After making your decision about which supplier to contract with, order your product samples but plan to evaluate them after you return home.

Sample Preparation

Sample preparation, depending which kind of products you want to import, can take considerable time. Contrary to what many people think, factories usually do not keep samples in their warehouse that can be sent right away. The more complicated a product is (for instance home appliances or consumer electronics products) the longer it will take and the more diligence needed from the factory to prepare the samples according to your specific requirements.

You have reached a turning point in your own quality control. The first step was your scrutiny of each supplier visited during the trip. You should have a good idea how each supplier will perform and how talented their management is.

Providing them with detailed information about your sample requirements could become the key to your success. Why is this so important?

When the Sample is Wrong

Imagine that you did not pay adequate attention to instructing the supplier about your sample requirements and they prepare the sample according their own factory standards. Timing however is important and you need the samples checked for compliance with your requirements in your home country. It needs to be right the first time.

If the first sample is incorrect, you could take a risk and place your order in hopes that the supplier will get it right the second time. It is not a good idea to take this risk because there cannot be a guarantee that the supplier will actually follow your new instructions.

It is best asking the supplier to manufacture new samples. Time starts to become an issue as you wait for new samples to be made and it will take 3-7 days delivery time to ship them to your home country. Add everything up and you have possibly lost a month. This could be crucial if your goal is to be among the first to promote the new products in your home market.

Never place any order with new suppliers before you receive acceptable samples with the proper quality and your QC people or an authorized lab has approved them. Anything else is a gamble and you do not want to begin production with that level of risk. Only after establishing a sound business relationship with your suppliers, can you be confident that factory will closely follow your instructions. It is important to set things right from the very beginning.

Have Samples Properly Packaged

When asking for samples, be sure to request they be packaged according to your specifications. This should be the same packaging the end consumer receives. At this point, they should workout the details to determine how many pieces fit into one 20' or 40' ocean-going container. Along with this, comes the details of how many fit into one export carton and if any inner packing needs to go into the export carton.

With this information, you can calculate the freight cost. It may be necessary to change the sales packaging size in order to fit more pieces into one container and save substantial freight charges. It makes a big difference if you can pack 1,400 coffeemakers in a 40' container instead of only 1,200 pieces and it will certainly affect your selling price.

Samples are seldom free which is understandable because they are handmade and very labor intensive. Even if they are simple plastic products, the supplier has to follow your instructions and injection mold them in a certain color which is very time consuming because the plastic injection machines are usually running at full capacity and the injection is limited to one color at a time. If you ask for several different color samples, they can only make them when they have production in the requested color. Naturally, this increases the time it takes to receive the samples.

An alternative is painting the samples but the surface of a spray painted object looks different from an injected one and may mislead you into approving something that later proves to be less than perfect.

Order Plenty of Samples

Do not make the error of ordering a single sample per product/color because you need reference samples for several purposes. Common samples needs include:

* Samples for your showroom
* Samples for lab testing
* Samples for photo shooting and gift box preparation
* Samples for your inspection company
* Samples for your sales managers to show to customers

That is only the beginning of a long list and believe me, large buying offices like hypermarkets, department stores, and other large volume importers ask for even more samples because they are aware of the extensive need when introducing a new product.

The worst-case scenario is if you give the only color reference sample to a key customer and after they place an order with you, you cannot determine which specific color to instruct the factory to begin with. It is a good idea to always keep one or more samples per color locked up in a safe place to avoid embarrassing errors. Due to the limited storage space, suppliers may not keep their reference samples at all after completing production.

You now have the information to better understand why suppliers are reluctant to provide free samples to new customers. In many cases, you can convince the supplier to refund the sample costs after you reach a certain order volume. It is good business to negotiate this in the beginning.

Besides the sample charges, you will be asked to pay the freight charges for the sample delivery. This can get expensive because samples are usually sent by air courier in order to make up lost time and stay on schedule. Suppliers do not want to pay these charges and it is often difficult to convince them to do so. If they do so, it is usually only after a successful business relationship has been established.

