UNIT 1: INTERNATIONAL TRADE

I. Vocabulary
Match up these words and expressions with the definitions below
1. Trade in goods: visible trade (GB) or merchandise trade (US)
2. Trade in services (banking, insurance, tourism, and so on): invisible imports and exports
3. Direct exchanges of goods, without the use of money: alter or counter-trade
4. The difference between what a country receives and pays for its exports and imports of
goods: balance of payments
p ayments
5. The difference between a country’s total earnings from exports and  its total expenditure
on imports: balance of trade
6. The (impossible) situation in which a country is completely self – sufficient and has no
foreign trade: autarky
7. A positive balance of trade or payments: surplus
8. A negative balance of trade or payments: deficit
9. Selling goods abroad at (or below) cost price: dumping
10. Imposing trade barriers in order to restrict imports: protectionism
protectionism
11. Taxes charged on imports: tariffs
12. Quantitative limits on the import of particular products or commodities
c ommodities:: quotas.

1. K 2. H 3. L 4. D 5. G 6. A
7. F 8. B 9. E 10. M 11. I 12. C
II. Reading
Reading 1:Read
1:Read the text and answer the following
foll owing questions
1. Why do most economists oppose protectionism?
protectionism?
- Because they think protectionism would prevent countries from raisin their living
standard and income.
2. Why do most governments impose import tariffs and/or quotas?
- Improve balance of trade/payment
- Competing with foreign companies
- Protect strategy industries and infant industries
- Reduce a balance of payment deficit
- Protect against dumping
3. Why were many developing countries for a long time opposed to GATT?
- Because they would industrialize in order to counteract what they saw as a inevitable
fall in commodities pace and to protect the infant industries.
4. Why have many developing countries recently reduced protectionism and increased
their international trade?
- Because of IMF pressure on the obligation to export as much as possible and export
leads to growth.
 1. What are factors which help countries have an absolute or a comparative
advantage in producing goods?
 Factors of production, most importantly raw materials, but also labor and capital,
climate, economies of scales, and so on.
2. Why does the theory of comparative advantage seem not to explain the
international trade?
 Because it doesn’t explain why the majority of the exports of advanced industrialized
country go to other very similar countries.
3. What is infant industries?
 A recently developed one that has not yet grown to the point where it benefits from
economies of scale, and can
c an be internationally completive.
4. What is the advantage of tariff for government?
 Unlike quotas, they produce revenue.
5. What are the advantages of quotas in quantity of goods?
 Unlike tariffs, you know the maximum quantity of goods that will be imported
i mported

