English for Economists

·Tariff is a tax on an import.

·Quota is a limit on the quantity of a good that may be imported in a given time period.

·WTO – World Trade Organization.

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5.2. GLOBAL MARKET AND DEVELOPING NATIONS

DISCOVERING CONNECTIONS

1.How would you define global economy, global market?

2.Do you agree that countries should be divided into industrialized and developing? Give your reasons.

3.What international economic organizations do you know? What are their functions?

4.What is globalization? What do you think about it?

READING

Text 1

The author organizes the following reading by considering industrialized nations, newly industrialized nations, developing nations and less developed nations. While reading pay attention to the problems facing different types of countries.

The World’s Economies

Economists classify the world’s economies as: industrial or developed nations (IN); newly industrialized nations (NIC); developing nations or less developed nations (LDC). Each of these types of countries has fairly specific characteristics, and economic issues.

Industrialized nations: Growing and Growing Old

An industrialized economy has a large base of productive capital, sophisticated banking systems and financial markets, a variety of industries producing a broad range of products, and vigorous and varied international trade. Industrialized nations also have well-established systems of government and law, and provide educational opportunities for their people.

Less than 20% of the world’s population live in industrial nations, and they account for about 70% of world output. The countries in the Group of Seven (G-7) have the most industrialized economies. The G-7 are the United States, Canada, Japan, Germany, France, the United Kingdom, and Italy (with Germany, France, the United Kingdom, and Italy comprising Europe’s so-called Big Four). The G-8 includes G-7 plus Russia, which may best be described as an economy in transition.

The entire EU – which also includes Austria, Belgium, Finland, Greece, Ireland, Luxembourg, the Netherlands, Portugal, and Spain – and some European nations outside the EU, such as Switzerland, Sweden, and Denmark, are

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also industrialized. So are Australia, New Zealand, and Taiwan.

But there is an income inequality, which creates some of the questions these countries face. The term sustainable growth refers to economic growth based on renewable resources and minimal environmental degradation.

However, the threat of terrorism, mainly from Islamic extremists from less developed counties, may well represent the most difficult and dangerous problem for industrialized nations, particularly the United States.

Newly Industrialized Nations: Getting Going

Newly industrialized nations (NICs) have a rapidly growing base of productive capital and rising incomes. Most of these nations have sound governments and banking and financial systems, although they may occasionally be subject to financial or political dislocation. For instance, Brazil is weighed down with international debt and must work hard to control inflation. Pakistan may face political instability and a shaky relationship with neighbouring India.

Newly industrialized nations include Hong Kong, Singapore, Taiwan, and South Korea (which are known as Asia’s “Four Tigers”), Pakistan, Malaysia, Indonesia, Thailand, Mexico, Brazil, Chile, Venezuela, Israel, South Africa, and Hungary.

Less than 5 percent of the world’s population lives in NICs, and they earn less than 5 percent of the world’s income.

The Four Tigers followed a strategy of export-oriented industrialization in which they moved from the status of developing country to that of NIC in the 1970s and 1980s. These nations ambitiously took Japan as a role model, but concentrated on light manufacturing. The World Bank and the International Monetary Fund have held up the Tigers as models for other developing and underdeveloped nations. However, export-oriented growth isn’t possible for every nation, especially when other nations, including China and some industrialized nations, still engage in protectionism.

NICs face a variety of problems, depending on their specific situations. One common issue is financing growth. A number of newly industrialized countries need more sophisticated banking and financial systems, and more stable governments.

Developing Nations

Developing nations range from the poorest in the world to those that have begun to build an industrial base, but have yet to achieve stable growth in production and income. These economies are also called underdeveloped, undeveloped, and, most commonly, less developed countries (LDCs). A number of these nations have large, growing urban populations and serious difficulties with unemployment, crime, and poverty in the cities.

The Organization for Economic Cooperation and Development, which I’ll

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discuss later in this chapter, includes the following nations in its official list of less developed countries: all countries of Africa except the Republic of South Africa; all countries of Asia except Cambodia, China, Japan, Laos, North Korea, and Vietnam; all countries in Latin America, except Cuba; all countries in the Middle East and Malta, Portugal, Spain, Greece, and Turkey.

The People’s Republic of China could be considered an LDC. However, most economists view the PRC as a special case because it is beginning to industrialize but still relies heavily on small farms.

Vocabulary Focus

Ex. 1. Various expressions are used to indicate categories of countries according to wealth of development.

Developed, developing, less developed, underdeveloped, undeveloped.

Use the following words to complete the sentences below:

1.To develop, development, developed, developing

2.The ___ countries are mainly agricultural primary producers whose economy is based on relatively primitive farming methods.

3.Such countries rely heavily on the export earning from the sale of their primary products to the ___ countries.

4.It is usually advantageous for countries ___ their own manufacturing industries.

5.Many countries aim at ___, but few are successful.

Ex.2. Matchthefollowingcommoncollocations with their Russianequivalents:

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Ex. 3. Math the verbs in column A with nouns in column C. Do not forget the proper preposition in column B.

