577
.pdfMost-favoured-nation (MFN) treatment is a clause in international commercial agreements or treaties in which tariff privileges accorded by a country to any other are extended to all other countries with which it signs treaties awarding most-favoured-nation treatment.
Unconditional MFN clauses automatically extend the benefits of tariff concessions to all countries enjoying MFN status with the tariff-reducing country, whether the concessions are given freely or reciprocally, that is in return for concessions. Conditional MFN clauses make extension of the privilege dependent upon the grant of similar concessions by the country benefiting from them.
The customs tariff of a country usually contains two kinds of rates of duty. Autonomous rates of duty have been established quite independently and are valid in general for all foreign countries. Conventional rates of duty, on the other hand, have been mutually agreed upon by two (or more) countries and are lower than the former.
Customs tariff agreements can be bilateral if concluded only between two countries, or multilateral, if concluded among more than two countries. An example of a multilateral customs tariff agreement is GATT (the General Agreement on Tariffs and Trade).
Subsidies
Subsidies are a financial aid supplied by a government for reasons of public welfare, the balance of payments, etc. Subsidies may be given on grounds of income distribution, to improve the income of producers or consumers. They are not usually efficient for either purpose: even goods consumed heavily by the poor such as rice in India, are also consumed by the better-off, so that a lot of the benefit of a subsidy goes to those who do not need it. Similarly, farm subsidies benefit large rich farmers more than smaller ones. Export subsidies may be paid to increase exports in order to improve the balance of payments.
While countries which subscribe to the General Agreement on Tariffs and Trade (GATT) cannot follow a policy of ‘dumping’ exports by giving direct subsidies, the volume and pattern of international trade may be influenced indirectly by other means, e.g. government assistance to the shipbuilding industry. Less obviously, welfare benefits, e.g. child-benefits and income supplements which keep down labour costs, may give one country a price advantage over another.
Quotas
In the context of international trade a quota is a prescribed number or quantity, as of items to be manufactured, imported, or exported. A quota may be set as a minimum or a maximum. A quota for jobs for disadvantaged groups, or for compulsory deliveries by former planned economy farmers to state marketing organisations, would be a minimum. A limit to imports of cars, or quantity of milk sold under the Common Agricultural Policy (CAP) in the European Union, would be a maximum. In each case it would be argued that any objective achieved by a quota system could be achieved at lower cost by use of the price mechanism, through an appropriate tax or subsidy. The use of quotas tends to inhibit competition, directly if quotas are allocated to individual producers, and indirectly, if they are fixed en bloc (all together), as this encourages the formation of organisations to share out the market.
If demand is inelastic, the increase in price resulting from a customs duty will have little effect on the quantity imported. Thus, to restrict imports of a good to a definite quantity, quotas must be imposed. This quantitative limit to imports may be set in terms of value or physical units. A quota in physical units is liable to lead to a rise in the average price of products imported, as higher-priced products generally carry a higher profit margin. Compared with duties, quotas have two main disadvantages.
1)As a result of the artificial shortage of supply, the price may be increased by the foreign supplier or by the importer. Hence, unless the government also introduces price control, they gain at the expense of consumers.
2)Quotas are usually based on a firm’s past imports, which makes the economy rigid by penalising the efficient firm wishing to expand.
To avoid having formal quotas imposed, ‘voluntary export restraints’ may be agreed, e.g. on the import of Japanese cars.
Physical Controls
A complete ban – an embargo – may be placed on the import or export of certain goods. Thus, narcotics cannot be imported, while the export of some strategic goods to certain countries is forbidden. An embargo is a prohibition on trading with a country, generally or in some particular
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goods. A general embargo is intended as an expression of disapproval, for example, of practices such as apartheid in South Africa; an embargo on particular products is generally based on defence considerations, to prevent the spread of advanced weaponry, for example, during the Iraq-Iran war in the 1980s. Similarly, imposing strict technical standards for certain goods or safety norms (e.g. milk), quarantine and health regulations (e.g. dogs and parrots), as well as the deliberate creation of customs difficulties and delays make trade in them more difficult.
