntary export restraint (VER)

A quota on trade imposed from the exporting country's side, instead of the importer's; usually imposed at the request of the importing country's government.

Voluntary export restraint (VER):

An arrangement under which exporters voluntarily limit exports of certain products to a particular country. Such restraints (also known as voluntary restraint agreements, or VRAs) are typically undertaken under threat of that country's imposition of import restrictions. VERs circumvent the GATT MFN principle, and the obligation on the part of the importing country to provide compensation to the exporting country when it imposes new import restrictions. The Uruguay Round agreement on safeguards bans the use of VERs.

Voluntary export restraint (VER):

Promise by a country to limit its exports of a good to another country.

Voucher

Consumer subsidy in which consumers exercise choice in purchasing publicly funded services.

War on Poverty

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A services-based strategy for dealing with problems of poverty in the United States. Promoted by the Johnson Administration in the mid-1960s.

Warranty:

A promise of quality or performance for a good or service.

Webb-Pomerene association:

Group of U.S. firms that operate within the same industry and that allowed by law to coordinate their export activities without fear of violating U.S. antitrust laws.

Welfare state:

A nation in which government plays a positive role to promote the social welfare.

Wholly owned subsidiary

A subsidiary in which the firm owns 100 percent of the stock.

With recourse:

Term signifying that should a trade acceptance or banker's acceptance sold by an exporter to an investor fail to be paid, the exporter will reimburse the investor; the exporter retains the risk of default by the signer of the acceptance.

Without recourse:

Term signifying that should a trade acceptance or banker's acceptance sold by an exporter to an investor fail to be paid, the exporter is not obligated to reimburse the investor; the investor retains the risk of default by the signer of the acceptance.

Word Bank Group:

Organization consisting of the World Bank and its affiliated organizations, the International Development Agency, the International Finance Corporation, and the Multilateral Investment Guarantee Agency.

Workers' compensation:

No-fault insurance providing recovery for workers who sustain illness or injury on the job.

World Bank

A multilateral development agency formed to provide loans and technical assistance to the less developed countries of the world.

World Bank

International institution set up to promote general economic development in the world's poorer nations.

World Bank:

See International Bank for Reconstruction and Development.

World Bank:

Officially the International Bank for Reconstruction and Development, the World Bank was founded in 1944 to make loans to finance productive investment in member countries.

World company:

Currently hypothetical firm that transcends national boundaries and has no national identity.

World Trade Organization (WTO)

The organization that succeeded the General Agreement on Tariffs and Trade (GATT) as a result of the successful completion of the Uruguay round of GATT negotiations.

World Trade Organization (WTO):

A new organization created by the Uruguay Round agreements to oversee the global trading system and monitor implementation of trade accords. The WTO is the successor organization to the GATT; unlike the GATT, however, it was explicitly established to play this role. The WTO encompasses and extends the GATT structure. It came into being in 1995.

World Trade Organization (WTO):

Successor organization to the GATT founded in 1995; created by the Uruguay Round negotiations.

World Trade Organization (WTO):

The successor organization to the GATT, create in 1995, with stronger power to resolve trade disputes.

Worldwide area structure

Organizational structure under which the world is divided into areas.

Worldwide product division structure

Organizational structure based on product divisions that have worldwide responsibility.

Zero sum game

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A situation in which an economic gain by one country results in an economic loss by another.