Text 7.1. International trade

Trade is the buying and selling of goods and services. Trade happens because people need or want things that they don't have. We also trade for work that we cannot do ourselves. Trade between countries happens for the same reason. Countries trade with each other to obtain things that are of better quality, less expensive or simply different from goods and services produced at home. The goods and services that a country buys from other countries are called imports, and goods and services that are sold to other countries are called exports. The exchange of goods or services along international borders is called international trade¹. International trade includes all economic transactions that are made

¹ Business dictionary.

between countries. Among the items commonly traded are consumer goods, machinery, raw materials and food. Other transactions involve services such as travel services and payments for foreign patents. International trade transactions are facilitated by international financial payments.

International trade is conducted generally toward the purpose of providing a nation with commodities it lacks in exchange for those that it produces in abundance; such transactions improve the standard of living of a nation.

Throughout its history international trade has been regulated by different economic polices. The 17th century saw the growth of restrictive policies that later came to be known as mercantilism¹. The mercantilists held that economic policy should be nationalistic and should aim at securing the wealth and power of the state. Governments were led to impose price and wage controls, foster national industries, promote exports of finished goods and imports of raw materials, and prohibit the exports of raw materials and the import of finished goods. A typical illustration of the mercantilist spirit is the famous English Navigation Act of 1651 which reserved for the home country the right to trade with the colonies and prohibited the import of goods of non-European origin unless transported in ships flying the English flag.

A strong reaction against mercantilist attitudes began to take shape towards the middle of the 18th century. In France, the economists demanded liberty of production and trade. In England, Adam Smith demonstrated the advantages of removing trade restrictions. Economists and businessmen voiced their opposition to excessively high and often prohibitive Customs duties and urged the negotiation of trade agreements with foreign powers.

In the middle of the 19th century Customs walls effectively sheltered many national economies from outside competition. The French tariff of 1860, for example, charged extremely high rates on British products. Transport costs between the two countries provided farther protection. A triumph for the liberal ideas was the Anglo-French trade agreement of

¹ Mercantilism [məˈkæntəlɪzəm] – economic theory and practice common inEurope from the 16th to 18th century that promoted governmental regulation of a nation's economy for the purpose of augmenting state power at the expense of rival national powers.

1860, which provided that French protective duties were to be reduced to a maximum of 25 percent within five years, with free entry of all French products except wines into Britain.

In the later part of the 19th century England was the only country to remain faithful to the principles of free trade. Germany adopted a systematically protectionist policy and was soon followed by most other nations. During the Civil War the United States raised its duties sharply.

But protectionism¹ during the last quarter of the 19th century was mild in comparison with the mercantilist policies that had been common in the 17th century and were to be revived during two world wars in the 20th century.

When World War II ended the lesson learned from the growth of protectionism since 1871 allowed the development of multilateral trade agreements and other forms of international economic co-operation. These developments culminated in the General Agreement on Tariffs and Trade (GATT).

The General Agreement on Tariffs and Trade (GATT) came to life in 1947 in Geneva as a framework for regulating international trade. It was signed by 23 countries.

GATT takes the form of a multilateral trade agreement setting forth the principles under which the countries shall negotiate «a substantial reduction in Customs tariffs and other impediments to trade, and elimination of discriminatory practices in international trade». GATT has become a charter governing almost all world trade.

The objectives of the GATT were to establish an orderly and transparent framework within which barriers to trade could be gradually reduced and international trade expanded. For this purpose, the agreement contained certain underlying principles and provisions. They are as follows:

1. there shall be no trade discrimination. The unconditional most-favoured-nation treatment is regarded as fundamental;

2. as a rule, there is to be no protection other than that provided by the Customs tariff;

¹ Protectionism – policy of protecting domestic industries against foreigncompetition by means of tariffs, subsidies, import quotas or other restrictions on handicaps placed on the imports of forign goods.

3. Customs unions and free trade groupings are considered legitimate means of trade liberalization.

Members of GATT are entitled to levy the following charges on imports:

ü an import tax equal in amount to internal taxes on the product concerned;

ü «antidumping» duties in case of imported products that are being sold at less than the price in the importer's home market;

ü countervailing duties to offset the effects of export subsidies; ü fees and other proper charges for services rendered.

The GATT's most important principle was trade without discrimi-nation, in which member nations opened their markets equally to one another. Once a country and its largest trading partners agreed to reduce a tariff, that tariff cut was automatically extended to all GATT members.

GATT also established uniform Customs regulations and sought to eliminate import quatas. It sponsored many treaties that reduced tariffs, the last of which, signed in Uruguay established the WTO. On January 1, 1995 GATT was replaced by the World Trade Organisation.