Reading 2:
1. What is a structure of production and trade of LCDs? What about MDCs?
- LDCs produce and export primary products and import manufactures goods,
intermediate inputs –  durable consumer goods, machinery, transport equipment,
chemical petroleum and so on, while MDCs export what LDCs import and import what
LDCs export.
2. Give three examples of the current reliance of LCDs on primary products for export.
- They were heavily dependent on the production and export of a limited range of primary
commodities (foodstuffs, fuels and industrial raw materials) going mainly to the
developed capitalist economy.
3. What are the arguments which suggest that there were no advantages to be gained by
LCDs from their structure of production and trade?
- Orthodox economists tended to argue that this structure of production and trade was
consistent with the LDCs’ comparative advantage and that they enjoy significant gains
from trade. The critics of this view, however, maintain that the gain from trade were
mostly more likely, for variety of reasons, to be appropriated by the developed capitalist
economies. The unequal exchange thesis espoused by some neo-Marxists, went further
and suggested that trade was actually carried out at the expense of the LDCs, producing
the condition of under development and poverty.
4. Give a definition of the net barter terms of trade.
- The commodity, or net barter, terms of trade are the ratio of the unit price of export to
the unit price of import and the deterioration in the index implies that a given volume of
exports is exchanged for a smaller volume of imports.
III. Exercises
2. Raw materials and goods = Commodities
3. Difference between total earnings from visible exports and total expenditure on visible
imports = Balance of trade
4. Difference between total earnings from all exports and total expenditure on all imports =
Balance of payments
5. Direct exchanges of goods without the use of money = Barter or counter-trade
6. The favoring of domestic industries = Protectionism
7. Inputs = Factors of production
8. Weather conditions = Climate
9. Specialization of work into different jobs = Division of labour
10. Savings in unit costs arising from large-scale production = Economies of scale
11. Taxes charged on imports = Tariffs
12. Restrictions on the quality of imports = Quotas
I E B A C K
H D F . G . M . L
Exercise 2:There is a logical connection among three of the four words in each of the
 following groups. Which is the odd one out, circle it and explain why?
1. Absolute advantage – barriers – comparative advantage – free trade
2.  Autarky – counter trade – invisible trade – visible trade
3. Balance – deficit – dumping – surplus
4. Banking – insurance – merchandise – tourism
5. Comparative advantage – protectionism – quotas – tariffs
6. Non-tariff barriers – normes – quotas – taxes
7. Barter – import substitution – infant industries – tariff barriers
8. Debt – reschedule – protect – subsidize – substitute
9. Liberalize – protect – subsidize – substitute
Exercise 3 :Complete the summary using the list of words, A-K, below.
1. Trade (G)
2. Components (B)
3. Container ships (C)
4. Tariffs (A)
Exercise 4: Which paragraph contains the following information? 
1. A suggestion for improving trade in the future
2. The effects of the introduction of electronic delivery
3. The similar cost involved in transporting a product from abroad or from a local supplier
4. The weakening relationship between the value of goods and the cost of their delivery
I F E D
Decide if these statements are true (T) or false (F) or not given (NG)
1. International trade is increasing at a greater rate than the world economy.
 T F NG T 5.NG
IV. Extension activities
1. Does your country have a trade surplus?
 Yes, in the last two years.
2. Does it have a balance of payments surplus or deficit?
 It has a balance of payments deficit.
3. What are its chief exports?
 Agricultural products, raw materials
4. Which industries or sectors are protected?
 Electricity, clear water, car manufacture.
5. Which do you think should be protected?
 Infant industries
6. Give example of Vietnam, which can apply the theory of comparative advantage in
importing and exporting?
 Vietnam has comparative advantage in producing rice compared to many countries.
Shoes and foot wear products need a huge number of labour which is abundant in
Vietnam, so our industry has a comparative advantage.
7. Does Vietnam gain or loss from trade? Give your explanation.
 Vietnam gains from trade, because we have comparative advantage of agricultural
products to export.
UNIT 2: FOREIGN DIRECT INVESTMENT
I. Vocabulary
1. Define foreign portfolio investment . How does it differ from foreign direct investment ?
 Foreign Portfolio Investment (FPI)  is the purchase of shares andlong-term debt
obligations form a foreign entity. Portfolio investor do not aim to take control of a
corporation. They can liquidate their investment at market value anytime.
Compared with FDI:
Foreign Direct Investment (FDI)  is the establishment of a plant or distribution
network abroad. Investors can acquire part or all of the equity of an existing foreign
corporation either to control or share control over sales, production, and research and
development.
FPI FDI