Ex. 4. There is a logical connection among three of the four words (or word combinations)in each of the following groups. Which is the odd one out, and why?

1)global economy -international trade-multinational corporationsfiscal policy;

2)GDPIMF – OECD – WB;

3)the UK-the USA-Germany-Pakistan;

4)Hong Kong – Singapore – Taiwan – Chile;

5)IN – NID – LDC – VAT;

6)low income - povertyunemployment – broad range of products;

7)productive capital – sophisticated banking systemvigorous international tradepolitical dislocation.

Ex. 5. Complete the following sentences, use the prompts below:

1.Economists classify the world’s economies as _______, ______and

________ nations.

2.The term ______refers to economic growth based on renewable resources and minimal environmental degradation.

3.An _____has a large base of productive capital, sophisticated banking systems and financial markets, a variety of industries producing a broad range of products, and vigorous and varied international trade.

4.Newly industrialized nations (NICs) have a rapidly growing base of productive capital and ______ .

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5.A number of developing nations have large, growing urban populations and serious difficulties with___,___ and ___.

Words for reference: industrialized, newly developed and developing; sustainable growth; industrialized economy; rising incomes; unemployment, crime, and poverty in the cities.

Comprehension

Ex. 1. Based on your understanding of the text, are the following TRUE or FALSE? Explain why.

1.Industrialized nations also have well-established systems of government and law, and provide educational opportunities for their people.

2.Greece may best be described as an economy in transition.

3.EU includes only countries of Europe.

4.The term sustainable growth refers to political growth based on renewable resources and average environmental degradation.

5.Newly industrialized nations (NICs) have a slowly growing base of productive capital and rising incomes. Most of these nations have poor governments and primitive banking and financial systems

6.Brazilisweigheddownwithinternationaldebtandmustworkhardtocontrolinflation.

7.Developing nations range from the poorest in the world to those that have begun to build an industrial base.

Ex. 2. Find in the text the answers to the following questions.

1.What countries are considered as industrialized countries?

2.What are problems facing the developed countries?

3.What countries are called Asian Tigers?

4.Why Asian Tigers succeeded in their economic development?

5.What is Brazil weighed down with?

6.What problems does Pakistan face?

7.How can you characterize the problems of developing countries?

Ex. 3. Speak on:

1.Classification of the nations according to the development of their economy.

2.International trade as a form of specialization.

3.Main features of industrialized countries

4.Sectors of the economy the NIC need to develop.

5.Primary issues of concern in LDC.

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Text 2

Scan the text and find information on the following issues.

–three factors for successful development;

–functions of ICC;

–the location of ICC;

–mission of APEC;

–difference between APEC and other multilateral trade bodies.

Economic Cooperation

Only international co-operation can shape globalization in a positive way, and make it equitable for all. Development is a long-term process. Three factors in particular account for successful development: ownership of the process by developing countries; effective dialogue between developing and developed countries; and coherent policies in developed countries, in areas such as trade, investment, and agriculture, that will have a maximum positive impact on developing countries.

Different international organizations appeared in different parts of the world. One of them is International Chamber of Commerce (ICC) is the voice of world business championing the global economy as a force for economic growth, job creation and prosperity. Because national economies are now so closely interwoven, government decisions have far stronger international repercussions than in the past. ICC – the world's only truly global business organization responds by being more assertive in expressing business views.

Transformations in Europe, gave European nations a completely new chance of cooperation and friendship. An example for cooperation is European Union, which attempts to form infrastructure that crosses state borders. Last years have shown, that the neighbouring cooperation between countries is possible and mutually advantageous, and the borders, which used to be burdened with the weight of conflicts from the past, have become a symbol of the reconciliation and integration between countries. the European Union Harmonised standards create a larger, more efficient market – member states can form a single customs union without loss of health or safety. For example, states whose people would never agree to eat the same food might still agree on standards for labelling and cleanliness.

Another example of international coperation is Asia-Pacific Economic Cooperation, or APEC, is the premier forum for facilitating economic growth, cooperation, trade and investment in the Asia-Pacific region. APEC was established in 1989 to further enhance economic growth and prosperity for the region and to strengthen the Asia-Pacific community.

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APEC is the only inter governmental grouping in the world operating on the basis of non-binding commitments, open dialogue and equal respect for the views of all participants. Unlike the WTO or other multilateral trade bodies, APEC has no treaty obligations required of its participants. Decisions made within APEC are reached by consensus and commitments are undertaken on a voluntary basis.

APEC's 21 Member Economies are Australia; Brunei Darussalam; Canada; Chile; People's Republic of China; Hong Kong, China; Indonesia; Japan; Republic of Korea; Malaysia; Mexico; New Zealand; Papua New Guinea; Peru; The Republic of the Philippines; The Russian Federation; Singapore; Chinese Taipei; Thailand; United States of America; Viet Nam.

Text 3

Skim the text and find the following information:

1.Location of IFM.

