International trade

The history of trade is largely the history of civilization. First it was what we call barter, a simple exchange of goods. International trade has now developed into an intricate mechanism of transactions. Today trade is not confined to visible exports and imports of goods but also includes invisible items like services, transportation, insurance, expenditure by tourists, etc.

Countries usually specialize in certain products and commercial activities. This specialization depends on such factors as differences in climate, natural resources, labour force skills and technology. These special conditions give one country an advantage over others in producing certain goods or services.

A country has absolute advantage if it produces the goods that no other nation is able to produce. A country has a comparative advantage in a certain product if it is produced more efficiently and at lower cost. Nations usually specialize in those goods and services in which they have the greatest comparative advantage and exchange their surplus for things they need and want but do not produce themselves.

When countries engage in international trade they express their agreement to specialize in order to produce more of certain goods or services. Countries that trade can together produce more goods and services than they could in the absence of trade.

The balance of trade indicates the difference between the total value of a country’s imports and exports of visible items (goods). The balance of trade is an important part of the balance of payments, which also includes invisible items and capital transfers from one country to another. If the total value of the goods imported (visibles) is higher than that of the goods exported, the balance of trade is bad (adverse or unfavourable), that is to say it shows a deficit. If the reverse case is true, the balance of trade is good or favourable and it shows a surplus. Invisible items can cover the deficit of the balance of trade and as a result the country will have a favourable balance of payments.

What a country can achieve in international trade is shown by the terms of trade. The terms of trade are the rate at which a country’s exports are exchanged for its imports. Terms are said to be good or favourable to a country when the prices of its exports are high in relation to the prices of its imports, and a bad or unfavourable when the reverse is the case. On a global scale imports must equal exports, since everygood exported by one country must be imported by another.

Exercise 3. Answer the following questions.

1. What was the first form of trade and does it still exist?

2. How does the concept of comparative advantage influence international trade?

3. What is the difference between visible and invisible exports and imports?

4. What does the balance of trade indicate?

5. How does the balance of payments differ from the balance of trade?

6. In what case is the balance of trade negative/ positive?

7. How can a country with the deficit of the balance of trade achieve a favourable balance of payments?

8. What do the terms of trade indicate?

9. In what case are the terms of trade considered to be good/ bad?

10. How are exports and imports balanced on a global scale?

Exercise 4. Translate into English.

Простий обмін товарами; не обмежуватись чимось; переказ капіталу з однієї країни в іншу; несприятливий торгівельний баланс; дефіцитний баланс; профіцитний баланс; співвідношення; кажуть, що умови торгівлі сприятливі/несприятливі; в протилежному випадку; відносна перевага.

Exercise 5. Translate into Ukrainian.

Expenditure by tourists; the total value of a country’s exports and imports; if the reverse case is true; more efficiently and at a lower cost; to express agreement to specialize; to engage in international trade; that is to say; to cover the deficit; in relation to.

Exercise 6. Match and learn the synonyms.

A: trade, demand, value, reverse,indicate, favourable, unfavourable;

B: price, show, commercial, good, need, bad, opposite.

Exercise 7. Substitute the words in italics for their synonyms.

1. We’ve developed a wide commercial network within the western regions of the country. 2. The company needs modernization. In the opposite case it will fail. 3. The value of the goods imported has to be balanced against the value of the goods exported. 4. Last year’s balance of payments showed a considerable surplus. 5. The climate in northern countries is bad for agriculture.

Exercise 8. Match and learn the opposites.

A: rise, surplus, favourable, good, visible, true, absence;

B: false, fall, bad, presence; invisible, unfavourable, deficit.

Exercise 9. Substitute the words in italics for their opposites so that the sentences make sense.

1. If prices rise people are able to buy more goods and services. 2. When a certain industry produces more goods than the population demands it creates a deficit which can be exported. 3. As we cannot see services or insurance they are referred to as visibles. 4. His plan is very efficient. I have the most unfavourable impression of it. 5. The chief accountant is away on business. We cannot decide this problem in his presence.

Exercise 10. Complete the sentences using the proper words from the list below:

transaction, item, comparative advantage, trade, unfavourable, specialization, expenditures

1. We are not confined to … only; we service the merchandise we sell. 2. If we produce these … at a lower cost, we’ll have a … over our competitors. 3. The … we carried out last months was very profitable. 4. Barter operations still exist, but they are very … for the economy. 5. Good climate or rich natural resources determine the … of a country’s economy. 6. If we attract more tourists to this region their… will increase the local budget revenues.

