《外贸英语》教学重点
1. Two main forces will be shaping the world in which development policy will be defined and implemented:
Globalization is the continuing integration of the countries of the world.
Localization is the desire for self-determination and the devolution of power.
2. At the end of the 20 th century, globalization has demonstrated that economic decision, wherever they are made in the world, must take international factors into account.
a. While the movement of goods, services, ideas, and capital across national borders is not new, its acceleration in the last decade marks a qualitative break with the past.
b. The world is no longer a collection of relatively autonomous neighborhoods that are only marginally connected and are generally immune to events in other neighborhoods.
c. Information and ideas can be accessed in all corners of the globe at the push of a button.
d. The international economic order is evolving into a highly integrated and electronically networked system.
3. At the same time, the forces of localization are tilting the balance of power within each country. Thus there are great demands for self-determination and the devolution of power.
There are a number of forms, including the replacement of authoritarian or single-party rule by multiparty politics, greater autonomy of subnational political units, and the involvement of community groups and nongovernmental organizations in governance.
4. At first glance, globalization and localization may look like countervailing forces, but in fact they often stem from the same source and reinforce each other.
For example, the same advances in information and communications technology that have been so important in the spread of global economic forces often allow local groups to bypass central authorities in the search for information, visibility, and even financing. Together, these global and local pressure are revolutionizing traditional forms of centralized governance and dramatically affecting development thinking.
5. Development economics: born after World War II, it came into being in an era when strong and autonomous states were the chief decision makers.
6. In order to manage the world's economy in the 21th century, new institutions will be needed at three levels: supranational, national and local.
Supranational: shaping and channeling the forces of globalization
National: learning which policies work well and which should be avoided for the purposes of macroeconomic stability.
Local: localization has made many central governments grant political, fiscal and administrative powers to local governments.
7. At the supranational level, some of the new institutions have been in place. They are the World Trade Organization (WTO), the Basle Accords, and the Montreal Protocol.
The three institutions affect respectively trade, banking systems and the release of ozone-depleting chemical agents worldwide. But the events of the 1980's and 1990's have shown that existing institutions are far from sufficient to address the economic and environmental issues of the future: many more are needed.
8. The purposes of these policies are to seek to moderate economic volatility through countercyclical macroeconomic actions designed to minimize the potential instability of capital flows; regulate the conduct of private agents; protect investors, depositors, and consumers; disclose the information necessary to assess risks and make prudent decisions; and provide social insurance to ride out temporary crises.
1. The statistical data show that the importance of international trade to the economic health and overall standard of living of a country has never been as clear as it is today.
2. The distribution of international trade:
a. In terms of major economic areas, the industrialized countries still dominate world trade, accounting for about 70 percent of world trade in recent years such as the European Union, the United States, Canada, Japan, Asia.
b. The major markets for all regions' exports are in North America, Western Europe, and Asia.
c. At the individual country level, the relative importance of Europe, North America, Japan, and East Asia is again quite evident. The largest world trader is the United States, followed by Germany. Japan, France, the United Kingdom, and Italy are the next largest.
The spectacular growth in the trade of Hong Kong, the Republic of Korea (South Korea), Taiwan, mainland China, and Singapore has also been noteworthy.
d. In terms of the commodity composition of world trade, trade in manufactured products accounts for 75 percent of international trade, with the remaining amount consisting of primary products.
3. What are primary products, manufactured products and final goods and services?
Primary products include agricultural products, forest products, aquatic products, raw materials, ores, metals fuels and food products etc.
Manufactured products include machinery, transport equipment, automotive products, chemicals, textiles, clothing and miscellaneous consumer goods.
Final goods and services are goods or services consumed by end-users or final consumption goods and services.
4. The current importance of trade in manufactures and declining importance of primary products are notable.
5. World trade focuses on merchandise trade and has ignored the trade in service. The rising importance of services in international trade should not be unexpected since the service category now accounts for the largest share of income and employment in many industrial countries including the United States.
6. Services generally include the following categories in the International Standard Industrial Classification (ISIC) system: wholesale and retail trade, restaurants and hotels, transport, storage, communications, financial services, insurance, real estate, business services, personal services, community services, social services, and government services.