If you need the samples urgently, and that is usually the case, you are better advised to look for a compromise, otherwise you may lose the competitive timing edge in your home market.

Article Source: http://EzineArticles.com/?expert=Klaus-Dieter_Hanke

How to search for buyers? Many enterprises have asked this question. There is another way to think about this question: If we make the buyers find the suppliers easily, this problem will become easy to settle.

According to the latest research, The major means of network marketing is search engine and its own website, which is much more important than other category of B2B website platform. For business to business (B2B) buyers, search engines are the primary research source, and one of the top influencers on purchasing decisions.

Among the buyers who search for suppliers, technology buyers accounted for 31.8%, and they are sent to ensure that the purchase of a product complies with the technical needs of the company. During the process of looking for suppliers, they mainly rely on four major channels: the mainstream search engine, seller site, B2B search engine and enterprise information site.

In the Business to Business Survey 2007, we found that general search engines topped the list of research sources throughout the purchase cycle, from awareness, through research, negotiation and purchase phases. However, many buyers move toward vertical search engines as they get closer to making a buying decision. The importance of cultivating a strong presence in relevant search results becomes even clearer to B2B vendors. Additionally, the more precise the key word is, the higher probability will the buyers inquiry. On the contrary, the broader of key word cause lower quality of inquiry.

When buyers in the study were talking about using a general search engine, they usually meant Google. A whopping 77 percent of respondents prefer Google, compared to 14 percent who chose Yahoo, 7 percent who chose Microsoft, and 2 percent who chose another engine. This reinforces for B2B marketers the importance of having a presence on general search engines, especially a presence on Google.

For B2B buyers, simpler is better. They want vendors to provide clear information, that's easy to get to and can be easily transferred within the buying organization. The person doing the searching is not usually the only person involved in making the final decision. The researcher may be tasked with finding the relevant pricing information, technical specs, customer service and support data, which they in turn will need to present to the decision makers. A vendor should use that knowledge to provide researchers with the opportunity to dig down into the details of their products, and make it easy for them to find what they need to move on to the next phase of the buying cycle, with the vendor still in their consideration set.

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What have Price and Terms Negotiations to do with Product Quality?

All price quotations in China are calculated on the individual BOM (Bill of Materials) list. This is a document used by the manufacturer or other business to authorize purchases to be made or to request materials be pulled from inventory to fulfill customer's order.

Bills of materials are of course only one part of a product cost. Other costs as factory operations, labor, and administrative costs all go into the net cost of a product. Finally, the supplier adds their profit margin before quoting their selling price.

When you negotiate prices with your supplier, the BOM plays an essential part in your supplier's calculation. Actually, the most important part because most of the other costs cannot be changed. The factory cannot significantly reduce the labor costs otherwise workers will flee to other employers. The equipment the factory owns and the cost of energy for the manufacturing relatively set factory operations cost.

That leaves the BOM as the only negotiable cost. Just like most things in the world, this is accomplished by substituting cheaper materials from other vendors or outsourcing part of their production to subcontractors who are likely taking quality short cuts that your supplier does not.

You might point to the profit margin as a good place to trim the price. In reality, the profit margins are so thin that if they were further reduced it would not make much sense to even open the factory doors for business. Certainly, they do not want your purchase order if it means they will lose money on the deal.

Both options that the factory has for reducing costs are bad for your quality requirements.

Sourcing cheaper components or materials usually means inferior parts or materials. Otherwise, the factory would already be using these less expensive components.

The Difference a Switch Can Make

Consider this example of what could happen.

A factory receives a large order for 200K electric hair dryers. They face the situation where the customer's requested price is too low. They scrutinize the BOM and find an electrical switch purchased from a reputable switch maker can be substituted with a lower cost switch made in-house.

