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III. Match the definitions with the terms on the right.

IV. Choose and mark the most appropriate word to be used in each sentence.

READING COMPREHENSION 1

1.Read the article and the questions to it.

2.For each question 1–5, choose ONE answer (A, B, C or D).

Gap Widens between Rich and Poor

One of the greatest challenges lies in the need to focus more of the wealthy world’s

scientific and technological research on the needs of deprived countries

Global inequality was far greater at the end of the 20th century than it had been at the start. In the 21st century, it is the economic growth in China and India – which account for 2.3 bn of the world’s population of 6 bn – that offers the greatest hope of a reduction in world inequality. These two economies have experienced rapid growth rates in recent years, and growth is the surest way to poverty reduction. The greatest challenge and the deepest problems lie in sub-Saharan Africa.

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In the 1,000 years before the industrial revolution, there was little world inequality because there was little economic growth, and so little relative change in living standards. With the advent of capitalism, and the modern age of economic growth, during past 200 years there has been a seemingly relentless rise in world inequality. According to the United Nations Human Development report, the gap between the world’s richest and poorest country was roughly 3 to 1 in 1820, 11 to 1 in 1913, and 72 to 1 in 1992.

Overall, the story of the 20th century is one of convergence in living standards among most of the 29 countries which make up the Organisation for Cooperation and Development – the rich countries’ club. The rapid rise in Japanese and Korean income per head is also observed. However, this world of economic convergence is not a widely shared one. The OECD countries account for 20 per cent of the world’s population, and 86 per cent of world output. The poorest 20 per cent of the world’s population account for 1 per cent.

During the past 50 years, world income per head had tripled, annual income per head in the OECD countries has risen above $25,000, and world income per head has risen above $5,000. Yet, the UN Development Programme estimates that 1.3 bn people live on less than $1 a day. One third of the 4.5 bn people that make up the developing world do not have access to clean water.

Aside from Japan and Korea, a number of Asian emerging markets have enjoyed rapidly rising income per head over the last 40 years. The financial crisis of the 1990s has meant severe economic strain and some lost ground. But the story of north and south-east Asia is one of overwhelming success.

(Financial Times)

1.Which of the following best summarises the opening paragraph?

A.Global inequality will continue growing in the 21 century.

B.Countries in sub-Saharan Africa will contribute to a reduction in world inequality.

C.Economic growth is the best way to reduce poverty and inequality.

D.Chinese and Indian economies will have a significant impact on solving the problem of world poverty and inequality.

2.In the second paragraph, the writer makes it clear that

A.the gap between advanced and developing economies is constantly widening.

B.there was no world inequality before the industrial revolution.

C.living standards were absolutely similar in different countries before the advent of capitalism.

D.a rise in world inequality could be avoided or smoothed.

3.In the third paragraph, the writer explains that economic convergence in the OECD countries

A.will sooner or later be shared by deprived countries.

B.is a positive factor for the world economy.

C.is not shared by many countries in the world.

D.will never be shared by non-member nations.

4.In discussing the selection of topics the fourth and fifth paragraphs, the writer says that recent years have been the period of

A.economic failures in many countries.

B.economic success in most countries.

C.successful growth in Japan, Korea and in north and south-east Asia.

D.overwhelming success in the so-called ‘tiger economies’ only.

5.According to the article,

A.advanced countries always ignore the needs of the poorest economies.

B.the gap between the richest and the poorest countries is impossible to bridge.

C.the greatest challenge for the advanced countries is to take into account the needs of deprived nations.

D.previously the problem of world inequality was as urgent as it is now.

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4.According to the fourth paragraph, one can make a conclusion that

A.Oxfam is a strong opponent of free trade.

B.trade sanctions on the poorest countries are unlikely to be imposed anyway.

C.it is in the poor countries’ interest to participate in a trade round.

D.free trade contributed and will contribute to economic growth in all developing countries.

5.According to the article,

A.it is no use trying to reconcile the interests of developing and developed nations.

B.opponents to trade liberalization is stronger than its defenders.

C.proponents of trade liberalization can provide more arguments than its opposition.

D.both developed and developing countries could gain if they participate in a comprehensive trade round with a broad agenda.

READING COMPREHENSION 3

1.Read the article and the questions to it.

2.For each question 1 – 5, choose ONE answer (A, B, C or D).

Economics Focus: Trade Disputes

Nagging doubts about the benefits of globalisation, and a look at the evidence

When David Ricardo, a 19th-century economist, criticised England’s protectionist corn laws, he based his argument on the notion of ‘comparative costs’, these days called comparative advantage. The idea, in brief, is that all countries can raise their living standards through specialisation and trade. Even if one country can make everything more cheaply than every other it still gains from focusing on the goods in which its relative advantage is greatest – i.e. in which it has a comparative advantage – and importing the rest. But trade in Mr Ricardo's day involved grain sent by ship from Germany, not computer code sent by e-mail from India. As the production of goods and, increasingly, services is ‘outsourced’ or ‘offshored’ to developing countries, many people in rich countries worry that this new development in international commerce will do them and their national economies more harm than good.

