INTERNATIONAL TRADE

• Producing goods which other countries want at a price which is cheaper than they can make them themselves.

• Import vs. export.

The balance of trade:

• Visible trade - goods which can be seen and touched such as machines, televisions, motorcycles, refrigerators, etc.

• Invisible trade - all the items which we export, which cannot be seen or touched, such as sales of insurance, banking services, airline seats, or sea cargo space, tourism.

• Balance of trade - taking all visible imports away from visible exports - a negative result = deficit in the balance of trade; a positive result - surplus in the balance of trade.

The balance of payments on current account:

• Balance of payments - similar to the balance of trade, but takes more information into account: the current account includes the balance of trade plus any invisible transactions which have been undertaken between the countries during the year.

Visible export - visible import = the balance of trade

Invisible export - invisible import = invisible balance

Visible balance - invisible balance = balance of current account

EXPORTING

Export procedures and documents

• Customs clearance

• Bill of lading

• Export invoice

• Certificate of origin

• Certificate of value

• Customs declaration

• Declaration of dangerous goods

• Certificate of insurance

• Health certificate

• Export licence

Paying for exports

• An open account

• Payment with order

• Draft/Bill of exchange (a sight draft, a term draft)

• A letter of credit

IMPORTING

Barriers to trade:

• Tariffs

• Quotas

• Subsidies

• Language

• Exchange controls

• Money/currency

• Import regulations

• Standards

ORGANISATIONS IN INTERNATAIONAL TRADE:

The International Monetary Fund (IMF) - set up in 1974 in order to ensure that the world's currencies were kept at reasonably stable rates against each other. The system of fixed exchanged rates - no matter how long the duration of a contract, a firm anywhere in the world would know exactly how much they would receive for selling their product. In the 1970's - the change into the system of floating exchange rates.

The United Nations Conference on Trade and Development (UNCTAD) - set up in the mid-1960's with interests in many areas:

- transport by sea and the charges a shipping company levies;

- the activities of multinational companies - big corporations;

- how barriers to trade work - their effect on the poorer countries;

- setting up systems to protect prices of certain commodities which are particularly important to the economies of the world's poorer countries.

The General Agreement on Tariffs and Trade (GATT) - established after the World War II with the aim to reduce the average levels of tariffs on goods manufactured throughout the world. Operated through a series of discussions between members countries [“rounds of negotiations”].

In 1994, the GATT was replaced by the World Trade Organisation.

Discussion Questions:

1. In what ways do businesses benefit from international trade?

2. Why might the Polish government urge the Polish consumers to “buy Polish”?

3. Is trade with foreign companies more difficult than trade with domestic companies?

1. Fill in the gaps using the words given in the box:

TRADE WITHOUT DISCRIMINATION

global bulk developing run exceptions trading heart agreements favour barriers strict market trade equally applies goal discriminate

The World Trade Organization (WTO) is the only …………. (1) international organization dealing with the rules of ………… (2) between nations. At its ………. (3), are the WTO agreements, negotiated and signed by the ………….. (4) of the world's trading nations and ratified in their parliaments. The ………….. (5) is to help producers of goods and services, exporters, and importers …………………. (6) their business.

Most-favoured-nation (MFN): treating other people …………….. (7). Under the WTO …………….. (8), countries cannot normally ……………….. (9) between their trading partners. Grant someone a special ………….. (10) (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members. Some ……..……… (11) are allowed. For example, countries can set up a free trade agreement that ……………… (12) only to goods traded within the group, discriminating against goods from outside. Or they can give …………….. (13) countries special access to their markets. Or a country can raise ………….. (14) against products that are considered to be traded unfairly from specific countries. And in services, countries are allowed, in limited circumstances, to discriminate. But the agreements only permit these exceptions under ………….. (15) conditions. In general, MFN means that every time a country lowers a trade barrier or opens up a ……………. (16), it has to do so for the same goods or services from all its ………… (17) partners, whether rich or poor, weak or strong.

FREER TRADE: GRADUALLY, THROUGH NEGOTIATION

encouraging beneficial rounds lowering fulfil discussed underway steadily include property introduce expanded rate restrict

Lowering trade barriers is one of the most obvious means of ……………. (1) trade. The barriers concerned ……………. (2) customs duties (or tariffs) and measures such as import bans or quotas that ………….. (3) quantities selectively. From time to time other issues such as red tape and exchange ………….. (4) policies have also been …………….. (5).