7. Why is it important that guidelines for trade in services be established?
Because if the guidelines for trade in services are established, country restrictions on trade in services and information flows will not impede their movement and the benefits which occur because of them.
8. The relative size of trade is often measured by comparing the size of a country's exports with its gross domestic product. Increases in the export/ GDP ratio indicate that a higher percentage of the output of final goods and services produced within a country's borders is being sold abroad.
9. International trade network encompasses not only final consumption goods but also capital goods, intermediate goods, primary goods and commercial services.
10 The relative importance of exports has increased in almost all individual cases and for every country grouping where data are available. What does it mean?
This means not only that individual countries are experiencing the economic benefits that accompany the international exchange of goods and services but also that their own economic prosperity is dependent upon economic prosperity in the world as a whole. It also means that competition for markets is greater and that countries must be able to facilitate changes in their structure of production consistent with changes in relative production costs throughout the world.
11. In order to survive the competition for markets, which has become greater and greater, we must be able to facilitate changes in our structure of production from time to time.
1. The benefits produced along with import and export:
Import is creating competition for home-produced goods
Export is giving manufacturers a larger market for his products, so helping to reduce the unit cost.
To sum up, they are to keep prices in the home market down.
2. How commodities are graded?
1) One is that can be accurately graded: raw materials and some items of produce by standard contract terms, such as M.C., F.P.C.O., G.O. B., F.A.Q., G.M.Q.
2) The other is that cannot be accurately graded: tea, wool, certain spices, on a tale quale basis.
3. Spot goods and forward goods:
To buy spot goods is to buy for immediate delivery.
To buy forward goods is to buy for forward delivery/ forward contract.
4. Hedging operation
1) Why do manufacturers go in for hedging operation?
Because manufacturers have to quote firm prices for many months ahead, but they run the risk of having to buy their raw materials in six months' time at a price higher than that on which they based today's selling price. But they cannot afford to take immediate delivery of all the raw materials they will require over the next six months. It would lock up too much finance, and they would be at a disadvantage if the raw material price fell, and their competitors bought at the lower price.
2) The good of hedge contract/ buying or selling forward.
It can restrict the manufacturer's loss within very narrow limits by averaging out the cost of his raw materials for many months ahead. In other words, it insures him against violent fluctuations in the price of his raw materials.
5. The various channels for import and export dealing:
a. A manufacturer may sell direct to wholesalers and maintain his own traveling representatives, or set up his own offices or companies abroad.
b. He may sell to an export merchanting house. He has little financial risk for the merchant acts as a principal and pays for the goods himself. E.g., small firms are through merchanting houses.
c. He can appoint foreign agents, who will work on commission and may be stockists. A special type of commission agent is indent house. A buyer can place either a closed indent, naming the supplier, or an open indent that is agent chooses supplier.
d. Large firms have their own import and export departments.
6. Some of the agents and workers involved in the complex operations of world trade:
Clearing and forwarding agents, advertising agents, commercial attaches and other government officials, seamen, dockers, band officials, customs officers and all the workers who grow, mine, manufacture goods.
1. The significance of L/C
L/C is the most widely used instrument of international banking. It has had a long and successful history as a means of facilitating international trade, particularly during times of economic and political uncertainty.
2. The roles of L/C
To seller: it assures him of payment if he makes the agreed-upon shipment.
To buyer: it assures him that he is not required to pay until the seller ships the goods.
To sum up: it is a catalyst that provides the buyer and the seller with mutual protection in dealing with each other.
3. The process of issuing a L/C
1) In the contract, the buyer and seller arrange payment by L/C.
2) The buyer requests his bank to issue a L/C in favor of the seller. The bank is called issuing bank.
3) According to the content of application, issuing bank issues its L/C, then send to notifying bank.
4) After inspecting/verifying, notifying bank passes L/C to beneficiary/seller.
