Unit 1 International Trade Today

Case-study

In today’s complex economic world, neither individuals nor nations are self-sufficient. The United States is a major consumer of coffee yet it does not have the climate to grow any of its own. Consequently, the United States must import coffee from countries (such as Brazil, Colombia, and Guatemala) that grow coffee efficiently. On the other hand, the United States has large industrial plants capable of producing a variety of goods, such as chemicals and airplanes, which can be sold to nations that need them. If nations trade item for item, such as one automobile for 10000 bags of coffee, foreign trade would be extremely troublesome and restrictive. But instead of barter, which is the trade of goods without an exchange of money, the United States receives money in payment for what it sells. It pays for Brazilian coffee with dollars, which Brazil can then use to buy wool from Australia, which in turn can buy textiles from Great Britain, which can then buy tobacco from the United States.

Discussion

Why do countries trade? Shouldn’t a strong country such as the United States produce all of the computers, television sets, automobiles and cameras it wants rather than import such products from Japan?

International Trade Today

International trade is also called world trade. World trade has grown rapidly over the past sixty years and at consistently higher rates than world GDP.

Developed countries dominate world trade. They account for 60 per cent of world exports and 65 per cent of world imports. The top ten trading nations account for 50 per cent of world merchandise exports. The country with the highest share is Germany(9.7%), followed by China(8.9%), the USA(8.5%), Japan(5.2%), France(4.1%), the Netherlands(3.8%), Italy(3.6%)and the UK(3.2%).

Why do countries trade with each other, and what do they gain from it? Without international trade, we would all be much poorer. There would be some items like pineapples, coffee, cotton clothes, foreign holidays and uranium that we would simply have to go without. Then there would be other items like wine and spacecraft that we could produce only very inefficiently. International trade has the potential to benefit all participating countries.

The reasons for international trade are really only an extension of the reasons for trade within a nation. Rather than people trying to be self-sufficient and do everything for themselves, it makes sense to specialize.

Firms specialize in producing certain goods. This allows them to gain economies of scale and to exploit their entrepreneurial and management skills and the skills of their labor force. It also allows them to benefit from their particular location and from the ownership of any particular capital equipment or other assets they might possess. With the revenues firms earn, they buy in the inputs they need from other firms and the labor they require. Firms thus trade with each other.

Countries also specialize. They produce more than they need of certain goods. What is not consumed domestically is exported. The revenues earned from the exports are used to import goods that are not produced in sufficient amounts at home.

But which goods should a country specialize in? What should it export and what should it import? The answer is that it should specialize in those goods in which it has a comparative advantage. The theory of comparative advantage, also called the comparative cost theory, was developed by David Ricardo in the nineteenth century. According to Ricardo, economic benefit largely lies in the theory of comparative advantage.

Countries have different endowments of factors of production. They differ in population density, labor skills, climate, raw materials, capital equipment, etc. These differences tend to persist because factors are relatively immobile between countries, but even with labor and capital there are more restrictions on their international movement than on their movement within countries. Thus the ability to supply goods differs between countries.

What this means is that the relative cost of producing goods varies from country to country. For example, one country may be able to produce one fridge for the same cost of 6 tonnes of wheat or three compact disc players, whereas another country may be able to produce one fridge for the same cost as only 3 tonnes of wheat but four CD players. It is these differences in relative costs that form the basis of trade.

New words and useful expressions

dominate 支配，控制

account for 占……比例

merchandise 商品，货物

uranium 铀元素

inefficiently 无效率地，缺乏能力地

potential 潜在的，可能的

benefit 有益于，对……有益

self-sufficient 自给自足

economies of scale 规模经济

entrepreneurial 企业家的，创业者的

labor force 劳动力，劳动人口

assets 资产，财产

domestically 国内地

comparative advantage 比较优势

endowments 禀赋，才能

GDP (Gross Domestic Product) 国内生产总值

specialize in 专门从事

I. Discuss the following questions according to the text.

1. What is international trade?

2. Why is it an irreversible trend to have the international trade for all the countries around the world?

3. Explain the differences between international trade and domestic trade?

4. What are the major benefits that result through international trading?

II. Multiple choice: choose the right meaning of the underlined part according to the context.

1. International trade is the fair and deliberate exchange of commodity and service across national boundaries.

A. intended

B. prudent

C. desire

D. detailed

2. Comparative advantage has directed countries to specialize in particular products and to mass-produce.

A. special

B. some

C. other

D. all

3. Whatlineof business is he in?

A. area

B. activity

C. feature

D. interest

4. Although you may have a general understanding of the meaning of each statement, at this time you probably would have difficulty in giving a clear-cut explanation of business.

A. straightforward

B. absolute

C. definite

D. first-class

5. If just one phase of business, such as transportation, were to suspend operations, factories could not ship their products.

A. example

B. percent

C. group

D. aspect

6. Only when the business activities of the community, the state and the nation are functioning smoothly can there be prosperity for everyone.