Exchange Control
Foreign exchange control is a system under which holders of a national currency require official permission or approval to convert it into other currencies. Exchange control may apply to all holders of a currency, or some holders, normally non-residents, may be exempt. Where non-residents are allowed convertibility, exchange control has to be applied to transfers from resident to non-resident domestic currency bank accounts. Exchange controls can be applied with varying degrees of strictness; frequently they are much more stringent on obtaining foreign currency for capital account than for current account purposes.
A tighter check on the amount spent on imported goods can be achieved if quotas are fixed in terms of foreign currency. This necessitates some form of exchange control. All earnings of foreign currency and claims to foreign currency have to be handed over to the government and goods can be imported only under licence. Thus, the government, not the free market, decides the priorities for imports.
Text 1.11. Read the text and get ready to give a three-minute talk on the historical background of GATT.
The General Agreement on Tariffs and Trade (GATT)
The General Agreement on Tariffs and Trade, established in 1947, has three major objectives:
1)to reduce existing trade barriers;
2)to eliminate discrimination in international trade; and
3)to prevent the establishment of further trade barriers by getting nations to agree to consult one another rather than take unilateral action.
It operates as follows. Member nations meet periodically to agree on a round of tariff reductions. Here the most-favoured-nation principle applies – any tariff concession granted by one country to another must automatically apply to all other participating countries. Thus, if the EC agrees to reduce its tariff on American automatic vending machines by 5 % in exchange for a 5 % reduction in the American tariff on EC man-made fibres, then both concessions must be extended to every other member of the GATT.
Today over one hundred nations subscribe to the GATT. Through the organisation, a progressive reduction in tariffs has been achieved, and the principle has been established that problems of international trade should be settled by cooperative discussion rather than by independent unilateral action. But difficulties have arisen.
1)The principle of reciprocity means that low-tariff countries have to begin from inferior bargaining positions, and the concessions they can make are thus limited. Such countries may, therefore, prefer a low-tariff regional arrangement, such as the EC.
2)In certain circumstances the most-favoured-nation principle may deter a country from making a tariff reduction to another country for the simple reason that it has to be applied to all.
3)The articles of the agreement have had to be waived to allow for special circumstances – balance-of-payments difficulties, protection of agriculture, and the establishment of 'infant' industries in less-developed countries and the discriminatory character of the EC.
4)While the GATT has been successful in dealing with tariffs and many physical barriers, it has been by-passed by the new forms of protection – voluntary agreement restraints, orderly marketing arrangements, subsidies for special groups of exports, and trading requirements as conditions for overseas investment.
5)The GATT rules will eventually have to be extended to cover services, which now account for a quarter of world trade, and intellectual property rights (patents, copyrights and trademarks).
The Uruguay Round, which started in 1986, took seven years to complete, largely because the USA required reform of the EC’s Common Agricultural Policy to prevent subsidised surplus produce depressing world prices. The final GATT agreement – including services, copyright, and investment, as well as trade in goods – was signed in Marrakech in 1994, and the organisation was
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superseded by the World Trade Organisation. Although consensus was reached on liberalising trade in services, the less-developed countries would not concede on intellectual property rights.
R e m e m b e r !
Although the WTO’s aim is to promote trade between different countries and to eliminate trade barriers, protectionism and restrictions are still in existence. The protectionist policy is believed to prevent unemployment or capital losses in industries liable to competition, etc. via tariffs, import quotas, or voluntary export restraints, and other non-tariff barriers to trade. Some politicians regard protectionism as desirable for their own sake; many who do not approve of protection still support it, as they cannot afford to lose the votes or financial support of those who demand it.
Concept check
1. Look back at Text 1.9, complete the table giving details of each argument for controlling international trade. Do you agree or disagree with the proposed classification? Why?
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Non-economic arguments |
Economic arguments having |
Economic arguments having |
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some justification |
little validity |
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1) |
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1) |
1) |
2) |
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2) |
2) |
3) |
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3) |
3) |
4) |
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4) |
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5) |
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6) |
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2. Complete the flow chart below with methods of protectionism. Describe them.