The savings is only US$ 0.05 but when multiplied by the 200K dryers it becomes a US$ 10,000 cost reduction.

Now for the real quality issue. The switch from the specialized switch maker was lab approved and had its own approval certificate. The in-house produced switch does not have its own certificate. Rather the supplier covers it with the existing certificate for the hair dryer.

You may think that an approval is an approval and it is a good way to cut costs. However, if something happens later and the hair dryer starts burning because of a faulty switch, the lack of proper approval will become a big deal.

A component with a stand alone approval is always an advantage but does cost more money.

You can see now the direct relationship between negotiating cost and the effect it can have on quality. The more you squeeze the more likely it becomes that he will reduce the BOM cost by substituting good components or materials with inferior ones.

There is always the option of substituting A-grade components with B-grade or even C-grade ones. It is nearly impossible to discover these changes but the result will be lower performing products. This is especially true of consumer electronics that need ICs, capacitors, and resistors in A-grade quality to perform properly.

If you have a good long-term relationship with a factory, you may have some reassurance that your factory will not use this cost cutting method but there is no guarantee of it.

Hidden Low Prices

Here is a little known fact that will probably surprise you. Insisting on larger than usual payment terms (L/C 90-120 days) will be reflected either in the product price or in lower quality.

The Chinese are usually good negotiators and know ways to persuade you to listen to their arguments. If they insist after several rounds of negotiations that they will lose money by meeting your target price, you should not continue pushing this issue or it will simply become hidden somewhere else.


Article Source: http://EzineArticles.com/?expert=Klaus-Dieter_Hanke

Researcher, Nancy Adler conducted a monumental study in the mid 1980’s to address myths about women and international business. Her study investigated if commonly held myths about women in international business were true including: women are not interested in International business, women were not willing to travel overseas for a variety of reasons namely family responsibilities and women would not be viewed as credible in overseas business due to the local perception of women. Her study results revealed that many of these false perceptions were indeed myths often held by male managers and HR personnel, and that women were interested and willing to conduct business overseas.

Today many of these same myths still exist despite the dramatic increase of women in business and women owned businesses and women traveling overseas.


Here are some facts published by the U.S. Department of Labor (DOL) (www.dol.gov), The National Association of Women Business Owners (NAWBO) (www.nawbo.org), and the Small Business Administration (SBA) (www.sba.gov), on women in the work force:
• Women account for over 46% of the work force in America and this is expected to increase to 48% by the year 2005.

• Women comprised 43% of employees in American executive, administrative, and managerial occupations in 1995 and this number is growing.

• Businesses owned by women number 8 million in the U.S., and they employ one out of every four workers. They are growing at double the rate of all businesses.

• 33% of women business owners report that they exported in their first or second year of operation and the majority reported that they were successful on their first transaction.

• In 1998 over 23 million Americans traveled overseas and the primary areas of travel were Europe, Asia, Japan and Latin America.

It is no longer just a rumor that women have become major players in the U.S. workforce and in the global business environment. More and more women are traveling overseas to conduct business for their corporations or for their own business ventures.

Despite these significant advances of women in International business we still find commercial guidebooks that suggest that women should not be in International business. Most books in this genre were written by men and either do not address women’s particular issues in international business or, worse, they suggest that women should not even be sent on foreign business assignments due to role differences which these men perceive to be unconquerable obstacles. In contrast, my own research (1992, 1993, 1995, 1997, 1998) indicates that women can and are successful in international business, despite the variety of viewpoints they encounter around the world. Specifically, my research has demonstrated that establishing credibility during the initial stages of business is one area that businesswomen find critical to their success.

