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I. Pre-reading task

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1. Definition of foreign trade. Tariffs in foreign trade. As we know, people have been trading since ancient times. In the global economy goods and services are exchanged across national boundaries in a process described as "international trade". Goods we purchase from abroad are known as imports. Those sold by us to foreign countries are exports.

Trade among nations takes place for the same reasons that it does within a nation: to obtain goods and services that a region could not produce itself, or to obtain them at a lower cost than they could be produced for at home. This is explained by the principle of comparative advantage, which states that as long as the opportunity costs to produce items differ between two nations, both will profit by specializing in those things that they produce most efficiently and exchanging their surpluses. Despite the many advantages of international trade, most nations have been erecting artificial barriers to the trade for ages. These barriers are usually in the form of tariffs or quotas. A tariff is a duty, or tax, on imports. There are two basic types of tariffs. Revenue Tariffs are levied as a way to raise money. Protective Tariffs are levied to protect a domestic industry from foreign competition. The goal is to make the foreign product more expensive then a similar item produced by a domestic producer. Then people will stop buying the foreign-made item and purchase its domestic counterpart. Restrictions on the numbers of certain specified goods that can enter the country from abroad are called quotas. Like protective tariffs, quotas limit the amount of foreign competition a protected industry will have to face.

2. Other devices affecting trade. There are a number of other devices that directly affect the free flow of trade among nations. One of these is export subsidy- a payment by a country to its exporters that enables them to sell their products abroad at a lower price than they could sell them for at home. Selling the same product for a lower price abroad than at home is called dumping.

Imports must be paid for in a currency that is acceptable to the seller. In order to facilitate these transactions, there is a market for the currencies of all trading nations. The selling price of one nation's currency in terms of the currencies of other nations is known as its "exchange rate". Exchange rates fluctuate in accordance with the laws of supply and demand.

When the value of a nation's currency is decreasing in terms of other currencies, its exports are likely to increase because they will be less expensive to people in foreign countries. Imports, in these circumstances are likely to decrease because foreign goods will become more expensive. When a nation's currency is appreciating in terms of other currencies, the opposite is likely to occur.

The balance of payments summarize the transactions that have been going on in international trade for a given period of time, usually one year. Economists look to the balance of payments for clues to future trends in the value of a nation's currency and other consequences of its foreign trade.

Дата добавления: 2014-10-15