Political Aspects of international Relations

1987, was echoed in stock markets around the world, and, on a smaller scale, the sharp price falls on the Mexican stock market in early 1995 led to falling prices on “emerging markets” elsewhere in Latin America and in Asia.

As modern international finance developed, new types of contract developed and were themselves traded internationally; markets in such derivative contracts relate the price of an option, future, swap, or other derivative contract to the price of the underlying asset. The underlying asset may be foreign exchange, short-term instruments, bonds, equities, or commodities, and the volume of trading in derivatives could affect the prices of the underlying assets internationally. Derivatives enable investors to reduce the risk they bear due to market volatility, but they also permit them to undertake more risky deals in the search for profits, and have created fears that they may increase the risks to the international financial system as a whole, as demonstrated in the derivatives-related collapse of the London merchant bank Barings in 1995.

Although there are strong grounds for expecting the growth of world finance to link interest rates and financial prices in many countries, the complexity of the forces have prevented simple statistical relationships from emerging, leading some to believe that global financial markets are irrational, or like casinos.

The World Economy

Economic conditions in every country are strongly influenced by the development of the world economy. It makes itself felt through international trade, global production, and international finance. Other important sinews connecting the economies of different countries into one global entity include international migration, creating a migrant labour force, and the international diffusion of technology. Although all those forces bind each country into one world economy, they do not produce a uniform result, for world growth is uneven, enabling some countries and regions to grow strongly in certain periods while others become poorer.

Working on the texts.

Task 1. Read the texts above and find the English equivalents to the following Russian phrases. Reproduce the situations from the texts where these expressions are used.

Production

1.вывоз деталей из нескольких стран и сборка их еще в одной (стране)

2.осуществляться в стране, где условия особенно благоприятны для такого вида работы

3.«источники со всего мира»

4.новая всемирная система производства как основа мировой экономики

5.важный двигатель изменений в международном разделении труда

6.владеть и управлять промышленным производством и оборудованием

7.характерная форма предприятия в современной глобальной экономике

8.интегрировать заводы как подразделения глобально организованного производственного процесса

Finance

1.купля и продажа иностранной валюты

2.объем валютных сделок, производимый импортерами и экспортерами

3.превращать финансовые активы из валюты одной страны в валюту другой в ответ на ожидаемые и фактические проценты, получаемые с разных валют и их валютных курсов

4.банковские депозиты, ценные счета, и другие краткосрочные сбережения, облигации, и акции в разных странах, а также нефинансовые активы, такие как недвижимое имущество

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5.быть освобожденным от правительственных ограничений на движение международного капитала

6.начало современных глобальных рынков в мире финансов

7.снять до некоторой степени ограничения на движение финансов

8.изменчивость курса валюты, процентов, и цен на финансовое имущество

9.устанавливать цены на выбранный товар, перспективу, обмен

10.договариваться о цене на основное имущество

11.предпринимать более рискованные сделки в поисках прибыли

12.серьезные основания для

13.связать проценты и финансовые цены во многих странах

Task 2. Translate The World Economy into Russian in written form without a dictionary.

Task 3. Discussion: divide into two groups, one is standing for globalization, the other is against it. Get ready with your own examples to illustrate the topic concerned.

Task 4. Translate the following sentences into English using your active vocabulary.

1.Большой объем торговли готовыми товарами включает вывоз деталей из нескольких стран и сборку их еще в одной стране.

2.Каждая специализированная отрасль всего процесса осуществляется в стране, где условия особенно благоприятны для такого вида работы.

3.Такие “источники со всего мира” стали заметны в 70х и распространились, создавая новую всемирную систему производства как основы мировой экономики.

4.Источники со всего мира стали важным двигателем изменений в международном разделении труда.

5.Как результат глобализации производства, многонациональные корпорации владеют и управляют промышленным производством и оборудованием.

6.Транснациональные корпорации – это характерная форма предприятия в современной глобальной экономике.

7.Однако, вместо того, чтобы просто руководить заводами за рубежом, многонациональные корпорации интегрируют те заводы как подразделения глобально организованного производственного процесса.

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8.Простейшая форма международного финансового бизнеса, купля и продажа иностранной валюты, оценивается в 1 миллиард долларов ежедневно.