Method Gainpart or all of ‘equity’, Buying house’s

of an foreign company debentures

Controlling or sharing Seeking profit from

Aim investment
control

Long-term commitment or Liquidate the

Liquidity
cannot withdraw the investment any time
 2. Foreign direct investment decisions are normally based on clear business strategies.
Name at least three categories that companies are looking for.
 The categories are: raw materials, markets, product efficiency, know- how,…
3. Give some examples of investment incentives. What are they supposed to achieve?
 Examples of investment incentives are: cash grants, lower taxes, accelerated
depreciation, training allowance,…  They are supposed to attract foreign investment.
4. What is non-exclusive distributor called? What does this mean?
 It is called multiple-distributor, which means a sales agent who represents for more than
one manufacturer.
5. What are royalty payments?
 It is payment made by a foreign manufacturer to a company that has licensed the
manufacturer to produce its products.
6. Define joint venture.
 It is a subsidiary formed by more than one corporation.
II. Reading
1. When foreign direct investors acquire a company, what do they normally seek to
control?
 They normally seek to control over production, R&D, sales,…
2. In considering foreigninvestment, what is an MNC’s first strategic objective?
 Their first strategic objective is the market for its present or future products. In addition,
they are also raw materials, product efficiency and know-how.
3. What are some financial considerations in making a foreign direct investment?
 They are: interest rates, cash flow projection, sources of working capital …
4. When is a foreign project said to be viable? What is a nonviable project?
 A foreign project is said to be viable when it has a availably reliable access to outside
financing, while a non-viable project has a lower rate of return compared to the project
in the host country.
5. Name two kinds of legislation that foreign investor study closely prior to making an
investment?
 They are: antitrust legislation and labor laws.
6. Why are investment incentives highest in a depressed area?
 Because these areas need to attract foreign investment to solve the problems like low-
income and living standard or unemployment.
7. When a corporation starts to export for the first time, how will it organize its sales?
 It will usually engage distributors who receive a commission on products sold.
8. What is a drawback of licensing or authorizing foreign distribution?
 The drawback of licensing or authorizing foreign distribution is that manufacturer gives
up the control over their product so if licensed product lacks quality, the exporter’s
reputation suffers.
 6. The seller presents the documents to his or her bankers (the advising bank). The
advising bank examines these documents against the details of the letter of credit and
the International Chamber of Commerce rules.
7. If the documents are in order, the advising bank sends them to the issuing bank for
payment or acceptance. If the details are not correct, the advising bank tells the seller
and waits for corrected documents or further instructions.
8. The issuing bank (the bu yer’s bank) examines the documents from the advising bank. If
they are in order, the bank releases the documents to the buyer, pays the money
promised or agrees to pay it in the future, and advises the buyer about the payment. (If
the details are not correct, the issuing bank contacts the buyer for authorization to pay
or accept the documents.) The buyer collects the goods.
9. The issuing bank advises the advising (or confirming) bank that the payment has been
made.
10. The advising/confirming bank pays the seller and notifies him or her that the
payments has been made.
III. Exercises
Exercise 1:Information search
Match the risks (a-g) with the payment methods.
1. Open account
2. Documentary
3. Bills for collection
4. Advance
a) Exporters must comply with the conditions of the credit documents.
b) Importers may delay payment.
c) Importers may not pay at all.
d) It takes a long time to process payment in some countries.
e) Importers may not accept the bill of exchange.
f) Bank charges may be high.
g) Exporters must take care to present the correct documents.
c, b, d a, d, g b, c, d, f f
Exercise 2:Complete the sentence
1. The first step the exporter takes is to ask his bank to draw  a bill of exchange on the
overseas buyer.
2. The exporter’s bank forwardsthe bill of exchange, together with the commercial
documents, to the importer’s bank.
3. At the same time, the exporterdispatchesthe goods.
4. The exporter must take care topresent the correct documents to the bank.
5. When the importeracceptsthe bill of exchange, the bank will releasethe documents of
title to the goods.
I. Vocabulary
Match the terms with their definition.
1. Distribution channel: All the companies or individuals involved in moving a particular
good or service from the producer to the consumer.
2. To launch a product: To introduce a new product onto the market.
3. Market opportunities: Possibilities of filling unsatisfied needs in sectors in which a
company can profitably produce goods or services.
4. Market research: Collecting, analyzing and reporting data relevant to a specific market
situation (such as a proposed new product).
5. Market segmentation: Dividing a market into instinct group of buyers who have different
requirements or buying habit.
6. Packaging: Wrappers and containers in which product are sold.
7. Point of sale: Places where goods are sold to the public – shops, stores, kiosks, market,
stalls, etc.
8. Product concept: An idea for a new product, which is tested with target consumers
before the actual product is developed.
9. Product feature: Attributes or characteristics of a product: quality, price, reliability, etc.
10. Sales representative: Someone who contacts existing and potential customers and
tries to persuade them to buy goods or services.
A I F H D
J E B C . G
II. Exercises
Exercise 1:Categorize the following aspects of marketing according to the well-known
“4P’s” classification of the marketing mix.
Product Optional features, after-sale service, line  –   filling, packaging, brand
name, sizes, characteristics, quality, guarantee, style.
Inventory, credit terms, market penetrations, going  –   rate, list price,
Price market skimming, payment period, prestige pricing, cash discount,