Exercise 11. On the basis of the text define the following terms:

international trade, balance of trade, balance of payments, terms of trade, barter.

Grammar point: Direct and Reported Speech(p.148-150)

* The verbs ‘ to speak’ vs. ‘ to talk’; ‘ to tell’ vs. ‘ to say’

* ‘ to speak ’ vs. ‘ to talk ’

There is not a completely clear difference between speak and talk. Generally, speak is more formal and usually refers to the use of language by just one person. Talk suggests the idea of a conversational exchange. Compare:

I’ll have to speak to this bookkeeper - he is getting very inattentive. After the presentation the guests began to talk sharing their opinions.

* ‘ to tell ’ vs. ‘ to say ’

When we use tell we mention the person to whom we address our speech, to tell somebody ( about ) something. Say is used without any personal object, to say something. Compare:

She told me that she would be late for the meeting.

She said that she would be late for the meeting.

Exceptions: to tell a story, to tell the truth, to tell a lie.

Exercise 12. Insert one of the following verbs to say, to speak, to talk, to tell in the proper tense form.

1.I’d like to know what they … about? 2. Our manager came from the trade exhibition and … us a lot of interesting things. 3. He made a mistake in the last sentence and the teacher asked him to … it again. 4. He has already … about it, hasn’t he? What did he …? 5. Every time I see my school friends we … about our school days. 6. Our English teacher often … that Sergiy can … the language very well. 7. The secretary … that the man I’d like to … to is coming here tomorrow.

Exercise 13. Express the following statements in reported speech using the reporting verbs in brackets.

1. “Our firm will be the leader in the market in a few months”, he said (boast). 2. “Yes, your terms are better than your competitors’ ”, she said (agree). 3. “They haven’t given me any explanation”, Mike said (claim). 4. She said, “Well, your proposal sounds interesting” (admit). 5. He said angrily, ”They never supply goods in time!” (exclaim). 6. The banker said,”We do not know your credit history” (protest). 7. “The opportunity to expand is very favourable at the moment”, he said to his boss (tell). 8. “Sh-sh-sh… You are speaking too loudly”, she said (whisper). 9. He said, “This project is vital for our business” (stress). 10. He said to himself, “Everybody will come to the presentation tomorrow” (think).

Exercise 14. Express the following questions in reported speech using the reporting verbs in brackets.

1.”Have you ever visited their office?” he asked me. 2. “Where does this money come from? “ she asked (want to know). 3. “When did you write to your partners last?” he asked (request). 4.”What were you doing yesterday at seven?” she asked (inquire). 5. “Haven’t they already completed this transfer?” the manager asked (wonder). 6. “Why did they change their opinion yesterday?” his boss asked (want to know). 7. “Are you going to set up a joint venture?” my friend asked me. 8. “Whom did you apply for the credit?” the chief accountant asked his employee. 9. “Will they have finished this construction by the end of the year?” the director asked (want to know). 10. “Where will they locate their new plant?” my partner asked (inquire).

Exercise 15. Express the following orders, requests and proposals in reported speech using the reporting verbs in brackets.

1. “Please, help me with this work”, she said to me (ask). 2. “Let’s write down our proposals and then discuss them in details”, he said (suggest). 3. “Open the ledger at page 27”, the accountant said to his assistant (tell). 4. “Please, don’t tell her about my failure”, he said to me (ask). 5. “Never mention this name to me again”, he said to his friend (warn). 6.”Let’s go and visit him tomorrow”, she said (propose). 7. “Don’t forget to send them a message”, he said to his secretary (tell). 8. “Please, sit down”, she said (invite). 9. “Better do it now”, he said (advise). 10. “Consider every clause of the agreement carefully”, the director said to his deputy (order).

Exercise 16. Retell the following dialogue in reported speech.

Anna: What is the matter with you, Jack? You don’t look yourself.

Jack: I am afraid I’ve made a serious mistake when summing up our revenues for the last month.

Anna: Stop worrying and go to the chief accountant immediately. I think it isn’t late to correct your report. They haven’t shown the documents to the board of directors yet.

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