EXERCISES

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

1. to prohibit a. to ask for payment

2. mercantilism b. arrangement or understanding made

by two or more persons, groups, business companies, governments

3. to urge c. to place tax on somebody

4. advantage d. something made smaller

5. to charge e. to refuse to permit by law

6. to promote f. to discuss, speak about

7. restriction g. fixed payments to the national

government

8. agreement h. the policy that the economic interests

of the nation are of the greatest importance

9. to impose i. to remove, take away

10. to provide j. to make smaller in size

11. to reduce k. to stimulate, help to develop

12. rates l. something that is in the way, that

hinders; an obstacle

13. charter m. something that keeps within limits

14. to negotiate n. to help to organize and start

15. to foster o. to give, to supply

16. reduction p. a declaration or document

17. to eliminate q. to encourage, press, persuade

18. impediment r. something likely to bring success or

benefit, especially in competition with others

II. Fill in the gaps to make the sentences complete. Reference words:

a. wealth and power f. Customs tariffs

b. origin g. multilateral trade

c. advantages h. protectionist policy

d. prohibitive Customs duties i. restrictive policies

e. free entry j. production and trade

1. Economists and businessmen voiced their opposition to excessively high …

2. The mercantilists held that economic policy should aim at securing the … of the state.

3. Under the GATT principles the countries shall negotiate a substantial reduction in … and other impediments to trade.

4. The English Navigation Act of 1651 prohibited the import of goods of non-European …

5. GATT takes the form of a … agreement.

6. The 17th century saw the growth of … that later came to be known as mercantilism.

7. Germany adopted a systematically …

8. In England Adam Smith demonstrated the … of removing trade restrictions.

9. In France the economists demanded liberty of …

10. The Anglo-French trade agreement provided … of all French products except wines into Britain.

III. Put the second sentence into the passive voice.

1. The French tariff of 1860 charged high rates on British products. High rates … on British products.

2. Germany adopted a protectionist policy. A protectionist policy …

3. Many other nations followed Germany. Germany …

4. During the Civil War the United States raised its duties. Duties …

5. 23 countries signed the General Agreement on Tariff and Trade in Geneva in 1947. The General Agreement on Tariff and Trade …

6. Governments imposed price and wage controls. Price and wage controls …

7. Many countries prohibited the exports of raw materials. The exports of raw materials …

8. Adam Smith demonstrated the advantages of removing trade restrictions. The advantages of removing trade restrictions …

9. The 17th century saw the growth of restrictive policies. The growth of restrictive policies …

10. The 17th century knew the mercantilist attitudes. Mercantilist attitudes …

IV. Study the following information about Subjunctive Mood.

As a rule Subjunctive Mood is used:

ü After certain verbs ask (просить), command (приказывать), demand (требовать), insist (настаивать), recommend (рекомен-

довать), request (требовать), suggest (предлагать) + that;

ü in the constructions: it is desirable (желательно), essential (необх димо), important (важно), necessary (необходимо), vital (крайне необходимо) + that.

eg. The director insists that we be present at the meeting.

His teachers recommended that he take part in this conference.

It is necessary that we choose the chief as soon as possible.

It was essential that every worker know his rights.

Answer the following question using Subjunctive Mood and the phrases below. Give your reasons for and against.

What should a government do to secure the wealth and power of the state?

to impose price control

to impose wage control

to foster national industries

to promote imports of raw material

to prohibit the imports of finished goods to promote the exports of finished goods to prohibit the exports of raw materials

V. Translate the questions from Russian into English and then answer them.

1.	Свидетелем чего стал XVII век?
2.	На что была нацелена полит ка меркантилизма?
3.	Что запрещал известный англ йск й Навигационный акт от
1651 года?	треб
4.	Где экономисты	вали св боды производства и торговли?
5.	Кто продемонс рир вал преимущества отмены торговых огра-
национальные эк номики от конкуренции извне?
ничений?
6.	Против чего выс упали экономисты и бизнесмены?
7.	Почему таможенные стороны в XIX веке надежно защищали
8.	Какая страна оставалась единственно верной принципам сво-

бодной т рг вли?

9. Когда началось развитие многосторонних торговых согла-ш ний и других форм международного торгового сотрудничества?

10. Какой договор был подписан в Женеве в 1947 году 23 стра-нами?

11. Каковы основные принципы Генерального соглашения по тарифам и торговле?

Study the following words and word combinations from the text.

to exert

to feel impelled

to take account of

to set aside

dictum [ˈdɪktəm]

government procurement [prəˈkjʊəmənt] practice

liberalization [lɪbrəlaɪˈzeɪʃn]

lifting

to assess

to accord

to yield

ultimately

to resort

restraint

windfall

enactment

issuance [ˈɪʃuːəns], [ˈɪʃ(j)uːəns]

оказывать

чувствовать принужденным принимать во внимание выделять, оставлять без внима-ния, пренебрегать изречение

практика государственных за-купок / поставок

л берализация отмена, снятие оп еделить, оценить

п едоставлять, оказывать приносить в конечном итоге прибегать ограничение неожиданный доход принятие, введение выдача

unilaterally [juːnɪˈlætrəlɪ] в одностороннем порядке

local content requirement требование отечественного ком-

понента¹

Любое¹ законодательное требование к доле национальных деталей или комплектующих в составе готовой продукции, соблюдение которого является необходимым условием для реализации товара на отечественном рынке или для открытия предприятия с иностранными инвестициями; может су-ществовать в форме минимально допустимой доли отечественной добав-ленной стоимости в товаре, требования к участию местных работников в производстве или требования к закупке местных комплектующих.