Establishing Your Credibility
For men, credibility is often derived from their gender and their status in the company. For women, credibility is more often derived from their individual skills. Women report that they often have to work extra hard to establish credibility because of their gender.
Some women explain:
When I conduct business in most countries I am consciously aware that my male colleagues have more credibility than I do, just because of gender differences. In most countries women are not expected to have significant positions of authority, so I am frequently viewed in the same way. I am first assumed to be an administrator, not the decision-maker in the group, whereas my male colleague is first viewed as the manager or decision-maker. I feel I have to work doubly hard to establish my credibility before I can effectively conduct business and I’m aware that I need to do this immediately so that the business can start. (Chicago)

When I travel outside the U.S. for the corporate office, I am viewed as foreign first, and female second. However, I feel I am still met with some degree of skepticism as to what my role is and how much authority I have for the corporate office. Due to this, I take extra steps to make sure that the proper introductions are made in advance to limit concerns that men might have about my credibility. (Los Angeles)

As a woman business owner I realize that I am not the norm in many countries. Therefore I have to develop methods by which to establish my self and my company as credible for my foreign business associates. This requires preparation and advance communication about my firm, our success and our viability -- perhaps more than is required for men who run their own firms. (New York)

Here are some pointers for establishing credibility:

• Be visible. Attend and host meetings between your company and your international counterparts whenever possible. International travel is often associated with decision-makers in a firm, so being present adds to your credibility.
• Introductions are important, particularly for women. If you are doing business with a firm for the first time, have yourself introduced by a higher-ranking person in your company who already knows the people with whom you will be dealing.
• If you cannot have someone introduce you, ask a higher-ranking person in your company to send a fax or written correspondence in advance, outlining your title, responsibilities and background.
• Make sure your business card indicates a distinctive title such as “Manager” or “Director” so that your position can be clearly understood. If there is any doubt about your title, it may be automatically assumed that you have a lesser role than other members on your team.
• Some women wear a school ring or a graduate school pendant to subtly advertise their background. Others wear corporate pins designating tenure, thus demonstrating their level of experience.
• In general, foreigners will often look and respond more to the men on your team than the women. This is because there are fewer women in executive positions outside of the U.S. Prepare for this by advising your colleagues of tactics that will help you and the other female members, including making seating arrangements that will place you in a position of authority.
• If someone appears confused about your name and rank, offer him another business card, even if you have already given him one. This is a subtle way of reinforcing your title and ensuring acknowledgment of your participation as an active member at the meeting
• Women should lead business discussions where possible. If there is only one woman and everyone is of equal rank, let the woman take the lead to help establish her credibility.
• A female team leader may experience a problem establishing her credibility unless team members defer to her as the authority figure on the team. American men need to be aware that their tendency to jump in and answer questions, especially when a woman is speaking, undermines her authority and the team’s effectiveness. Women should advise team members not to answer questions directed to her and to otherwise defer to her whenever appropriate. A good response when asked a question that should be directed to a female colleague is: “Jane is the best person to answer that question.”
• Be professional. Present yourself in a sincere, confident, professional manner, both in appearance and speech, to create a good first impression. Be yourself. Do not come on too strong, but don’t defer when it is appropriate for you to respond. Deferring to age and position is, however, always acceptable for both sexes.
• Be aware of women’s roles in other countries. If you understand where women are in their own corporate environment it will give you insight into how the culture may perceive you.

The Role of the Manager

Managers can be very effective in international business by helping to enhance their team’s credibility. The manager can introduce the staff members by title and outline their areas of expertise, act as moderator to refer questions to the appropriate team member, and highlight the staff’s achievements.
In particular, managers can help in the following ways:

• It is important that all team members, including management, understand their roles at the meeting and, more importantly, that they do not act out of role. If one of your colleagues is acting out of role, call for a break to explain how the group loses effectiveness when it is not cohesive.
• As a woman, you should advise management that your personal credibility may be jeopardized if your role is undermined, and that this could hinder the success of the team at any follow-up meetings.
• Managers can help enhance the credibility of female teammates by reinforcing their authority during the meeting. For example, if a woman is not receiving the appropriate respect, the manager may once again bring attention to her role and authority.

