The difference between global and international business isn't huge, but it's there. It's the difference between your company doing business with customers in another town and the laws and regulations that govern that relationship. International business can exist without globalization, but not vice versa.
International trade happens whenever a business in one country sells to customers in another. Globalization is a political program to eliminate obstacles to international trade, creating a level playing field.
International Business And Trade
When businesses in the United States trade with China or Saudi Arabia sells oil to the U.S., international trade happens. For the United States in its first century, the focus was on internal trade, using tariff barriers to protect American industry from competition. In the 20th century, after high tariffs contributed to the Depression of the 1930s, tariffs came down and international trade increased.
Trade is mostly individual businesses in one country doing business with customers in another, but the total of international trade is measured at a national level. In January 2020, for instance, the U.S. had a $67 billion trade deficit in goods, meaning U.S. businesses and individuals bought more items from overseas than they sold; services, however, ran a $21.7 billion surplus.
Why Trade Overseas?
International trade typically happens because one country offers something customers in another country want to buy. Businesses in China are able to produce many goods cheaply for the American market which is why the U.S. runs a goods deficit with China. The U.S. total trade balance for services is a surplus because our workforce includes a significant number of skilled individuals who can provide valuable services.
The deficit vs. surplus situation is affected by multiple factors:
- The value of one currency vs. another.
- Government subsidies that help businesses produce goods for overseas trade cheaply.
- Tariffs that make goods from other countries artificially expensive.
- Consumer demand. One school of economics argues that the U.S. running a trade surplus reflects that the country has lots of consumers who can afford to spend money on imports from the rest of the world.
- The overall health of the economy. In a depression or recession, the money spent on imports may decrease.
The Difference Between Global and International Business
There are many examples of global companies doing business around the world, such as Apple, Amazon and the China Construction Bank. "Global business," however, means much the same thing as "international business". It's quite distinct from globalization.
International trade is business that inevitably has political elements. Globalization is a political agenda that deals with business. The goal of globalization is to integrate economic and financial systems across the world, reducing artificial barriers to trade in goods and services. The end goal is a level playing field so that factories and factory workers in, say, Vietnam, can compete with American workers at making laptops or running shoes
The difference between global and international business is that international trade doesn't require globalization. Monopolies, tariffs, government intervention and the theft of intellectual property all interfere with the globalized level playing field but none of them stop international trade.
Globalization: The Drawbacks
International trade has been around, off and on, since ancient Rome. Globalization is a new thing, and critics say one difference between global and international business is that we'd be better off without globalization. Far from creating a level playing field, the "anti" argument runs, globalization actually creates an unfair environment for international trade.
- The typical wages in poor countries give corporations in the United States or Europe an incentive to relocate factories and slash labor costs. That works out great for the investors who see profits rise, but it's a bad deal for workers. Even if jobs stay in the developed world, the threat of outsourcing may pressure workers there into accepting less.
- Safety standards in poor countries are often lower than in the First World. The workers take risks but see little of the profits. As manufacturers don't have to spend money meeting safety and environmental standards, they can cut costs.
Politicians and economists constantly debate how to solve these drawbacks without crimping international trade.