Task 11. Summarizing the Topic.

International trade

Read the text and write short headings:

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International trade can be defined as the exchange of goods and services between different countries. Depending on what the country produces or needs, it can export or import. The basic idea of international trade and investment is simple: each country produces goods or services that can be either produced at home or exported to other countries.

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Basically countries trade with each other because they are better at producing certain things than others. Nations may have advantages in producing goods or services because of factors of production: raw materials, climate, division of labour, economies of scale, etc. Climatic variations among countries offer different possibilities for agriculture.

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It is easy to understand why nations import goods they cannot produce. But why are clothing, toys and cars imported if they are also made in the country? There are two answers: quality and price. A country that specializes in making a certain product may produce goods of such quality that buyers abroad prefer them to the domestically produced goods. The Swiss, e.g., have long specialized in making watches. The success of imports is also connected with lower prices. The workfoce in China, South Korea and Taiwan is cheap and as a result the goods made in Asia are cheaper. Sometimes a country is able to produce goods more cheaply because it has newer and more efficient production facilities.

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The transfer of goods is only one aspect of the international balance of payments. A country gets payments not only for the goods it sells to other countries, but also for the services it offers them. These are some of the most important sources of invisible exports and imports: foreign travel, international transportation, banking insurance, foreign investment.

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Governments are interested in monitoring their country’s foreign trade. Most countries are keen to develop their export trade to increase their earnings of foreign exchange. At the same time they prefer to keep down the flow of imported goods to reduce the loss of foreign exchange. Governments impose tariffs and quotas to protect their country’s strategic industries-notably agriculture and growing industries until they are large enough to achieve economies of scale and strong enough to compete internationally.

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Tariffs are taxes or duties on goods as they cross an international border. For example, in Trinidad and Tobago protection tariffs have been placed on motor vehicles to protect the region’s young automobile assembly industry. Tariffs make imported goods more expensive than home-produced goods. They get a price advantage and this makes the consumer less keen to buy imported goods. Another purpose of imposing tariffs is to raise money for the government.

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Another instrument of control is quotas. It is the maximum quantity of a product that may be admitted in a country during a certain period of time. Quotas are usually applied to commodities that exceed the world demand. By setting quotas, country limits the amount of goods that may be imported. Yet unlike tariffs, quotas provide no revenue for the government. Many countries have a «negative list» of goods which are not allowed to be imported. Import controls are often imposed to encourage the production of particular kinds of goods within the country.

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Today, many different kinds of groups attempt to regulate international trade. The United Nations has several agencies and commissions working on trade-related problems. Some multilateral organizations concentrate on specific trade-related problems, e.g. the World Intellectual Property Organization. But at the core of all of them are the IMF, the World Bank, and the WTO, founded in the 1940s.

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A great number of countries set up commodity trade agreements, such as the International Coffee Agreement and the International Sugar Agreement to solve the problems of price fluctuations. Under such an agreement sugar-producing countries are allowed to sell a certain amount of sugar to the EEC at guaranteed prices. Organization of Petroleum exporting Countries (OPEC) was set up in an attempt to maintain oil prices for the benefit of the producing countries.

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The European Community was founded in order to create a common market in which tariffs and quotas between member countries would be progressively eliminated. Many steps have been taken to create a single European market, free of physical, technical and fiscal barriers.

Retell and discuss the text.