9.Это гораздо больше, чем объем валютных сделок, производимый импортерами и экспортерами.

10.Большинство сделок представлены банками, корпорациями и частными лицами, превращающими финансовые активы из валюты одной страны в валюту другой в ответ на ожидаемые и фактические проценты, получаемые с разных валют и их валютных курсов.

11.В движении между валютами инвесторы покупают и продают банковские депозиты, ценные счета, и другие краткосрочные сбережения, облигации, и акции в разных странах, а также нефинансовые активы, такие как недвижимое имущество.

12.Основные рынки, через которые протекают финансы, сейчас освобождены от правительственных ограничений на движение международного капитала.

13.Эти рынки “европейской валюты” были началом современных глобальных рынков в мире финансов.

14.С конца 70х годов, и особенно с середины 80х годов, отдельные страны до некоторой степени сняли ограничения на контроль за движением финансов.

15.Создание всемирного рынка финансов с начала 70х годов сопровождалось большей изменчивостью курса валюты, процентов, и цен на финансовое имущество.

16.По мере развития международной финансовой системы, появились новые типы контрактов, устанавливающие цены на выбранный товар, перспективу, обмен, или договаривающиеся о цене на основное имущество.

17.Производные контракты дают возможность инвесторам сократить риск, связанный с изменчивостью рынка, но они также позволяют им предпринимать более рискованные сделки в поисках прибыли.

18.Хотя есть серьезные основания для перспективы роста мировых финансов, чтобы связать проценты и финансовые цены во многих странах, сложность процесса не позволяет нам верить, что глобальные финансовые рынки сродни казино.

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ASPECT 7. INTERNATIONAL TRADE.

International Trade, the exchange of goods and services between nations. Goods can be defined as finished products, as intermediate goods used in producing other goods, or as agricultural products and foodstuffs. International trade enables a nation to specialize in those goods it can produce most cheaply and efficiently. Trade also enables a country to consume more than it would be able to produce if it depended only on its own resources. Finally, trade enlarges the potential market for the goods of a particular economy. Trade has always been the major force behind the economic relations among nations; it is a measure of national strength.

Emergence of Modern International Trade

Although international trade was an important part of ancient economies, it acquired new significance after about 1500; with the establishment of empires and colonies by European countries, trade became an arm of governmental policy. The wealth of a country was measured in terms of the goods it possessed, particularly gold and precious metals. The objective of an empire was to acquire as much wealth as possible in return for as little expense as possible. This form of international trade, called mercantilism, was commonplace in the 16th and 17th centuries.

International trade began to assume its present form with the establishment of nation-states in the 17th and 18th centuries. Heads of state discovered that by promoting foreign trade they could mutually increase the wealth, and thus the power, of their nations. During this period new theories of economics, in particular of international trade, also emerged.

Advantages of Trade

In 1776 the Scottish economist Adam Smith, in The Wealth of Nations, proposed that specialization in production leads to increased output. Smith believed that in order to meet a constantly growing demand for goods, a country's scarce resources must be allocated efficiently. According to Smith's theory, a country that trades internationally should specialize in producing only those goods in which it has an absolute advantage, that is, those goods it can produce more cheaply than can its trading partners. The country can then export a portion of those goods and, in turn, import goods that its trading partners produce more cheaply. Smith's work is the foundation of the classical school of economic thought.

Half a century later, the English economist David Ricardo modified this theory of international trade. Ricardo's theory, which is still accepted by most modern economists, stresses the principle of comparative advantage. Following this principle, a country can still gain from trading certain goods

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even though its trading partners can produce those goods more cheaply. The comparative advantage comes if the mathematics of production costs and price received work out so that each trading partner has a product that will bring a better price in another country than it will at home. If each country specializes in producing the goods in which it has a comparative advantage, more goods are produced, and the wealth of both the buying and the selling nations increases.

Besides this fundamental advantage, further economic benefits result when countries trade with one another. International trade leads to more efficient and increased world production, thus allowing countries (and individuals) to consume a larger and more diverse bundle of goods. A nation possessing limited natural resources is able to produce and consume more than it otherwise could. As noted earlier, the establishment of international trade expands the number of potential markets in which a country can sell its goods. The increased international demand for goods translates into greater production and more extensive use of raw materials and labour, which in turn leads to growth in domestic employment. Competition from international trade can also force domestic firms to become more efficient through modernization and innovation.