Barriers to International Trade
Price- |
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Limits on |
Other non- |
based |
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FDI |
tariff |
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barriers |
Customs |
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duties |
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Political and |
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Quotas |
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administrative |
Subsidies |
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constraints |
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Ad |
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Exchange |
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OPEC |
ISA |
control |
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valorem |
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Prohibitive |
Revenue |
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3.Explain the essence of the most-favoured-nation (MFN) regime. What is the difference between unconditional and conditional MFN clauses?
4.What is the correlation of customs duties and tariffs? Give definitions for both and their classifications.
5.What were the purposes of the GATT in the past and what are the purposes of the WTO?
6.Read each statement and decide if it is true or false. Discuss them with your partner.
1)Protection of an industry of strategic importance has little economic validity.
2)Politics may influence economic decisions in the sphere of international trade.
3)Protection of infant industries can be economically validated.
4)Maintaining domestic employment in the period of recession may cause a contraction in world trade.
5)There are many economically valid arguments for protecting home industries from foreign competition.
6)Subsidies are an efficient tool in increasing customers’ incomes.
7)Quotas may only be established as a maximum.
8)Quotas tend to hinder competition directly and indirectly.
9)An embargo actually means a zero quota.
10)With exchange control, it is the free market that decides the priorities for imports.
11)Deliberate creation of customs difficulties and delays hinders international trade.
12)Many difficulties still exist for GATT member countries.
7.Complete the sentences below.
1)The reasons to defend government controls are …
2)A government can impose a tax on an imported good in order to …
3)Introduction of restrictions on imports enabling an industry to decline gradually can …
4)Dumping may be possible because …
5)The policy of retaliation may be viewed as a vicious circle since …
6)Quotas must be imposed in order to …
7)Factor cost is the value of goods and services at the price received by sellers. This is the market prices which are …
8)Subsidies may be granted for various reasons, such as…
9)Compared with duties, quotas have two main disadvantages, such as …
10)Foreign exchange control is a system …
8.Write questions, relating to Texts 1.9 and 1.10, to which these could be answers.
1)Unlike quotas, they produce revenue.
2)Unlike tariffs, you know the maximum quantity of goods that will be imported.
3)Government assistance to a certain industry.
4)Any tariff concession granted by one country to another must automatically apply to all other participating countries.
5)Less-developed countries.
LANGUAGE STUDY
1. Match the words on the left with their definitions on the right.
1) impose |
a) take the place of something; displace |
2) unilateral |
b) flexibility; a measure of the sensitivity of demand for and supply of |
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goods |
3) infant |
c) establish as something to be obeyed or complied with; enforce |
4) eliminate |
d) involving or performed by only one party of several |
5) concession |
e) in an early stage of development; nascent |
6) elasticity |
f) remove or take out; get rid of |
7) supersede |
g) the act of yielding or conceding, as to a demand or argument |
8) subscribe |
h) discourage (from acting) or prevent (from occurring), usually by |
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instilling fear, doubt, or anxiety |
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9) deter |
i) relating to government finances, esp. tax revenues |
10) retaliate |
j) a formal agreement or contract between two or more states, such as an |
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alliance or trade arrangement; the document in which such a contract is |
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written |
11) ad valorem |
k) a degree, extent, or frequency of occurrence; amount |
12) fiscal |
l) inscribe or sign (one's name, etc.) at the end of a contract, or other |
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document |
13) treaty |
m) (of taxes) in proportion to the estimated value of the goods taxed |
14) reciprocal |
n) take retributory action, esp. by returning some injury or wrong in |
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kind |
15) incidence |
o) relating to, or designating something given by each of two people, |
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countries, etc., to the other; mutual |