Despite commonly held myths about women in International businesswomen are traveling and conducting business internationally in increased numbers and they are successful in their business dealings. Establishing credibility in advance is one of the key areas where women can do to ensure her business success.

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An American marketing director gives a major business presentation to a company in Korea. The executive is regarded as an effective speaker back home. He knows his material. He is confident and succinct in his delivery.

He leaves his listeners baffled.

Why? His presentation was geared toward an American audience.

Cultures receive and process information differently. They think differently, make decisions differently, and act upon what they hear differently. "It is entirely possible for two people raised in different cultures to hear the exact same message and draw opposite conclusions, with neither being right or wrong," said Siri Karm Singh Khalsa, president of The Boston Language institute. "If you want to do business with people from another country, you have to be sensitive to cultural differences.

Through its International Business Consulting Practice, The Boston language Institute helps companies to understand cultural differences that can impede international business ventures or lead to communication problems within their own organization. The Institute offers companies both group seminars and one-on-one coaching. Topics may include cultural values and their impact on business practices and behavior, business etiquette and protocol, meetings and negotiations, forging relationships, foreign government restrictions on joint ventures or anything else that clients wish to focus on.

Overcoming Cultural Differences

How can companies bridge cultural gaps? Some tips:

Recognize how "they" think. As important as knowing business etiquette is, it will not get executives very far unless they understand how other cultures think and communicate, says Margaret Firman-Turner, a cross-cultural consultant who works with the Institute's clients.

Western Educated North Americans tend to be linear thinkers and their presentation style reflects this. They typically move from point A to point B to point C, with the most pertinent information at the beginning. People of other cultures, especially Asian, tend to be associative thinkers. A typical presentation starts with an overview or history that provides a context for the information that follows. The newest information often comes at the end. People from Msditerranean cultures, on the other hand, tend to present information as a series of loops.

Firman-Turner, who has written speeches for government leaders and chief executives from various countries, advises the Institute's clients to accommodate the learning needs of their listeners. "You can't expect the audience to adjust to you. You have to present your information in a way that they can process."

Understand "their" decision-making process.
"They can't make a decision!" firman-Turner hears this all the time from American executives who do business internationally. "Of course they can make a decision," she tells them. "They simply do it in a different manner and at a different pace than Americans do."

Imagine that two companies, one American, the other Japanese, have entered into negotiations on a joint venture. The American team presents its terms. Time passes, and the Japanese team has not given its response. The Americans wonder why they are being "Secretive" and begin to question their commitment to the deal.

Unknown to them is the fact that in Japan, as in many other cultures, decision-making is ruled by consensus. The Japanese team is going through a standard process of gathering opinions and approvals. Once they have reached consensus they will present their decision in a meeting with the American team, but not before.

Unlike in America, the purpose of a meeting in Japan is not to debate issues or make decisions, but rather to reaffirm what has already been decided.

Know the reasons behind "their" behavior. The Institute recently conducted a seminar for employees of a large consumer-products company with extensive business dealings in Germany. Many members of the group were frustrated with certain aspects of their German associates' behavior. "Germans will constantly ask for more details," said Firman-Turner. "Americans will say, 'Well, we're going to get to that.' But the reason they want the information is that they have to put all the pieces in place before they can make an assessment and figure out their actions." Also, she said, Germans tend to double-check and triple-check information, Why? "They don't want to be held responsible for making a mistake."

Familiarize yourself with "their" customs. Another recent consulting project involved providing protocol and business practice advice to a public official and members of his staff who were about to embark on a trade mission to Japan.

One of the goals of that mission was to secure a business deal with at least one of three competing corporations. The staff planned on sending letters to the presidents of these companies inviting them to a dinner party. The problem? Corporate leaders in Japan president would be offended if he were asked to dine with his competitors. Moreover, a letter should not be sent directly of the head of a company, but to a member of his staff who would present it to him personally.