 production costs, quantity discounts.
Advertising, commercials, franchising, public relations, free sample,
Promotion  poster, publicity, sponsorship, mailing, media plan, personal selling.
Place Point of sales, transportation, rending machines, ware housing
distribution channels, wholesaling.
Exercise 2:Complete the eight sentences below, by adding an example from the second box.
1. Conversional marketing is the difficult task of reversing negative demand, eg. for dental
work, or hiring disable people.
2. Stimulation marketing is necessary where there’s no demand,  which often happens with
new products and services.
3. Developmental marketing involves developing a product or service for which there is
5. Synchro-marketinginvolves altering the times pattern of irregular demand, eg. for public
transport between rush hours, or for ski resorts in the summer.
6. Maintenance marketing is a matter of retaining a current (may be full) level of demand,
eg. for churches, inner city areas, or ageing film stars.
7. De-marketing is the attempt (by governments rather than private businesses) to reduce
overfull demand, permanently or temporarily, eg. for some roads and bridges during
rush hours.
8. Counter-marketing is the attempt to destroy unwholesome demand for products that are
considered undesirable, eg. cigarettes, drugs, handguns, or extremist political parties.
f h a g
e c d b
Exercise 3:Match up these marketing actions with the eight tasks described above
i. Alter the pattern of demand through flexible pricing, promotion, and other incentives.
j. Connect the benefits of the product with people’s needs and interests.
k. Find new target markets, change product features, develop more effective
communication.
l. Find out why people dislike the product, and redesign it, lower prices, and use more
positive promotion.
m. Increase prices, reduce availability, make people scared.
n. Keep up or improve quality and continually measure consumer satisfaction.
o. Measure the size of the potential market and develop the goods and services that will
satisfy it.
p. Raise prices, reduce promotion and the level of service.
l g o k
i n p m
Exercise 4:Complete the text with the words in the box 
The classic product life cycle is Introduction, Growth, Maturity and Decline. In the
Introduction stage the product is promoted to create awareness. It has low sales and
will still be making a loss. If the product has few competitors, a skimming price strategy
can be used (a high price for early adopterswhich is then gradually lowered). In the
Growth phase sales are rising rapidly and profits are high. However, competitors are
attracted to the market with similar offerings. The market is characterized by alliances,
joint ventures and takeovers.  Advertising budgets are large and focus on building the
brand.
In the Maturity phase sales growth slows and then stabilizes. Producers attempt to
differentiate productsand brands are key to this. Price wars and competition occur as
the market reaches saturation. In the Decline phase there is a downturn in the market.
The product is starting to look old-fashioned or consumer tasteshave changed. There is
intense price-cutting and many products are withdrawn from the market .
 1. Disputes only arise in commercial transactions.
2. Commodities are things traders buy and sell, usually raw materials, like coffee, wool or
copper.
3. A neutral forum has a balanced composition to ensure fairness to both parties.
4. New York is the only American arbitration venue named in the text.
5. Arbitration is a business in itself, for lawyers and their associates.
6. Name recognition for arbitration is like brand awareness for consumer goods.
7. International business depends on rapid resolution of contractual disagreements.
8. The courts of law in each country are less powerful than arbitration panels.
F T T T T T T F
II. Exercise
Exercise 1:Match these terms with their definitions
1. Dispute resolution: Settling disagreements
2. A money-spinner: Something that makes profits for everyone
3. Have recourse to the courts: Reverse something already decided
4. Home-team advantage: Benefit from being local or on home ground
5. Local bias: Unfair treatment
6. Financial crisis: Serious money problems
7. Delaying tactics: Ways of making things take a long time
8. Speed things up: Accelerate
9. Interfere: Meddle or get involved with
10. Overturn decisions: Become operational
11. Take steps: Institute action
12. Come into force: Make use of the legal system
d h c f a k
i b g . j . l . e
Exercise 2:Terms of disagreement and dispute
Use an appropriate word or phrase to complete each sentence.
1. There is a serious problem we must try to resolve.
2. He was a distinguish lawyer who was an expert arbitrator.
3. The process took far longer than the parties had expected arbitration.
4. This was due to the delaying tactics employed by one of the companies involved.
5. The question is: how are we going to arbitratethis dilemma?
6. When the goods arrived in poor condition, a disputearose over whose fault this was, and
who should bear the cost.
7. The best way is not to go to court, which is public and costly, but to settlean agreement.
8. I believe you are wrong on that point – we disagree on the interpretation.
9. There is always an answer if you try hard to find it: every difficulty has aresolution.
10. You cannot assume he will agree to those terms: you must check with him first.
3. The price was negotiated between the buyer and thesellerof the house, in a private sale.
4. The bank agreed that the borrower should pay 12% on the loan, so the lender made a
fair profit!
5. Manufacturers sell their goods towholesaler and in turn, retailerbuy from them.
6. The relationship between a lawyer and client is bound by confidentially.
7. The beer can be produced under license but the licensee  must fulfill all the
requirements imposed by the licensor.
8. Some clothes companies sell their products on a franchise basis: each country has a main
franchiser, with numerous people working as franchisees.
9. A letter was sent to the manager complaining about working conditions. All the
members wrote their names. The letter read: ‘We, the undersigned  strongly protest
about conditions at work’.
10. Many projects require the cooperation of various partners. If they all agree to work
together, they become parties to the agreement .