16) constraint |
p) freed from or not subject to an obligation, liability, tax, etc. |
17) exempt |
q) compulsion, force, or restraint; restrictive condition |
2. Match the words in column 1 with their synonyms (column 2) and antonyms (column 3).
Word |
Synonym |
Antonym |
1) restrict |
a) encourage, promote |
a) unlimit |
2) foster |
b) confine |
b) demote |
3) extend |
c) superficial, obvious |
c) urban |
4) shallow |
d) stretch |
d) profound |
5) rural |
e) mediocre |
e) shorten, curtail |
6) inferior |
f) intentional |
f) loose |
7) deliberate |
g) country |
g) superior |
8) tight |
h) imitation |
h) flexible |
9) artificial |
i) stiff |
i) genuine, natural |
10) rigid |
j) enlarge |
j) shrink, contract |
11) expand |
k) strict |
k) accidental |
12) stringent |
l) hinder |
l) imprecise |
13) inhibit |
m) exact |
m) promote |
3.Make up your own sentences with the words, their synonyms and antonyms in 2 to illustrate them in the context of international trade.
4.Fill in the gaps in the following sentences with the correct form or derivative of the words given above in 1.
1)The … courtesies enjoyed among our partners during all negotiations benefit us all.
2)… liabilities mean that they affect one party only and do not involve the other party in reciprocal obligations.
3)After the government increased customs tariffs, their country … by tightening the safety norms for wines.
4)They signed a … to settle all border disputes by arbitration.
5)The demand for goods is … if it is sensitive to changes in price or other marketing variables.
6)Nothing will … us from signing this contract with the British partners.
7)Even now, it is impracticable to … all trade barriers in foreign trade.
8)The … of taxation varies from country to country depending on their legislations.
9)An … industry needs protection until it is large enough to achieve the economy of scale and strong enough to compete internationally.
10)We provided very strong arguments so that our partners agreed to make … .
11)The company was … from paying the profit tax for a year.
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5. There is a logical connection among three of the four words in each of the following groups. Which is the odd one out, and why?
1)absolute advantage – barriers – comparative advantages – free trade
2)autarky – countertrade – invisible trade – visible trade
3)balance – deficit – dumping – surplus
4)banking – insurance – merchandise – tourism
5)comparative advantage – protectionism – quotas – tariffs
6)non-tariff barriers – norms – quotes – taxes
7)countertrade – import substitution – infant industries – tariff barriers
8)liberalize – protect – subsidise – substitute
RENDERING
Render the texts about organisations in the field of international relations and trade in English.
1. Основные особенности современного миропорядка.
Современный хозяйственный миропорядок характеризуется двумя основными особенностями – глобализацией (открытость рынка, либерализация торговли, создание ТНК) и регионализацией (объединение стран в экономические и таможенные союзы, создание зон свободной торговли, формирование региональных торгово-экономических блоков). Эти процессы сопровождаются интернационализацией и интеграцией мировой экономики.
ООН создана в современном виде в 1946 году. ЭКОСОС – Экономический социальный совет – один из 6 главных органов ООН, координирующий экономические и социальные вопросы: анализ состояния мирового экономического положения и экономик отдельных стран, деятельности ТНК, оказание помощи в ликвидации экономических кризисов и др. Имеет 6 региональных комиссий в Европе, Восточной Азии, Африке, Латинской Америке и Западной Азии с отраслевыми организациями по торговле (ЮНКТАД – United Nations Conference on Trade and Development, UNCTAD), промышленности (ЮНИДО – United Nations Industrial Development Organisation, UNIDO), сельскому хозяйству (ФАО – Food Agricultural Organisation, FAO), окружающей среде (ЮНЕП – United Nations Environment Programme, UNEP), образованию и культуре (ЮНЕСКО – United Nations Educational, Scientific and Cultural Organisation, UNESCO), здравоохранению (ВОЗ – World Health Organisation, WHO), помощи детям (ЮНИСЕФ – United Nations International Children’s Emergency Fund, UNICEF) и др.
2. Мировые финансовые организации.
Международный валютный фонд – МВФ, учреждён ООН, самая крупная в мире финансовая организация. Основная задача – содействие развитию торговли, стабилизация международного торгового рынка, предоставление кредитов странам при валютных затруднениях. Основной учредительный вклад внесён США, поэтому многие решения зависят от этой страны.
