D. Match the words from the text with their corresponding definitions.

corporation	the process of making something such as a business operate in a lot of different countries all around the world, or the result of this
free market	a big company or a group of companies acting together as a single organization
benefit	the activity of buying, selling, or exchanging goods between countries
to develop	an economic system in which prices are not controlled by the government
international	affecting or including the whole world
globalization	an advantage, improvement, or help that you get from something
trade	to grow or change into something bigger, stronger, or more advanced, or to make someone or something do this
integration	to help something to develop or increase
to promote	the combining of two or more things so that they work together effectively

 

E. In pairs, make a list of what you think the principal advantages or disadvantages of globalization are.

Listening: For and against globalization

(Market Leader, Intermediate Business English CB by D. Cotton, Unit 1)

 

Over to you

 

Conduct some research into either the costs or the benefits of globalization. You should aim to give a presentation lasting approximately 15 minutes outlining your case. At the end of the presentation, you should be prepared to take 10 minutes of questions from your 'audience' on the issues you have raised in your presentation.

The 'opposition' will present their case in a similar manner. At the end of the exercise, you will be asked to write a short 500 word report on whether, and how, globalization should or can be 'managed'. The intention of the report is to get you to write a concise summary of the key issues facing the planet as globalization takes a further hold. You will be raising the key issues that face the authorities rather than providing any form of definitive answer. For example, you may feel that a key way of solving many of the problems is to further extend the movement towards freeing up trade. At this level, how that may be done is another matter!

Module 2 International trade

Starting up

 

v Think of some things you own (e.g. shoes, clothes, car and etc.). Which are imported? Where were they made?

v Try to recall the meals you’ve eaten in the last 24 hours. How much of the food came from abroad?

v What are your country’s major imports and exports?

v Do you think products made in your country are better than products made in other countries?

v Can you even imagine living in a country that did not import anything, where only locally produced food and textiles and products were available?

 

 

Reading: Protectionism and free trade

A. Study the topical vocabulary.

comparative cost principle	принцип сравнительных издержек
economies of scale	экономия за счет масштаба
to impose tariffs and quotas	вводить тарифы и квоты
substitutes	товары-заменители
to retaliate against	принимать ответственные меры против кого-либо
to impose restrictions	вводить ограничения
infant industries	неокрепшая отрасль промышленности
most favoured nation	государство, пользующееся режимом наибольшего благоприятствования

B. Read the text and answer the following questions.

1) Why do most economies oppose protectionism?

2) Why do most governments impose import tariffs and/or quotas?

3) Why were many developing countries for a long time opposed to GATT?

4) Why have many developing countries recently reduced protectionism and increased their international trade?

C. Read the text.

The majority of economists believe in the comparative cost principle, which proposes that all nations will raise their living standards and real income if they specialize in the production of those goods and services in which they have the highest relative productivity. Nations may have an absolute or a comparative advantage in producing goods or services because of factors of production (notably raw materials), climate, division of labour, economies of scale, and so forth.

This theory explains why there is international trade between North and South, e.g. semiconductors going from the USA to Brazil, and coffee going in the opposite direction. But it does not explain the fact that over 75% of the exports of the advanced industrial countries go to other similar advanced nations, with similar resources, wage rates, and levels of technology, education, and capital. It is more a historical accident than a result of natural resources that the US leads in building aircraft, semiconductors, computers and software, while Germany makes luxury automobiles, machine tools and cameras.

However the economists who recommend free trade do not face elections every four or five years. Democratic governments do, which often encourages them to impose tariffs and quotas in order to protect what they see as strategic industries – notably agriculture – without which the country would be in danger if there was a war, as well as other jobs. Abandoning all sectors in which a country does not have a comparative advantage is likely to lead to structural unemployment in the short (and sometimes medium and long) term.

With tariffs, it is impossible to know the quantity that will be imported, because prices might be elastic. With quotas, governments can set a limit to imports. Yet unlike tariffs, quotas provide no revenue for the government. Other non-tariff barriers that some countries use include so-called safety norms, and the deliberate creation of customs difficulties and delays.

The General Agreement on Tariffs and Trade (GATT) had the objectives of encouraging international trade, of making tariffs the only form of protectionism, and of reducing these as much as possible. The most favoured nation clause of the GATT agreement specified that countries could not have favoured trading partners, but had to grant equally favourable conditions to all trading partners. The successor of GATT is the World Trade Organization.

It took nearly 50 years to arrive at the final GATT agreement because until the 1980s, most developing countries opposed free trade. They wanted to industrialize in order to counteract what they rightly saw as an inevitable fall in commodity prices. They practised import substitution (producing and protecting goods that cost more than those made abroad), and imposed high tariff barriers to protect their infant industries.

Nowadays, however, many developing countries have huge debts with Western commercial banks on which they are unable to pay the interest, let alone repay the principal. Thus they need to rollover (or renew) the loans, to reschedule (or postpone) repayments, or to borrow further money from the International Monetary Fund, often just to pay the interest on existing loans. Under these circumstances, the IMF imposes severe conditions, usually including the obligation to export as much as possible.

East Asian ‘Tiger’ economies (Hong Kong, Singapore, South Korea and Taiwan), were afraid of being excluded from the world trading system by the development of trading blocks such as the European Union, finalized by the Maastricht Treaty, and the North American Free Trade Agreement (NAFTA), both signed in the early 1990s. So they tended to liberalize their economies, lowering trade barriers and opening up to international trade.