Lesson+4

Important Terms for this Chapter:
Political system:the means by which people in a society make the rules by which they live Democracy:all citizens take part in making the rules that govern them Totalitarian system:most people are excluded from making the rules by which they live; one person or a small group of people hold political control. Host country:the country in which a multinational enterprise is a guest Social Responsibility:the process whereby people function as good citizens and are sensitive to their surroundings Home Country:the country in which a multinational enterprise is headquartered.

Trade Barriers: protectionism: a government policy of protecting local or domestic industries from foreign competition duty: (tariff) a tax placed on products that are traded internationally boycott: an absolute restriction on the import of certain products form certain countries quota: a limit on the quantity or moentary amount of a product that can be imported form a particular country trade embargo: a stop of all import/ex[port trade with another country expropriation: occurs when a government takes control and ownership of foreign owned assets and companies economic nationalism: the trend of some countries to restrict foreign ownership of companies and to establish laws that protect against foreign imports.

International Taxes: customs duty: tax assessed on imported products sales tax: tax on the sale of products excise tax: a tax levied on the sale or consumption of a specific product, such as alcohol or tobacco payroll taxes: taxes automatically deducted from an employee's pay Value Added Tax: (VAT) tax assessed on the increase in value of goods from each stage of production to final consumption. VAT is similar to a national sales tax and is common in most Euoprean nations. income taxes: a tax on the amount of income a person earns

Link to Article for Reading Assignment 4-2 []

__The 4 Ways Governments Encourage Global Business__: 1. free trade zone: a designated area, usually around a seaport or airport, where products can be imported duty free and then sotred, assembled, or used in manufacturing. The importer pays duty when the product leaves this zone. 2. most favored nation status: allows a country to export into the granting country under the lowest customs duty rate 3. free trade agreement: member countries agree to eliminate duties and trade barriers on products traded among members 4. common market: countries join together; members eliminate duties and other trade barriers, allow companies to invest freely in each member's country, and allow workers to move freely across borders

__Government Protection From International Risk__ EXIM-(Export-Import Bank of the United States)-a U.S. government agency that helps finance the export sales of U.S. products. It provided loans, guarantees, and credit insurance. OPIC-(Overseas Private Investment Corporatation)-provided investment insurance to U.S. companies that establish operations in developing countries. This shields a company from losses that may occur as a result of dmages due to war, revolution, terrorism, and sabotage.

Tax Incentives double taxation: U.S. companies doing business in another country are taxed twice--once by the host country, and once by the home country. to avoid double taxation: --U.S. countires are given a tax deduction on their income earned by foreign subsidiaries --U.S. has double taxation avoidance treaties(agreements) with soem countries --U.S. companies are likely to invest in countries and create local jobs when given a favorable tax environment tax holiday: the corporation does not pay corporate income taxes if it invests in a country under this rule. A tax holiday does not have to be one day-it can last up to 10 years.