Всемирный банк – ВБ, группа финансовых организаций при ООН. В него входят МБРР – международный банк реконструкции и развития, МФК – международная финансовая корпорация, МАР – международная ассоциация развития. Основная деятельность – предоставление долгосрочных кредитов на конкретные программы при наличии части средств у кредитуемой страны для данного объекта.
Европейский банк реконструкции и развития – ЕБРР, учреждён Европарламентом стран ЕС. В него вошли также ряд других стран – США, Япония, Австралия, Канада и др.
3. Всемирная торговая организация.
В 1947 г. рядом государств по инициативе США подписано Генеральное соглашение по тарифам и торговле – ГАТТ, что явилось в последующем основой создания в 1995 г. крупнейшей международной организации – ВТО. Основная задача ВТО – обеспечение благоприятных режимов торговли: либерализация внешнеторговой деятельности стран, снижение таможенных тарифов, исключение государственного протекционизма экспорта и его субсидирование, количественных ограничений экспорта-импорта.
4. Международная торговая практика.
Международная торговая практика в современных условиях характеризуется значительной степенью правовой унификации, которая направлена на то, чтобы устранить коллизии,
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возникающие между различными правовыми нормами, существующими в национальных системах права. Прежде всего, это касается практики составления внешнеторговых контрактов, в частности, международных договоров.
Регулированием международной торговой практики занимаются такие международные экономические организации, как:
•ЮНСИТРАЛ (United Nations Commission on International Trade Law) — Комиссия ООН по праву международной торговли;
•УНИДРУА (International Institute for the Unification of Private Law,) — Международный институт унификации частного права;
•ЮНКТАД (United Nations Conference on Trade and Development, UNCTAD) — Конференция ООН по торговле и развитию;
•ЕЭК ООН — Европейская экономическая комиссия ООН.
Unit 2
METHODS OF FOREIGN TRADE. INTERMEDIARIES INVOLVED
DISCUSSION
How much do you know about methods of international trade? Discuss the following points with your partner.
•The role of government in international trade.
•Direct sales versus indirect sales.
READING
METHODS OF FOREIGN TRADE
Key concepts and terms
Match up the words on the left with their definitions on the right.
1) merchandise |
a) a formal offer to supply specified goods or services at a stated cost |
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or rate |
2) highest bidder |
b) a gathering of producers of and dealers in a given class of products |
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to facilitate business |
3) auction |
c) economic activity aimed at profiting from expected changes in the |
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prices of goods, assets, or currencies |
4) commodity exchange |
d) commercial goods, commodities |
5) hedging |
e) a public sale of goods or property, esp. one in which prospective |
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purchasers bid against each other until the highest price is reached |
6) sample |
f) activities designed to reduce the risks imposed by other activities |
7) speculation |
g) an investment project where a foreign firm contracts to build a |
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factory, install equipment and train local labour, and hand it over as a |
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going concern ready to start production |
8) fair |
h) a number of objects considered together as forming a group or |
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collection; a consignment of goods |
9) tender |
i) a small part of anything, intended as representative of the whole; a |
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specimen |
10) turnkey project |
j) a place or institution through which commodities are traded |
11) lot |
k) a price offer of a specified amount in attempting to buy something, |
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esp. in competition with others as at auction |
12) bid |
l) the company that offers the highest price |
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Text 2.1. Read the text and explain the difference between direct and indirect sales.
Direct and Indirect Ways of Trade
Direct Sales
Foreign trade may successfully be carried on in a number of ways. These include direct sales, international production cooperation and sales through associations and firms at a government level. Manufactures also may choose to deal in their goods through intermediaries. It often depends on the kind of merchandise and the market available. When new markets are to be gained, it may be advantageous to use the services of foreign agents who have a long experience of trading and know the markets in their countries better. According to world-wide statistics, over half of the world’s foreign trade is handled by agents and distributors. Apart from these, trade may be carried at commodity exchanges, auctions, fairs and by tenders. Also joint enterprises can be set up by manufacturing works to produce goods for sale in the host country and in third countries.