The Americans also didn't know that securing a business agreement could take years. "With many cultures, the first thing you must do is build a relationship," said Khalsa. "This takes time. But if you demonstrate respect, patience, and perseverance, you may well be rewarded."

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Baylor or University's mission is to educate men and women for worldwide leadership and service.

Baylor has a tradition of excellence in international education spanning more than a century. The Hankamer School of Business has continually expanded its international curricular offerings and extended its network of faculty and student exchanges.

Baylor Business students are being prepared for positions of leadership in a dynamic environment of global production, exchange, information and finance.

For this purpose, a wide array of international business courses and degrees are offered, and students are encouraged to participate in study abroad programs, foreign language instruction, campus lectures, international student organizations and other extracurricular activities (such as Baylor's award-winning Model U.N. program).

In 1992, the McBride Center for International Business was established to provide general coordination and support of all the business school's international activities. Supported by a generous endowment from the estate of Mayo McBride of Woodville, Texas, the McBride Center is headed by its Director, Professor Stephen Gardner, and its Associate Director, Professor Joseph McKinney.

* With help from the Mcbride Center,

students can strengthen their knowledge of global business and practice their international skills by participating in study abroad programs held every semester and during the summer sessions, by participating in many international internship opportunities made possible through the strong, global Baylor network and choosing an academic emphasis on one of the many facets of international business offered in the undergraduate, graduate and executive MBA programs.

There is no substitute for the cultural insight language skill and personal maturity gained while studying in another country. To provide for the needs of our students, Raylor maintains relationships with a wide range of universities through bilateral agreements and consortium arrangements, such as the MAUI/Utrccht Program. Kaylor has bilateral exchange programs with universities across the globe - from Yonuk College in Thailand to Monterrey Tech in Mexico and the University of Edinburgh in Scotland. Hundreds of students participate in summer study abroad programs, including Haylor in Great Britain, the Baylor European Business Seminar and Kaylor in Cuba. A study abroad experience is provided for all of the students who gain admission to the Business Excellence and Scholarship Team (BEST). We operate exchange or study abroad programs in Argentina, Australia, Canada, China, the Czech Republic, France, Germany, Great Britain, Italy, Japan, Korea, Mexico, the Netherlands, Russia, Scotland, Spain, Sweden and Thailand.

* Today's marketplace

is unobstructed by national boundaries. The competitive environment is growing tougher every day, but exciting new opportunities are opening for those who have the skills to operate on the global stage. Accordingly, a growing number of our students are reinforcing their undergraduate degrees in the traditional business disciplines with a second major in international business. They are learning about the institutional and cultural context of international business, and are applying their skills in accounting, economics, marketing, finance and management to business problems on a global level.

Baylor offers several options for students who wish to pursue international careers. These include an International Business specialization in the MBA program, a Master's of Science program in International Economics, and an interdisciplinary Master's of International Management program. The Executive MBA program, created in 1991, accommodates the needs of full-time working students who hold management-level positions. The program features two strong international courses - Analysis of National and Global Business Decisions and Global Strategic Management and includes a study abroad experience.

The McBride Center also provides support for the business faculty by providing research materials and resources, organizing international conferences and supporting faculty participation in international meetings and educational programs.

With each year that passes, the McBride Center develops new international relationships and programs providing Baylor Business with a growing window to the world.

Now in a newly updated and expanded second edition, "International Business" is the collaborative work of academicians and international business experts Oded Shenkar (Professor of International Business, Fisher collebe of Business, Ohio State University) and Yadong Luo (Professor of International Business and Strategy, University of Miami). Providing the reader with a comprehensive and comprehensible introduction to the role of culture, politics, and legal issues in international business, this superbly organized and presented 598-page compendium illustrated and explains how such factors influence the institutions, structures, and processes that comprise, regulate, and enable all business functions. Offering an integrated, 'reader friendly', practical, and 'real-world' approach to the analysis and conduct of doing business in a global market, "International Business" is an ideal classroom textbook for college courses and a welcome, core addition to Business School and academic library reference collections, as well as informed and informative supplemental reading for corporate executives, economists, governmental agency heads, and anyone else engaged in or having oversight responsibilities for international trade.