2.Goals of IFM.

3.USA contribution to the fund.

The International Monetary Fund is like a central bank for the world’s central banks. It is headquartered in Washington, D.C., has 184 member nations, and cooperates closely with the World bank, which we discuss in Chapter 19. The IMF has a board of governors consisting of one representative from each member nation. The board of governors elects a 20-member executive board to conduct regular operations.

The goals of the IMF are to promote world trade, stable exchange rates, and orderly correction of balance of payments problems. One important part of this is preventing situations in which a nation devalues its currency purely to promote its exports. That kind of devaluation is often considered unfairly competitive if underlying issues, such as poor fiscal and monetary policies, are not addressed by the nation.

Member nations maintain funds in the form of currency reserve units called Special Drawing Rights (SDRs) on deposit with the IMF. (This is a bit like the federal funds that. commercial banks keep on deposit with the Central Bank reserve.) The value of SDRs is reassigned every five years. SDRs are held in the accounts of IMF nations in proportion to their contribution to the fund. (The United States is the largest contributor, accounting for about 25 percent of the fund.) Participating nations agree to accept SDRs in exchange for reserve currencies – that is, foreign exchange currencies – in settling international accounts. All IMF accounting is done in SDRs, and commercial

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banks accept SDR-denominated deposits. By using SDRs as the unit of value, the IMF simplifies its own and its member nations’ payment and accounting procedures.

CASE STUDY

A. Introduction to the problem

1. What do you know about Boeing and Airbus companies? 2. Do you know any other aircraft producers?

3. When you fly, are you aware of the company producing the airplane? 4. Should you be aware? Give your reasons.

B. Scanning for Information

Work in pairs. Each person should scan one of the two articles on Airbus Industrie and the Boeing Company and fill in the table after the texts in the appropriate section. Then, share information so that partner has the same data and can fill in Airbus Industrie and the Boeing Company table.

Text A

Airbus Industrie

In 1970, four European nations created Airbus Industrie to offset a decline in the airframe industry and challenge U.S. dominance in the global commercial aircraft market. Airbus is a four-country international consortium: In this unusual business structure, the four partners are both owners and suppliers, the common language of business is English, and all sales are transacted in U.S. dollars.

In the early years, Airbus Industrie was clearly the underdog, lagging far behind the U.S. companies of Boeing and McDonnell Douglas, which had dominated the industry for years. Since the consortium had no track record on safety or maintenance, airlines were reluctant to purchase the new aircraft. Through favourable pricing, generous maintenance contracts, and other competitive offers, the company was able to attract a number of carriers, including some in the United States. As a result, in less than twenty years, Airbus was able to produce a full family of airplanes and, with over 100 customers, it moved into the number two spot in the global aircraft industry.

Airbus succeeds because civil aircraft manufacturers from four nations pool their financial and technological resources in a true multinational partnership. It also succeeds because officials in these countries believe that European industry must be supported and protected by a strong industrial policy.

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For Airbus Industrie (the largest single industrial undertaking in the EC) support takes the form of an estimated $26 billion in subsidies. As a result of this financial backing Airbus has been able to recover from 70 to 100 percent of its product development costs, which are enormous in the industry. It can easily take four to six years, for example, for a plane to move from the design stage to actual production. During this time, the project yields no profits.

Airbus officials defend subsidies as a way to help level the playing field. They are quick to point out that Boeing and McDonnell Douglas receive millions of dollars in contracts to build military aircraft and spacecraft for the U.S. government, which is clearly a form of subsidy. It is hypocritical, say Airbus executives, to argue that the market is or can be completely free from government intervention.

Airbus officials point out that the consortium is a source of pride for the European Community, a model of international cooperation that can inspire future economic development in the area. Moreover, high quality Airbus products provide a viable alternative to U.S. airframes, assuring customers all over the world of the benefits of industrial competition.

With 30 percent of the global airframe market already, Airbus officials are gunning for at least 40 percent over the next several years. Predictions of increasing worldwide air traffic are fuelling Airbus’s growth. The consortium is already anticipating the need for airplanes that are quieter, more fuel efficient, and more comfortable for air travellers on long trips. According to company literature, “Airbus Industrie looks forward to lasting financial success well into the twenty-first century.”

Text B

The Boeing Company

Bill Boeing, a wealthy lumberman from Washington State, founded the Boeing Company. In 1916, he set up an airplane factory in Seattle, Washington, a city, which now depends on the aircraft industry. Fascinated with the technology of flying, Bill Boeing when he founded the company promised, “to let no new improvement in flying and flying equipment pass us by.”

During World War II, the Boeing Company established its reputation as a supplier of military aircraft. After the war, in the early fifties, Boeing made the first passenger jet, which soon replaced all of the propeller-driven aircraft in the passenger market. It has also built a number of spacecraft used in the U.S. space program. Over the years, the company has developed a strong reputation for reliable products and the service of those products. It has been number one in worldwide sales for years, controlling over 50 percent of the market for commercial aircraft.

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