Import export

International trade is the exchange of goods and services between different countries.

Depending on what a country produces and needs, it can export (send goods to another country) and import (bring in goods from another country)

In most countries import export represents a significant share of GDP

Governments can control international trade. The most common measures are tariffs (or duties) and quotas.

A tariff is a tax on imported goods, and a quota is the maximum quantity of a product allowed into a country during a certain period of time.

These measures are protectionist as they raise the price of imported goods to protect domestically produced goods.

International organisations such as the WTO (World Trade Organisation) and EFTA (European Free Trade Association) regulate tariffs and reduce trade restrictions between member countries.

Companies have a choice:

They can choose from various methods to establish their products in a foreign market.

One option is to start by working with local experts such as sole agents or multi-distributors, who have a specialist knowledge of the market and sell on behalf of the company.

This often leads to the company opening a local branch or sales office.

Another option is to sell, or give permission to use, patents and licences for their products.

They may wish to start by manufacturing in the export market, in which case they can either set up a local subsidiary or a joint venture with a local partner.

A country’s balance of trade is the difference between the values of its imports and exports. This includes visible imports / exports (goods) and invisible imports / exports (services). If a country imports more than it exports, it has a trade deficit. If it exports more than it imports, it has a trade surplus.

How does international trade work?

Rich countries produce goods and want to sell them at a profit. To protect their profits, they place high taxes on goods imported from other countries (unless they have a special trade agreement).

Poor countries also produce goods and want to sell them at a profit. However, in order to export their goods to other countries they are forced to pay high taxes before they can sell them. This makes the price of their goods very expensive and so they do not sell.

Rich countries need raw materials to produce their goods. Raw materials are cheap as they are not a finished product that consumers will want to buy. Many poor countries have the raw materials that rich countries need. So, rich countries buy these cheap raw materials and turn them into expensive desirable products such as clothes and sell these at a huge profit. For example, shoes costing a few pounds to make could be sold for 60 pounds in shops. The producers of the raw materials would have only seen a tiny percentage of this profit.

In poor countries the producers of raw materials are forced to sell at low prices by big companies. If their price is too high, the companies will simply go elsewhere. If producers want to sell their materials they have to sell at a low price.

Why don’t poor countries place high taxes on imports?

The simple answer is that they’re not allowed. Poor countries borrow money from international organisations.

Part of the deal on the loan is that they have to allow rich countries to export their goods to them-this is called “Free Trade”. It means that trade takes place freely to give the consumer the best deal.

It all about money. Small scale farmers and producers in poor countries simply can’t compete.

Compound adjectives

Commonly confused words

Adjectives can be formed by combining two words, for example long-term. Match these words to get adjectives: Environmentally Old Short Low Well High User

Fashioned Term Budget Known Friendly Level Trained

Complete these nouns with the correct adjectives from the last exercise:

1) _______ ________ packaging2) _______ ________ typewriter3) _______ ________ opportunities4) _______ ________ advertising5) _______ ________ personality6) _______ ________ decision-making7) _______ ________ software8) _______ ________ staff

Use the same adjectives to complete the following sentences:

1) This is just a ________ investment. We have other plans for the next year.

2) He is a _________ singer and now he is on tour in the Third world countries.

3) Fortunately, yours is a _________ plan. Maybe we’ll get the green light and get the money we need.

4) It is a _________ management problem. Only a few people will know all the details.

Commonly confused words: circle the correct word in italics:

1) Importers and exporters are constantly in contact seeking his advice/advise about the market.

2) This report examines the relationship/relation between education and the level of development in Africa.

3) Car manufacturers are developing more economic/economical engines and improved fuel systems to make their vehicles more efficient.

4) Austria and Finland were excepted/accepted into the European Union in 1995.

5) Of the two proposals put forward, I prefer the later/latter.

6) Who’s/Whose responsible for consumer affairs in this company?

7) I’ve added an appointment with Ms Diaz to you’re/your agenda.

8) The poor weather this summer will certainly effect/affect the grape harvest.

9) We attended a conference on the principles/principals of strategic management.

10) Our personnel/personal are given intensive language training before being assigned abroad.

11) The budget proposition/proposal was accepted unanimously.

12) When you are working in a foreign country you should conform to the business practises/practices of that culture.