International business consists of transactions that are developed and carried out across two or more international borders to satisfy the business objectives of individuals and organizations. Technology has created opportunities for business internationally in ways that make boundaries of countries seamless in transacting business at the click of a computer.

MAJOR FACTORS AFFECTING THE GROWTH OF INTERNATIONAL BUSINESS

International business has experienced an unusually strong growth pattern since 2004. Several major factors are involved in this growth. One major factor deals with the surge in oil prices, a commodity in great demand by many nations.

Another major factor affecting the growth of international business has been the expansion of technology. Computers and all their applications have deeply penetrated international business, and using the Internet as an integral tool of communication has been paramount in promoting diversified international business opportunities.

A third major factor has been the decline in the value of the U.S. dollar. When prices are lower for U.S. goods, other nations rush to take advantage of the bargain prices.

EXPORTING AND IMPORTING

The primary activities that take place in international business transactions are exporting and importing. Exporting is the act of an individual or business in one country selling goods and services to a buyer in another country. Importing is the act of a buyer in one country buying goods and services from an exporting organization in another country.

For example, when an individual organization in Country A sells goods to a buyer in Country B, the Country A seller would receive the proceeds from the sale to Company B, just as in a domestic sale between two companies within the same borders.

The amount of the proceeds from the sale would be the amount agreed upon by the two companies, less any expenses incurred by Country A, the exporter. To calculate the annual income, however, it is necessary to calculate the balance of payments for a stipulated time, such as a month or years. The balance of payments may include gold, merchandise costs, services costs, interest and dividend payments, travelers' expenditures, and loan repayments.

Usually, trade between two countries does not involve ownership interest in the other nation's business firm. Occasionally, however, one of the trading nations makes a foreign direct investment in the other nation's trading firm with whom they are doing business.

A list of the items typically imported by the United States would include machinery, transport equipment, manufactured articles, crude materials, chemicals, food and live animals, minerals and lubricants, beverages, and tobacco.

In addition, almost all countries appear to have a need for engaging in international business. The major reason lies in the need to acquire sufficient quantities of needed commodities in order to have a healthy balance of needed items available. Virtually no country can produce enough of every kind of material it needs by itself. So, if Country A has plenty of a certain kind of raw material, it can trade it to Country B in exchange for Country B's manufacturing capacity and know-how, which Country B can trade to Country A, sometimes at lower prices.

Shortly after the 2004 U.S. presidential election, the value of the U.S. dollar went down. The reduced value, however, made U.S. prices abroad more attractive to buyers throughout the world. The United States began experiencing a serious trade deficit. It is worthy of taking note that capital-intensive products (such as cars, trucks, construction equipment, and industrial machinery) are manufactured by countries with a strong industrial base.

Labor-intensive products (such as shoes and clothing) are made in countries with low labor costs and relatively modern productive plants, often found in Asian countries.

General Motors plant sign in front of the General Motors plant in Silao, Mexico, March 12, 1996. © DANNY LEHMAN/CORBIS

GOVERNMENTAL INTERNATIONAL TRADE POLICIES

Domestic sales are those made where both seller and buyer are conducting business within the same borders. Domestic business organizations of all types—such as retail, wholesale, manufacturing, and agriculture—look to their government to protect them against firms from other nations taking away their customers and their sales.

A tariff is an example the kind of protective legislation used by governments that seek to provide this kind of protection. Suppose, for example, that $500 is the typical price of an item imported by Country A. When the residents of Country A learn they can buy the item from within the bounds of Country A from a foreign source for $500, they will tend to buy the lower-cost item, even if the item must be purchased from a foreign source. Imposition of a tariff by Country A would have the effect of a tax on the items. It would raise the real cost to a figure higher than the domestic cost.