Since GATT's creation in 1947-48, there have been eight …………. (6) of trade negotiations. A ninth round, under the Doha Development Agenda, is now …………… (7). At first these focused on ………….. (8) tariffs (customs duties) on imported goods. As a result of the negotiations, by the mid-1990s industrial countries' tariff rates on industrial goods had fallen ……………… (9) to less than 4%.

But by the 1980s, the negotiations had ………….. (10) to cover non-tariff barriers on goods, and to the new areas such as services and intellectual ………….. (11). Opening markets can be ……………… (12), but it also requires adjustment. The WTO agreements allow countries to ……………(13) changes gradually, through “progressive liberalization”. Developing countries are usually given longer to ………….. (14) their obligations.

PROMOTING FAIR COMPETITION

described undistorted secure unfair gain circumstances treatment charging entirely dedicated establish competition

The WTO is sometimes …………… (1) as a “free trade” institution, but that is not ………….. (2) accurate. The system does allow tariffs and, in limited ……………… (3), other forms of protection. More accurately, it is a system of rules …………… (4) to open, fair and …………… (5) competition.

The rules on non-discrimination, MFN and national …………… (6), are designed to ………….. (7) fair conditions of trade. So too are those on dumping (exporting at below cost to ………….. (8) market share) and subsidies. The issues are complex, and the rules try to ………… (9) what is fair or unfair, and how governments can respond, in particular by charging ……………. (10) import duties calculated to compensate for damage caused by ……………… (11) trade.

Many of the other WTO agreements aim to ………….. (12) fair competition: in agriculture, intellectual property, services, for example. The agreement on government procurement (a “plurilateral” agreement because it is signed by only a few WTO members) extends ………… (13) rules to purchases by thousands of government entities in many countries.

PREDICTABILITY: THROUGH BINDING AND TRANSPARENCY

bindings negotiating case trade domestically rates loss substantially surveillance set (v.) open charged commitments accusations stability

In the WTO, when countries agree to ……….. (1) their markets for goods or services, they “bind” their commitments. For goods, these ………… (2) amount to ceilings on customs tariff rates. Sometimes countries tax imports at …………. (3) that are lower than the bound rates. Frequently this is the ………… (4) in developing countries. In developed countries the rates actually ………….. (5) and the bound rates tend to be the same.

A country can change its bindings, but only after …………. (6) with its trading partners, which could mean compensating them for ………….. (7) of trade. One of the achievements of the Uruguay Round of multilateral …………… (8) talks was to increase the amount of trade under binding …………….. (9). In agriculture, 100% of products now have bound tariffs. The result of all this: a ……………. (10) higher degree of market security for traders and investors.

The system tries to improve predictability and ………….. (11) in other ways as well. One way is to discourage the use of quotas and other measures used to ……….. (12) limits on quantities of imports — administering quotas can lead to more red-tape and ………….. (13) of unfair play. Another is to make countries' trade rules as clear and public (“transparent”) as possible. Many WTO agreements require governments to disclose their policies and practices publicly within the country or by notifying the WTO. The regular ………….. (14) of national trade policies through the Trade Policy Review Mechanism provides a further means of encouraging transparency both ……………. (15) and at the multilateral level.

2. Complete missing prepositions:

There are a number of ways ____ looking ____ the WTO. It's an organization _____ liberalizing trade. It's a forum ____ governments ____ negotiate trade agreements. It's a place ____ them to settle trade disputes. It operates a system ____ trade rules. (But it's not Superman, just ____ case anyone thought it could solve, or cause, all the world's problems!)

Above all, it's a negotiating forum. Essentially, the WTO is a place _____ member governments go, to try to sort ____ the trade problems they face _____ each other. The first step is ____ talk. The WTO was born _____ _____ negotiations, and everything the WTO does is the result ____ negotiations. The bulk of the WTO's current work comes _____ the 1986-94 negotiations called the Uruguay Round and earlier negotiations _____ the General Agreement on Tariffs and Trade (GATT). The WTO is currently the host _____ new negotiations, under the “Doha Development Agenda” launched ____ 2001.

Where countries have faced trade barriers and wanted them lowered, the negotiations have helped ____ liberalize trade. But the WTO is not just ____ liberalizing trade, and ____ some circumstances its rules support maintaining trade barriers, ____ example to protect consumers or prevent the spread _____ disease.

It's a set ____ rules. ____ its heart are the WTO agreements, negotiated and signed ____ the bulk ____ the world's trading nations. These documents provide the legal ground-rules ____ international commerce. They are essentially contracts, binding governments to keep their trade policies ____ agreed limits. Although negotiated and signed ____ governments, the goal is ____ help producers ____ goods and services, exporters, and importers conduct their business, while allowing governments ____ meet social and environmental objectives.