Within each economy, the importance of international trade varies. Some nations export only to expand their domestic market or to aid economically depressed sectors within the home economy. Other nations depend on trade for a large part of their national income and to supply goods for domestic consumption. In recent years international trade has also been viewed as a means to promote growth within a nation's economy; developing countries and international organizations have increasingly emphasized such trade.

Government Restrictions

Because international trade is such an integral part of a nation's economy, governmental restrictions are sometimes necessary to protect what are regarded as national interests. Government action may occur in response to the trade policies of other countries, or it may be resorted to in order to protect specific industries. Since the beginnings of international trade, nations have striven to achieve and maintain a favourable balance of trade—that is, to export more than they import.

In a money economy, goods are not merely bartered for other goods; rather, products are bought and sold in the international market with national currencies. In an effort to improve its balance of payments (that is, to increase reserves of its own currency and reduce the amount held by foreigners), a country may attempt to limit imports. Such a policy aims to control the amount of currency that leaves the country.

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Import Quotas

One method of limiting imports is simply to close the ports of entry into a country. More commonly, maximum allowable import quantities may be set for specific products. Such quantity restrictions are known as quotas. These may also be used to limit the amount of foreign or domestic currency that is permitted to cross national borders. Quotas are imposed as the quickest means to stop or even reverse a negative trend in a country's balance of payments. They are also used as the most effective means of protecting domestic industry from foreign competition.

Tariffs

The most common way of restricting imports today is by imposing tariffs, or taxes on imported goods. A tariff, paid by the buyer of the imported product, makes the price higher for that item in the country that imported it. The higher price reduces consumer demand and thus effectively restricts the import. The taxes collected on the imported goods also increase revenues for the nation's government. Furthermore, tariffs serve as a subsidy to domestic producers of the items so taxed; the higher price that results when a tariff is imposed encourages the competing domestic industry to expand production.

Non-Tariff Barriers to Trade

In recent years the use of nontariff barriers to trade has increased. Although these barriers are not necessarily administered by a government with the intention of regulating trade, they nevertheless have that result. Such nontariff barriers include government health and safety regulations, business codes of conduct, and domestic tax policies. Direct government support of various domestic industries is also viewed as a nontariff barrier to free trade, because such support puts the aided industries at an unfair advantage among trading nations.

20th-Century Trends

In the first half of the 20th century, equal tariffs for similar goods was not the policy of all nations. Countries levied differential tariffs (charging lower tariffs to favoured nations) and established other restrictive trading practices as weapons to fight unfriendly nations. Trade policy became the source of many international economic disputes, and trade was severely affected during times of war.

Trade Negotiations

Attempts were first made in the 1930s to coordinate international trade policy. At first countries negotiated bilateral treaties. Later, following World War II, international organizations were established to promote trade by, for example, liberalizing tariff and nontariff trade barriers. The General Agreement on

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Tariffs and Trade, or GATT, signed by 23 non-Communist nations in 1947, was the first such agreement designed to moderate impediments to international trade; growing to well over 100 signatories, and affecting about 80 per cent of international commerce. From 1947 GATT sponsored a number of specially organized rounds of multilateral trade negotiations, culminating with the Uruguay Round, completed in 1994. This set the stage for its replacement as world trade body by the World Trade Organization (WTO), and is expected to increase world trade by up to a quarter by the 21st century, raising world income by some US$500 billion.

Trading Communities and Customs Unions

Several trading communities have been established to promote trade among countries that have common economic and political interests or are located in a particular region. Within these trade groups, preferential tariffs are administered that favour member countries over nonmembers. One early example of a trading community is the Commonwealth of Nations; it was established under the provisions of the Ottawa Agreements of 1932, which allowed preferential tariffs to be levied among members of the Commonwealth. Non-Communist countries encouraged trade-promoting programmes to stimulate the redevelopment of economies ruined during World War II.