Thus, foreign trade is carried on in two main ways: directly between enterprises and foreign firms, and indirectly through intermediaries.
Direct sales imply trade based on continual ties between a producer and an ultimate consumer of the product without any intermediary. Such sales mean direct delivery from the seller to the buyer and are practiced by well-established large companies which have good experience of foreign trade and which can gain from the economy of scale. The process of direct sales can be divided into episodic and systematic foreign trade operations. Usually this method is used for sale and purchase of raw materials under long-term contracts, large-size and expensive equipment, as well as agricultural goods.
With the direct method of trade, there is a certain financial benefit as costs are reduced by the sum of a commission to the intermediary. The risk and dependence of the results of commercial activities on possible unconscientiousness or the insufficient competence of intermediary organisations are reduced. This method also allows a company to be constantly on the market, to take into account its changes and duly react to them.
At the same time, the usage of the direct method of trade means less commercial qualification and trade experience, otherwise financial charges will increase considerably. Moreover, international trade is riskier than internal which is caused by economic, political, legal and social features of different countries, their traditions and customs, as well as large distances between trading partners. As a result, for realization of international trading operations it is very often more advantageous and sometimes even necessary to resort to the help of intermediaries, i.e. to indirect methods of trade.
Indirect Sales
Indirect sales are sales through intermediaries or mediators. This method is used by less experienced or smaller firms because of absence of their own sales network abroad. Their purposes are to achieve serial production and reach remote or small markets for promotion of new goods. Indirect sales include sales through associations and companies at the government level, agents and distributors, auctions, tenders, fairs and exhibitions.
Associations and companies at the government level deal in raw materials such as oil, gas, ores and some foodstuffs and consumer goods, as well as carry out all kinds of construction work (joint ventures at home and turn-key factories and works abroad).
Commodity exchanges are the places where raw materials, some manufactured goods and some items of produce, such as cotton, wheat, vegetable oils, etc. are bought and sold. The goods that can be accurately graded are bought and sold at commodity exchanges according to grades or standards (under standard descriptions), and on the basis of standard contract terms. The grades remain practically unchanged every year. Commodity exchanges are called accordingly: the Wheat Exchange, the Metal Exchange and so on.
Commodity markets were originally places or buildings, where traders could come together, which facilitated comparisons of price and quality. Commodities, which need to be physically inspected, are often still traded in such markets; in other cases names such as the Corn Exchange commemorate former physical centers which have been replaced by systems of traders linked by telephones and computers. Commodity markets include both spot markets, where goods are traded for immediate delivery, and forward or futures markets, where prices are agreed in advance for trading at various dates in the future. Such trading is facilitated by market conventions on the specification and
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quality of the goods traded, and systems for adjudicating disputes. These are clearly essential for spot trades, where the buyers do not physically inspect what they are getting, and even more so for forward and futures trading, where it is impossible to inspect crops which have not yet been grown or minerals which have not yet been mined. Thus, nowadays commodity exchanges are losing their role as markets of physical goods and are becoming mainly futures exchanges where deals are chiefly made for speculation purposes or for hedging.
Non-standard goods like tea, fur, bristles, spices which cannot be accurately graded are sold at auctions, where dealers are supposed to inspect every lot for sale. But in fact they deal with a certified stock. A certified stock is a commodities stock which was checked and acknowledged proper for delivery. The quality of the goods traded at auctions may vary from year to year and from lot to lot so they are sold according to sample. The delivery is usually performed on a tale quale basis (i.e. on ‘as is’ terms) which means selling without the guarantee of quality whereas the seller is not liable for quality deterioration in transit during transportation of cargoes. An auction is the way of buying and selling things by offering them up for a bid. It is the sale where the price is fixed by an auctioneer who invites bids and awards the article being auctioned to the highest bidder.