A. freedom

B. wealth

C. opportunity

D. security

7. For the business owner business activities offer the opportunity to render a service and to make a profit.

A. obtain

B. win

C. provide

D. get rid of

8. Marketing is the process to bring about exchanges that satisfy individual and organizationalobjectives.

A. needs

B. demands

C. goals

D. interests

9. Activities like buying gasoline for one’s cars or purchasing a book are business transactions.

A. actions

B. transfers

C. dealings

D. agreements

10. Some stores glimpse of marketing on our imaginary tour may be a store that sells food.

A. stop

B. step

C. quick look

D. experience

III. Translate the following sentences from Chinese into English.

1.比较优势指一个国家能以比任何其他国家低得多的成本生产某种商品或提供某种服务。

2.有些国家无法大量生产出某种产品，所以，必须从其他国家进口这类商品。

3.国际贸易包括货物贸易的进出口或服务贸易的进出口。

4.通过扩大出口和进口贸易，一个国家可以刺激本国的经济，给国民提供更实惠的产品和服务，满足他们消费商品的不同口味和偏好。

5.比较优势引导各国专门和批量生产某些特定产品。

IV. Grammar task of the present tense and past tense.

1. We are disappointed that you______ to make delivery on time.

A. failed

B. fail

C. will fail

D. would fail

2. On July 26, the manager ______ Haier Group and ______ with the staff there.

A. visited/talked

B. visits/talks

C. willvisit/talked

D. visits/talked

3. The meeting ______ in an hour.

A. begin

B. begins

C. was begin

D. is beginning

4. When did John ______ Mr. Smith’s office?

A. leaving

B. left

C. leave

D. have left

5. I ______ we need two new fax machines.

A. thought

B. think

C. had thought

D. has thought

6. Sometimes it just ______ an extra pair of eyes to see the problem.

A. took

B. takes

C. cost

D. costed

7. It is time we ______ the contract.

A. sign

B. should sign

C. signed

D. will sign

8. We’ll deliver the goods as soon as the contract ______.

A. is signed

B. signs

C. will be signed

D. will sign

9. After graduation, Tailor ______ in a shirt factory as a consultant for a short period.

A. works

B. worked

C. is working

D will work

10. These figures are really bad. We ______ a loss.

A. make

B. will make

C. are going to make

D. have made

11. If the plan succeeds, one-third of Japan’s financial players ______ or be merged out of existence.

A. likely vanish

B. will likely vanish

C. will be likely to vanish

D. are likely vanishing

12. In ten years’ time, I ______ the boss of my own successful company.

A. will be

B. am

C. am going to be

D. has been

V. Speaking practice

Meeting Foreign Guests at the Airport

A: Excuse me, are you Mr. Wilson from Singapore?

B: Yes, I am. They are my delegation.

A: I’m Li Ming, secretary of the China-ASEAN Exhibition committee.

B: How do you do? Mr. Li?

A: How do you do, Mr. Wilson? Welcome to China!

B: Thank you! It’s very kind of you to come and meet me at the airport, Mr. Li.

A: It’s my pleasure. I hope you’ve had an enjoyable trip.

B: Yes, thank you.

A: I’m glad to hear that. Is this your first trip to Nanning, Mr. Wilson?

B: Yes, the very first.

A: I hope you will enjoy your stay here in Nanning.

B: Thanks. I’m sure I will.

A: Our car is waiting over there. Let’s drive to the hotel. May I help you with your luggage?

B: No, thanks. I can manage all right. Let’s go.

VI. Supplementary reading

The Function of International Trade

International trade influences a whole range of activities including job creating and hunting, consumption and fighting against poverty. It also affects the price and availability of practically everything we buy，the environment and relations among countries. In turn, trade is shaped by a host of influences ranging from natural resources to fashion. Trade-related issues can give rise to strong feelings, and trade measures such as banning or limiting imports are often called for to respond to major economic problems. An understanding of the benefits and downsides of trade, and of what trade policy can and cannot be achieved, will help us to form our own opinions on debates about international trade.

Goods and services do not flow freely among countries, even among those with excellent relations. Countries put up barriers to trade for a number of reasons. Sometimes it is to protect their own companies from foreign competition. Or it may be to protect consumers from dangerous or undesirable products. Or it may even be unintended, as can happen with complicated customs procedures. Tariff barriers have been reduced considerably over the past few decades, but other obstacles still remain. Getting rid of unnecessary trade barriers would give a great boost to global economic welfare.

Producing consuming and moving goods all have environmental costs that are rarely included in the price we pay. This is also true for trading goods interna- tionally. But it is by no means always the case that a locally sourced product is more environmentally friendly than the one that has travelled a long distance. Trade can also help to reduce the negative consequences of economic growth by making environmentally-preferable products and technologies more easily available.

Trade and innovation are closely intertwined and mutually beneficial. Trade allows new technologies to move more freely around the world, benefitting more firms and more people. This process increases the size of the market both for the innovator and for those who acquire and apply the innovation. And that in turn stimulates competition and more innovation.

Reading comprehension:

1. What are the following factors not the international trade influences?

A. employment

B. consumption

C. benefit

D. imports

2. According to the passage, which of the following is true?

A. Goods can be transferred freely from one country to another.

B. Services flow freely among countries.

C. Services may not be delivered to another country completely freely.

D. Goods may be bought from countries without any barriers.

3. According to the writer, which of the following statement is NOT correct?

A. Tariff barriers have never been reduced

B. Trade barriers are used to prevent foreign competition.

C. Reducing trade barriers can be beneficial to the whole economics.

D. Not all the trade barriers are intended.

4. Environmental cost does not exist in ________.

A. Manufacturing goods

B. Packing goods

C. Consuming goods

D. Transporting goods

5. For all export transactions, documents required need to be prepared largely on the basis of the ________.

A. sales contract

B. letter of credit

C. commercial invoice

D. packing list