The system's overriding purpose is to help trade flow ____ freely ____ possible, so long _____ there are no undesirable side-effects. That partly means removing obstacles. It also means ensuring that individuals, companies and governments know what the trade rules are ____ the world, and giving them the confidence that there will be no sudden changes ____ policy. ____ other words, the rules have ____ be “transparent” and predictable.

And it helps ____ settle disputes. This is a third important side ____ the WTO's work. Trade relations often involve conflicting interests. Agreements, ____ those painstakingly negotiated ____ the WTO system, often need interpreting. The most harmonious way to settle these differences is ____ some neutral procedure ____ on an agreed legal foundation. That is the purpose ______ the dispute settlement process written ____ the WTO agreements.

3. Fill in the gaps using one word only:

ENCOURAGING DEVELOPMENT AND ECONOMIC REFORM

The WTO system ………………. (1) to development. On the other …………. (2), developing countries need …………….. (3) in the time they take to implement the system's agreements. And the agreements themselves inherit the earlier ……………. (4) of GATT that allow …………… (5) special assistance and trade concessions for …………….. (6) countries.

Over three quarters of WTO …………… (7) are developing countries and countries in …………… (8) to market economies. During the seven and a half years of the Uruguay Round, over 60 of these countries …………….. (9) trade liberalization programmes autonomously. At the same time, developing countries and transition economies were much more active and ……………. (10) in the Uruguay Round negotiations than in any previous round, and they are even more so in the current Doha Development Agenda.

At the end of the Uruguay Round, developing countries were prepared to ……………. (11) most of the obligations that are …………… (12) of developed countries. But the agreements did give them transition periods to …………….. (13) to the more unfamiliar and, perhaps, difficult WTO provisions, particularly so for the poorest, “least-developed” ………….. (14). A ministerial ………………. (15) adopted at the end of the round says better-off countries should accelerate implementing market access commitments on goods exported by the least-developed countries, and it seeks ……………. (16) technical assistance for them. More recently, developed countries have ……………… (17) to allow duty-free and quota-free imports for almost all …………….. (18) from least-developed countries. On all of this, the WTO and its members are still going ……………. (19) a learning process. The current Doha Development Agenda includes developing countries' concerns about the difficulties they ………………. (20) in implementing the Uruguay Round agreements.

4. Vocabulary. Match the expression (1-20) with their definitions (a-t):

1. a certificate of origin	a. a document drawn by the seller stating that the buyer agrees to pay as soon as the goods are delivered and the documents handed over
2. a floating exchange rate	b. bureaucratic regulations
3. a quota	c. a special name, sign, or word that is marked on a product to show that it is made by a particular company
4. a red tape policy	d. a document that proves that goods come from a given country
5. be underway	e. a rate which may change at any time in terms of another currency
6. a bill of lading	f. a document drawn by the seller stating that the buyer does not need to pay until 30, 60 or 90 days after the documents have been handed over
7. a subsidy	g. a country in the process of changing
8. a certificate of insurance	h. money that is paid by a government or organisation to make prices lower, reduce the cost of producing goods, etc.
9. visible import	i. a poor country that is trying to increase its industry and improve trade
10. a sight draft	j. an official order that forbids trade
11. a trademark	k. an obligation that must be obeyed
12. intellectual property	l. a document that contains details of goods being shipped, their destination and which ship they will travel on, etc.
13. a term draft	m. an official limit on the number or amount of something that is allowed in a particular period
14. a trading partner	n. happening now
15. dumping	o. the policy involving the sale of goods at prices lower than costs of production to gain markets and eliminate competitors
16. a country in transition	p. a rich industrial country with a lot of business activity
17. a developing country	q. goods brought into the country which can be seen and touched, e.g. domestic appliances, cars, etc.
18. a developed country	r. a document need by the shipping company, or airline, or by a customer in order to be assured that the value of the goods is covered if any accident happens
19. a binding commitment	s. a partner in trade
20. an import ban	t. something which someone has invented or has the right to make or sell, especially something protected by a patent

Give synonyms:

1. to levy a charge -

2. to encourage development -

3. to undertake a transaction -

4. to set up an agreement -

5. to enjoy the benefits of competition -

6. to take on obligations -

7. to set limits on trade -

8. to go through a process -

9. to discriminate between trading partners -

10. to negotiate -

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