In the customs union known as Benelux, operative since 1948 and consisting of Belgium, the Netherlands, and Luxembourg, customs duties on trade among the three members were abolished, and uniform duties were established on imports from nonmember states. In 1951 France, West Germany (now part of the united Federal Republic of Germany), and the Benelux countries joined to form the European Coal and Steel Community. In 1957 these six countries established the European Economic Community, or EEC (now the European Union), aimed at reducing trade barriers among member countries. The EEC was expanded after its creation, with other nations joining the original members. The Communist counterpart to these group was the Council for Mutual Economic Assistance (COMECON). Established in 1949, it was dissolved in 1991 as a consequence of the political and economic changes in the Communist world.

Many economists foresee the development of three major trading blocs in the developed world—the EU, the members of the North American Free Trade Agreement (NAFTA) and a Pacific-Asian bloc. Trade within each bloc will be encouraged by the removal of trade restrictions, but difficult negotiations may be required to reduce trade barriers between the trading blocs.

World Trade

In 1995 world trade (exports and imports) was, in US dollars, an estimated $5 trillion. World trade almost doubled between 1976 and 1985, and increased

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nearly tenfold between 1965 and 1985. Dramatic trade growth occurred in the oil-exporting developing countries between 1976 and 1982. Furthermore, world trade continued to increase in the 1980s, driven by economic recovery in the major industrial nations. After a pause in the early 1990s, caused by recession in Europe and Japan, trade growth resumed in the mid-1990s.

Floating currency exchange rates were adopted in 1973, replacing earlier agreements that limited the rise of one currency's value in relation to that of another. In the 1970s and early 1980s, price competition between trading partners was augmented by the resulting fluctuations in exchange rates. Attempts to manage these, such as the European Exchange Rate Mechanism, soon broke down. In the short run, the depreciation of a nation's currency makes its exports appear cheaper while also causing imports to appear more expensive. It is still difficult to predict the long-range effects that currency fluctuations will have on the flow of international trade, but there are signs that governments worldwide are being forced into tight monetary policies to curb inflation and retain their currencies' world competitiveness.

In the 20th century, trade has increased, becoming a more dominant segment of the world's economy. It is expected that the trend toward increasing interdependency among national economies will continue into the future, albeit countered by the tendency towards regional blocs, which will make some groups of countries more interdependent than others.

Notes:

1.GATT = General Agreement on Tariffs and Trade (Генеральное соглашение о тарифах и торговле – ГАТТ)

2.WTO = World Trade Organization (Организация по международной торговле/ Всемирная торговая организация – ВТО)

3.ECSC = European Coal and Steel Community (Европейское объединение угля и стали – ЕОУС)

4.COMECON = Council for Mutual Economic Assistance (Совет экономической взаимопомощи – СЭВ)

5.NAFTA = North American Free Trade Agreement

(Североатлантическая зона свободной торговли, Канада, США, Великобритания)

Working on the text.

Task 1. Read the text above and find the English equivalents to the following Russian phrases. Reproduce the situations from the text where these expressions are used.

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International Trade

1.специализироваться в тех товарах, которые она (страна) может производить наиболее дешево и эффективно

2.потреблять больше, чем она могла бы произвести

Emergence of Modern International Trade

1.орудие правительственной политики

2.измеряться в наборе товаров, которыми она (страна) обладала

3.быть обычной вещью

4.принимать свою современную форму с образованием национальных государств

Advantages of Trade

1.специализация в производстве

2.приводить к росту производительности

3.иметь абсолютные преимущества

4.принцип сравнительного преимущества

5.приносить более высокую цену в другой стране, чем дома

6.вести к более эффективному и возросшему мировому производству

7.потреблять больший по объему и более разнообразный набор товаров

8.возросший международный спрос на товары

9.более широкое использование сырья и труда

10.рост внутренней занятости

11.заставить местные фирмы стать более эффективными посредством модернизации и инновации

12.расширять их внутренний рынок

13.помогать экономически отсталым секторам

14.средство, способствующее росту национальной экономики

Government Restrictions

1.неотъемлемая часть национальной экономики

2.в ответ на

3.прибегнуть к (чему-то)

4.достичь и поддерживать благоприятный баланс торговли

5.увеличить резервы своей собственной валюты

6.контролировать количество валюты, которая вывозится из страны

7.закрыть въезд в страну

8.количественные ограничения

9.остановить или даже полностью изменить негативное направление в

балансе платежей страны 10.защита местной промышленности от иностранной конкуренции

11.налагать тарифы, или налоги, на импортируемые товары

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