Competitive tendering is the system of purchasing goods or services by inviting bids or ‘tenders’ and choosing the supplier from among the bids received, i.e. trade by tenders implies one buyer and a number of sellers. It is frequently used for construction work or for delivery of goods. General terms and conditions of the future deal are announced beforehand. Other things being equal, the cheapest tender is chosen and the contract is given to the suppliers who offer the lowest price and the most favourable terms. But purchasers will also be guided by their views on the technical and financial capacity of the bidder to deliver the goods and services reliably. Such a scheme guarantees the efficient execution of a contract at the lowest price because it employs free competition principles.
Trade fairs and exhibitions are also very important tools of promoting goods in international trade. They usually attract thousands of visitors and many prospective buyers among them. A great deal of profitable business is done in commercial centers at the exhibitions as they provide a great variety of services, such as stands to display, warehouses, etc. It is here where new contracts can be made, new transactions concluded, new orders placed and new markets established. Usually trade fairs and exhibitions are held in the world centers of international trade. They are held in order to
•demonstrate new products and goods, promote them to new markets or launch them in the already developed markets;
•see innovations;
•find investors for the production of novelties;
•conclude new contracts and involve partners into cooperation as buyers have an opportunity to familiarise with a product as well as to estimate its positive qualities and shortcomings; and
•analyse the activities of rivals.
Concept check
1. What patterns of trade are used by international business organisations? Complete the chart and describe it.
Patterns of International Trade
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… Sales |
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Joint Ventures |
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Associations |
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and companies |
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Agents |
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Commodity |
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Fairs |
at government level |
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and |
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Exchanges |
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…… |
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and |
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… |
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2. What are the advantages and disadvantages of direct sales? Complete the following table.
Advantages |
Disadvantages |
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1) |
1) |
2) |
2) |
… |
… |
3. What are the two purposes of futures deals at commodity exchanges? 4. Choose the correct statement. Justify your choice.
1) If you want to reduce risks from futures trade, your aim is speculation.
2) Hedging and speculation are two purposes of one and the same transaction. 3) Aiming at getting profit while trading in futures you hedge your deal.
4) The risk of making losses if the price falls can be avoided by hedging.
5. Read each statement and decide if it is true or false. Correct the false ones and discuss them with your partner.
1) Government is the only intermediary in foreign trade.
2) The way of trading which manufacturers choose depends on the quality of the goods they produce.
3) Direct trade is more advantageous than indirect.
4) Direct sales can be performed by small companies with poor experience in foreign trade. 5) It is more beneficial to trade through agents because it is cheaper.
6) The same goods may be traded at commodity exchanges and auctions.
7) The highest bidder is a person who occupies the top position in a company.
8) Companies who offer the lowest price and the best terms of the contract are supposed to win a tender contract.
6. Trade fairs and exhibitions are of great importance in establishing new trading ties. Prove it.
LANGUAGE STUDY
1. Find the English equivalents for the following word combinations.
Лицо, предлагающее самую высокую цену на аукционе; заводы «под ключ»; поставка на условии «такой, какой есть» (тель-кель); создавать совместное предприятие; реагировать должным образом; сертифицированная партия товара; ухудшение качества в процессе перевозки; сортировать точно по стандартам (отбирать по сортам); варьироваться из года в год и от партии к партии; продаются согласно образцу; производство новинок; оценивать положительные качества и недостатки.
2. Match the words on the left with their definitions on the right.
1) launch |
a) ability, enough skill or knowledge to do something |
2) value |
b) anything that is bought and sold |
3) network |
c) stored on the premises or available for sale or use |
4) profit |
d) purchasing power, price |
5) competence |
e) an interconnected group or system |
6) in stock |
f) money that is asked for a thing or for doing something |
7) commodity |
g) a gain in money; an excess of income over expenditure |
8) charge |
h) the price that has been or must be paid for something |
9) cost |
i) to put (a new product) on the market |
10) process |
j) make known publicly; proclaim |
11) produce |
k) treat or prepare by a special method |
12) announce |
l) agricultural products regarded collectively |
3. Match the words on the left with their synonyms on the right. |
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1) carry on (a business) |
a) last, final |
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