VI. International Trade

Task 1. Read and translate the text.

International trade is exchange of capital, goods, and services across international borders or territories. Industrialization, transportation, and globalization influence the international trade system. Depending on what a country produces and needs, it can export (sell goods to another country) and import (buy goods from another country).

The main difference between international trade and domestic trade is that governments control international trade by means of tariffs (or duties) and quotas. A tariff is a tax on imported goods, and a quota is the number of goods, that must be produced or imported into a country during a certain period of time. These measures increase the price of imported goods to “protect” national economy. International organizations such as the WTO (World Trade Organization) and EFTA (European Free Trade Organization) regulate tariffs and reduce trade restrictions between member countries.

Two basic concepts describe the process of international trade – the concept of specialization and the concept of economic interdependence.

The concept of specialization focuses on comparative advantage, when countries specialize in producing what they produce best. A nation’s comparative advantage is measured in relation to all of the goods and services the nation produces. By specializing in production, each nation can make the best use of its available resources.

Economic interdependence is another force which stimulates international trade. It means that the distribution of resources often gives a nation an absolute advantage in the production of a particular product. Absolute advantage means that using the same resources one nation can produce a product at a lower cost than a second nation.

Brazil, for example, enjoys an absolute advantage over the United States in coffee production. Brazil's resources – especially its land, climate and labor force let this country produce large quantities of coffee at a relatively low price compared to the costs for coffee production in the United States. Thus, it is to Brazil's advantage to export coffee to the United States.

The United States, on the other hand, enjoys an absolute advantage over Brazil in many other areas, particularly in the production of manufactured goods. The United States has natural resources, a highly skilled labor force and well-developed means of production for consumer and capital goods. Thus, it is to the advantage of the United States to export manufactured goods to Brazil.

Vocabulary: border – граница tariff (duty) – тариф (пошлина) quota – квота tax – налог measure – мера

restriction – ограничение comparative advantage – сравнительное преимущество absolute advantage – абсолютное преимущество to cost – стоить skilled – умелый