Lesson 11 THE GLOBAL ECONOMY

I. Read and memorize the following words, word- combinations and word-groups:

to benefit — отримувати користь

e.g. The countries benefit because trade enables them to

exchange things they don't need for the things they do need and want.

transaction — справа, угода; ведення ділових операцій e.g. Nations trade with one another for the same reason

that individuals and business firms within a country trade: both sides expect to benefit from the transaction, advantage — перевага

e.g. A nation has a comparative advantage in the production

of an item when its opportunity costs to produce the item are lower than those of other nations, to restrict — обмежувати

e,g. Despite the many advantages of trade between nations,

most countries, including our own, often restrict that trade in a number of ways.

revenue — прибуток; джерело прибутку

e.g. Through most of its history (until 1910), the United

States looked to the revenue tariff as its principal source of income, to levy — оподаткувати

e.g. Protective tariffs are levied to protect a domestic

industry from foreign competition, surplus — надлишок

e.g. Both countries expect to benefit from the transaction,

because trade enables them to exchange their surplus goods and services.

revenue tariff — тариф на прибуток

e.g. Revenue tariff are levied as a way to raise money as a

principal source of income.

protective tariff — пільговий тариф для вітчизняного ви­

робника

e.g. The goal of the protective tariff is to make the foreign product more expensive than a similar item produced in the

country.

dumping — демпінг; розвантажування

e.g. Selling the same product (or a lower price abroad than at home is called dumping.

administrative red tape — адміністративне регулювання e.g. Administrative red tape is the deliberate use of

governmental rules and regulations to make it difficult to import goods from abroad.

II. Give English equivalents of the following:

отримувати прибуток від операцій мати переваги

спеціалізація з виробництва деяких природні ресурси

товарів джерело прибутку

виробляти товар з меншими обмежувати торгівлю витратами вести торгівлю

імпортувати товар із-за кордону

транспортні засоби

III. Fill in the blanks with appropriate words:

Manufacturing can also be performed more ... in some parts of our country than in others. Natural resources, an adequate labor ..., and ... facilities have promoted the development of certain industries in particular regions of the country. Nations will ... because of differences in terms of climate, natural resources, ..., capital, and technology. Differences make it sensible to ... tn the production of some products. A nation has a comparative ... in the production of an item when its to produce the item of an item are lower than those of other nations. A ... is a duty, or tax, on imports. Restrictions on the numbers of certain specified goods that can enter the country from abroad are called . . . . Another tactic that has been used to restrict foreign trade can be classified as ... .

transportation supply labor supply quotas specialize opportunity costs tariff efficiently gain advantage administrative red tape

IV. Read and translate the text:

Nations trade with one another for the same reason that individuals and business firms within a country trade: both

sides expect to benefit from the transaction. They benefit

because trade enables them to exchange things they don't need (their surplus goods and services) for the things they do need and want. Some areas can produce things that others cannot- Because of its warm climate and the type of soil it has, Florida grows oranges but not wheat. Kansas grows no oranges, but it does grow wheat. The people in Florida and Kansas would like to have wheat and oranges, and so each specializes in one of those crops and trades its surplus with the other.

Manufacturing can also be performed more efficiently in some parts of our country than in others. Natural resources, an adequate labor supply, and transportation facilities have promoted the development of certain industries in particular regions of the country- For example, the computer industry is concentrated in northern California, the steel industry developed in western

Pennsylvania, and large automobile factories were first built in southern Michigan.

Absolute Advantage- Nations will gain because of differences in terms of climate_r natural resources, labor supply, capital, and technology. These differences make it sensible for them to specialize in the production of some products and to buy the other things they need from other countries.

Despite the many advantages of trade between nations, most countries, including our own, often restrict that trade in

a number of yvays. Some of these ways are discussed below.

Tariffs. A tariff is a duty, or tax, on imports. There are two basic types of tariffs. Revenue Tariffs are levied as a way to raise money. Through most of its history (intil 1910), the United States looked to the revenue tariff as its principal source of income- Protective Tariffs are levied to protect a domestic industry from foreign competition. The goal is to make the foreign product more expensive than a similar item produced in the United States- Then people will stop buying the foreign made item and purchase its domestic counterpart.

Quo/as. Restrictions on the numbers of certain specified goods that can enter the country from abroad are called quotas. Like protective tariffs, quotas limit the amount of foreign competition a protected industry will have to face. In the 1980's, for example, the government protected the U.S. automobile industry by placing a quota on the number of automobiles that could be imported from Japan.

Other Tactics. There are a number of other devices that directly affect the flow of trade among nations. One of these is the expect subsidy — a payment by a country to its exporters that enables them to sell their products abroad at a lower price than they could sell them for at home. Selling the same product for a lower price abroad than at home is called dumping.

Still another tactic that has been used to restrict foreign trade can be classified as «administrative red tape». This is the deliberate use of governmental rules and regulations to make it difficult to import goods from abroad (pp. 151 —155).

V. Answer the following questions:

1. Why do countries trade with each other?

2. What is absolute advantage?

3» Why do nations gain when they specialize?

