II. For each question 1-4, mark one for the answer you choose.

1. A market system should deal with the problem of pollution because

A. consumers suffer from producers’ activities.

B. people have become acutely aware of the problem.

C. it should react to people’s interests.

2. The costs of pollution

A. are mostly suffered by society.

B. are borne by the polluter.

C. are personal costs of the factory owner.

3. People buy “green” products and “ozone-friendly” aerosols because

A. they are totally selfish.

B. they are aware of the damage they do to the ozone layer from their personal use of “non-friendly” goods.

C. being socially responsible they take into consideration the possible impact of their actions on other people.

4. A very unsuitable way of controlling pollution could be

A. encouraging people to buy more and more goods.

B. organizing “green thinking” propaganda.

C. relying on people’s being socially conscious.

III. The mistakes in the sentences below have been underlined. Write the corrections in the spaces provided.

1. Recently people became aware of the damage being done to the environment by pollution.

2. Personal costs may be quite insignificantly when the owner is deciding whether the factory is profitable.

3. People take into account the effect their actions have to themselves.

4. They like to do their own little bit, otherwise small, towards protecting the environment.

5. To rely on people’s conscious may be a very unsatisfactory method of controlling pollution.

1. _____________________________________________

2. _____________________________________________

3. _____________________________________________

4. _____________________________________________

5. _____________________________________________

Strategic trade theory

An argument for protection?

I. Read the text. Some parts of the text have been taken out. These extracts are listed below. Complete each gap with the appropriate extract. One sentence does not belong in any of the gaps.

a) Governments frequently adopt trade protection because it is an easy option politically.

b) These policies include quotas, exchange controls, import licensing, export taxes, tariffs.

c) Infra-industry occurs because of scale economies and consumer demand for diversity.

d) Reasons for restricting trade that have some validity in a world context include some arguments.

e) Although international trade can benefit the world as a whole, some countries will lose out until the gainers compensate the losers.

1. Lester Thurow is Dean of the Sloan School of management at the Massachusetts Institute of Technology (MIT). He is also one of the USA’s best-known and most articulate advocates of “managed trade”.

2. Thurow (and others) have been worried by the growing penetration of US markets by imports from Japan, Europe and many developing countries. Their response is to call for a carefully worked-out strategy of protection for US industries. ___ (1)

The strategic trade theory that they support argues that the real world is complex. It is wrong, they claim, to rely on free trade and existing comparative advantage. Particular industries will require particular policies of protection or promotion tailored to their particular needs: ___ (2)

3. Some industries will require protection against unfair competition from abroad – not just to protect the industries themselves, but also to protect the consumer from the oligopolistic power that the foreign companies will gain if they succeed in driving the domestic producers out of business.

• Other industries will need special support in the form of subsidies to enable them to modernize and compete effectively with imports.

• New industries may require protection to enable them to get established – to achieve economics of scale and build a comparative advantage.

• If a particular foreign country protects or promotes its own industries, it may be desirable to retaliate in order to persuade the country to change its mind.

4. Thurow claims that Japan has been following a policy of managed trade for years – and look how successful it has been!

5. But, despite the enthusiasm of the strategic trade theorists, their views have come in for concerted criticism from economic liberals. If the USA is protected from cheap Japanese imports, they claim, all that will be achieved is a huge increase in consumer prices. The car, steel, telecommunications and electrical goods industries might find their profits bolstered, but this is hardly likely to encourage them to be more efficient.

6. Another criticism of managed trade is the difficulty of identifying just which industries need protection, and how much and for how long. Governments do not have perfect knowledge. What is more, the political lobbyists from various interested groups are likely to use all sorts of tactics – legal and illegal – to persuade the government to look favourably on them. In the face of such pressure will the government remain “objective”? No, say the liberals. ___ (3)

7. So how do the strategic trade theorists reply? If it works for Japan, they say, it can work for the USA. What is needed is a change in attitudes. ___ (4) Rather than industry looking on the government as either an enemy to be outwitted or a potential benefactor to be wooed, and government looking on industry as a source of votes or tax revenues, both sides should try to develop a partnership – a partnership from which the whole country can gain.

8. But whether sensible, constructive managed trade is possible in the US democratic system, or the UK for that matter, is a highly debatable point. “Sensible” managed trade, say the liberals, is just pie in the sky.