Does such trade defy Mr Ricardo’s insights, or does it lead, just like the old-fashioned kind, to, greater overall prosperity? Two papers in forthcoming issues of the Journal of Economic Perspectives, both by greatly respected economists, confront this question. The first paper is by Paul Samuelson, a Nobel laureate whose textbook has introduced students to economics for decades. He paraphrases the defence of free trade by ‘economists John and Jane Doe spread widely throughout academia’:

Yes, good jobs may be lost here in the short run. But still total and net national product must, by the economic laws of comparative advantage, be raised in the long run (and in China, too). Correct economic law recognises that some American groups can be hurt by dynamic free trade. But correct economic law vindicates the word ‘creative’ destruction by its proof that the gains of American winners are big enough to more than compensate the losers.

Of course, says Mr. Samuelson, Ricardo was right. Take the example of a poorer, less productive economy, and a richer, more productive one: say, China and America. In the classical model, trade does indeed benefit both economies. Though there are both winners and losers, the winners’ gains exceed the losers’ losses. Productivity gains in China’s export sector raise total wealth in each country.

But, he adds, not so fast. Suppose the poor country, spurred by technical progress, improves productivity in the rich country’s export goods: think of China’s advances in semiconductors or India’s in financial services. Then, says the theory, trade can turn entirely to the poor country’s advantage. The improvement in productivity in the poor country can reduce the price of the rich country’s exports by enough to make it worse off, despite the increased availability of cheaper goods. It may be that not just some Americans lose, but that the country as a whole is worse off.

Few mainstream economists doubt that this is possible, at least in theory. Mr. Samuelson himself described the idea in the 1970s. Europeans worried about American growth in the 1950s for this reason, and Americans later worried about Japan. But evidence that it has been borne out in

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READING COMPREHENSION 4

1.Read the article and the questions to it.

2.For each question 1 – 5, choose ONE answer (A, B, C or D).

The Third Age of Globalisation

Enter the true multinationals

More and more multinationals will shift the operation and control of key business functions away from their head office. They will be following companies like IBM, which recently opened a regional head office in Singapore with 1,000 employees to watch over its growing activities in the area and said that it must accelerate the transfer of its white-collar professionals outside the United States. This diffusion of power speeded up in 2004 into what became a third age in the global strategy of multinationals.

At first, when companies went global, they sold abroad, manufactured at home and controlled their operations from home. In the second phase, both sales and manufacturing moved around the globe, but control remained firmly in the hands of the parent's head office – invariably located in the ‘triad’ of America, Japan and Western Europe. Today we are seeing a significant shift in the location of this control. Almost for the first time, multinational companies are becoming truly global.

The first stage of global strategy was most famously expressed by Theodore Levitt in a 1983 article in the Harvard Business Review. In it, he foresaw ‘the emergence of global markets for standardised consumer products on a previously unimagined scale of magnitude’. Mr Levitt’s typical global firm was a big national producer which exploited its economies of scale to market and distribute products globally. He had in mind firms like the giant Japanese electronics companies. Based on home-grown R&D and domestic production facilities, they exported their uniform output around the world.

But already a second phase of globalisation was starting to take shape. Driven largely by a desire to cut costs, big western firms moved chunks of their production facilities to countries where wages were cheaper. In the 1990s this contributed to a rapid rise in foreign direct investment. By 2001, for example, foreign multinationals owned 39 % of the 500 largest companies in Latin America, up from 27 % ten years earlier.

This second age gave birth to a growing hostility among anti-globalist groups in the West (in contrast, governments around the world were keener than ever to attract foreign investors). In the first age, the main objection had been that multinationals reduced consumer choice by spreading blandly homogeneous products. In the second age, it was alleged, not only did multinationals destroy diversity, but they also exercised arrogant control over their far-flung empires, exploited the poor and imposed inappropriate practices on others.

Not for the first time, the multinationals were accused of being imperialists. In 1998 two business professors, C.K. Prahalad and Kenneth Lieberthal, published an article about the end of corporate imperialism. A few years ahead of its time, it argued that multinationals “will have to develop a new mindset and adopt new business models to achieve global competitiveness in the post-imperialist age.”

Those models are only just beginning to appear. In July 2003 Rod Eddington, chief executive of British Airways, wrote a piece arguing that only the world's favourite empires will last. The British empire, he said, had faded because it “lost its early suppleness; the veins clogged and the mindset became crusty.” Applying the lessons of empire to business, said Mr Eddington, means that companies like British Airways “need a centre that is strong without being crushing, and outposts that are true to themselves without losing our corporate identity.”

More hints as to the shape of the post-imperial multinational emerged in 2004.

1) Further dispersion of headquarters. It is rare for big companies to move their main HQ from one country to another—although Ikea and BHP-Billiton have done it. But a growing number of companies are setting up regional headquarters or relocating specific HQ functions elsewhere. A UNCTAD survey found that 829 ‘HQ operations’ of multinationals were relocated between January 2002 and March 2003, nearly a quarter of them in developing countries.

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