4. How can you explain the term «comparative advantage»?

5. What does the law of comparative advantage explain?

6. Why do most countries restrict trade?

7. In what ways do some countries restrict trade?

8. What is tariff?

9. How can quotas restrict trade?

VI Define the terms:

transaction revenue tariff to specialize protective tariff to restrict trade quota

revenue expect subsidy

absolute advantage dumping tariff administrative red tape

VII Translate into English:

1 - Держави ведуть торгівпю з тих самих причин, що й приватні особи та фірми. 2. Держави отримують зиск від торгівлі тому, що вона дає їм можливість обмінювати над­

лишок товару, який вони виробляють, на товар, у якому вони мають потребу. 3. Природні багатства, транспортні засоби, трудові ресурси дали поштовх розвиткові окремих

видів промисловості. 4. Різниця в кліматичних умовах, природних багатствах, трудових ресурсах зробила можливою спеціалізацію з виробництва окремих видів товарів- 5- Незважаючи на значні переваги торгівлі, більшість країн запро­

ваджує обмеження на торгівлю. 6. Упродовж Історії свого існування США розглядали фіскальні тарифи як головне джерело надходжень. 7. Для того щоб захистити вітчизняну промисловість від іноземної конкуренції, існують тарифи,

мета яких — зробити зарубіжний товар дорожчим за такий самий товар, виготовлений у країні. 8. Квоти знижують рівень конкуренції, з якою може зіткнутися вітчизняна промис­

ловість, обмежуючи кількість імпортованого товару.

VIII. Read and dramatize the following dialogue:

A.: It's amazing!

6.: What's amazing?

A.: We had an assignment the other day to discover how much we depend on foreign trade. B.: What's so amazing about that?

A.: I found that my clock radio was made in Japan, my slippers came from Taiwan, my robe from India, my comb was made in Mexico, my sweater was from Scotland and my shoes from Italy.

S.: And I want to treat you to the hot chocolate made by a

Swiss company out of cocoa beans from Ghana and sweetened with sugar from Ecuador.

A.: I see that we are all dependent upon the goods and services from other countries, and imports have risen steadily almost every year in the past,

B.: But why do countries trade with each other?

A.: Trade among nations takes place for the same reasons that it does within a nation; to obtain goods and services that a region could not produce itself, or to obtain them at a lower cost than they could be produced for at home. This is explained by the principle of comparative advantage.

B.: But I've heard that some countries put up barriers to trade and what is the reason for that?

A.: Despite the advantage of international trade, most nations have erected artificial barriers to that trade- These barriers are usually in the form of tariffs or quotas,

B.: And how are payments made in international trade?

A.: Imports must be paid for in a currency that is acceptable to the seller. In order to facilitate these transactions, there is a market for the currencies of all trading nations. The selling price of one nation's currency in term of the currencies of other nations is known as its «exchange rate». Exchange rates fluctuate in accordance with the laws of supply and demand.

B.: How do exchange rates' fluctuations influence the nation's exports and imports?

A.: When the value of a nation's currency is decreasing in terms of other currencies, its exports are likely to increase because they will be less expensive to people in foreign countries- Imports, in these circumstances, are likely to decrease because foreign goods will become more

expensive. When a nation's currency is appreciating in terms of other currencies, the opposite is likely to occur.

S.: I see. And why do economists look to the balance of payments?

A.: The balance of payments summarizes the transactions that have taken place in international trade over a given period of time, usually one year. Economists look to the balance of payments for clues to future trends in the value of a nation's currency and other consequences of its foreign trade.

IX. Make up your own dialogue using the following expressions:

to levy protective tariffs to benefit from the transaction to specialize in the production of to limit the amount of foreign competition

to place a quota to exchange things to be concentrated to restrict trade

X. Put questions to the italicized words:

M o d e l : Our nations will be trading with one another when governmenis of the two countries limit quotes. When will our nations be trading with one another?

1. They will be exchanging their products at the international fair at this time tomorrow, 2. Our company will be manufacturing new devices from September to November the following yean

3. The factory will be specializing in the production of automobiles when they change the management. 4. The government of the country will be promoting trans-portation facilities for a number of reasons. 5. Using the expect subsidy, the government will be affecting the flow of trade among nations.

XI. Change the following sentences from direct into indirect speech:

M o d e l : He said: «They will be producing machines during the next two years».

He said that they would be producing machines during the next two years.

1. He said: «They will be growing vegetables the whole season». 2. The manager said: «From now on we shall be promoting the development of certain industries in particular regions». 3. She remarked: «We shall be specializing in the production of new products from October this year to October next year». 4. The President said: «We shall be restricting trade in a number of ways from now on». 5. He said: «We shall be limiting the amount of foreign competition during the following years».

XII. Translate into English using the Future Continuous Tense (the Active Voice):

1. Ми будемо спеціалізуватися з виробництва певних видів товарів упродовж кількох наступних років. 2. Ця країна з початку й до кінця наступного року обмежуватиме зовнішню торгівлю. З, Це фермерське господарство вирощуватиме овочі впродовж усього року. 4. Вони застосовуватимуть квоту на деякі види імпортних автомобілів з наступного місяця цього року до червня наступного року. 5. Тарифи захищатимуть вітчизняну промисловість протягом певного часу.

XIII. Communicative situations:

1. Trade among people and nations has occured for thousands of years. What are the advantages of trade? Why do many people seem to fear trade with other countries?

2. American steel production is down. Many steelworkers are unemployed. The equipment sits idle. A bill before Congress proposes high tariffs and quotas to protect the steel industry

from imported steel.

a) Explain how each of the following parties might respond to the issue.

Steel industry Iron and steelwokers

Consumers Auto industry

b) Considering the position of different groups in the economy, do you believe it would be a wise or unwise economic decision to protect the steel industry from foreign producers? Explain your position,

3. Describe the position you would take on high tariffs, quotas or voluntary restraints on automobiles manufactured in Japan if you were:

a) the owner of an American automobile company;

b) a worker in that automobile plant;

c) a consumer interested in buying a new automobile;

d) an American manufacturer of computer parts to be sold in Japan.