5) After the beneficiary inspects the L/C with the contract, he ships the goods as specified in L/C. As soon as it does, the seller assembles the documents promptly, prepares the draft drawn on the issuing bank and forwards them to the negotiating bank for payment. The negotiating bank examines the draft and documents upon receipts, to ensure that the documents conform to the L/C, then the bank pays the sight draft presented by the seller.
6) The negotiating bank sends the draft and documents to issuing bank, requiring repaying.
7) The issuing bank verifies the draft and documents making repaying to negotiating bank.
8) The issuing bank notifies the buyer that he must pay the bank in accordance with his application. After the payment has been completed, the bank releases the documents to the buyer. The buyer now has the B/L, which he can present to the shipping company to receive his goods.
4. The documentary requirements are made in application of buyer's: an invoice, a B/L, marine insurance, a packing list, a weight list, an inspection certificate, a certificate of origin.
5. Some phrases on the customary L/C:
1) full set: steamship companies issue more than one original B/L.
2) on board: which indicates that goods have actually been put on board the named vessel.
3) Ocean B/L: which confirms that the shipment is by sea.
4) To order shipper, blank endorsed: the title of the goods belongs to those who possess the B/L.
1. The importance of information
1) One kind of knowledge is we know where we can find information upon a subject.
2) Accurate and timely information is the most important ingredient for making decisions.
2. The history of the development of trade information.
1) Throughout most of the 18 th and 19 th century, the only method of communication was by word of mouth.
The time of correspondence relied on the sail of a ship or gallop of a horse.
In London the Royal Exchange and adjacent coffee houses were the main centers for discussion and the swapping of information.
2) In the middle of 19 th .century came the communication by electric telegraph, which was soon followed by the invention of telephone.
Difficulty was passed from the transmission of facts to interpretation of information.
Teleprinter services/ financial presses reported world trade.
3). In recent years, computers are used for analyzing information and for communication.
A major advantage of computerized system is that they are entirely objective and without emotion.
4). Now, fully computerized trading systems have come into being. In techniques, the conversations between computers, which can even involve low level decision-taking are possible.
1. All customers are important, but some are more important than others.
1) Being a customer can be baffling these days. Why?
Because these days companies have tried many new ways to sell customers their stuff. All these special services are baffling customers and they don't know what to buy.
2). What customers will be loyal ones? What is something companies desperately need?
Only happy customers will be loyal ones. Loyalty is something companies desperately need if they are to survive in today's difficult climate.
2. Competitors galore
Many companies find it more of a struggle than they did to win new customers and to keep those they already have. Why?
A. Competition
a. Competition has sprung up form all sorts of new directions in the past few frenetic years.
b. Competition will intensify as the downturn makes customers both pickier and more cautious.
c. The Internet has brought new competition into many established markets, and created some real new business models as well as the many bogus ones.
B. Information
a. The sheer quantity of information that now bombards customers makes it ever harder for even an established brand to maintain visibility , as well as terrifyingly expensive to build a new one.
b. The Internet also threatens old loyalties by giving customers a new way to search for what they want.
C. Cost
The arrival of new competitors and the spread of information have also raised the cost of acquiring new customers. It can cost three or four times as much to acquire a new customer as to make a repeat sale to an existing one.
3. Keep them happy
1) Companies have all sorts of expensive new electronic gadgetry at their disposal to help them manage their customers relationships: vast databases, fancy software for “mining” them, intranets and extranets.
2) To retain customers should start with trying to understand more about them, and then to work out what to do with the knowledge.
3) Companies should think more clearly about the information they collect.
4) Firms should know why they want information and then collect it sensibly and thoughtfully and skillfully use data.
5) Durable customer relations mainly require relentless attention to the following: good products, prompt service, well-trained staff with the power to do a little extra when they judge it right to do so.
1. The first 500 of the 21th century is loaded with firsts:
1) The first pure Internet company to make the list: AOL appears at No.337;
2) The list's first biotech concern: Amgen weighs in at No. 463;
3) The first woman CEO of a top fortune 500 company, Carly Fiorina, makes her debut at the helm of No. 13, Hewlett-Packard.
2. The year 1999 was a successful year for the Fortune 500 companies/they enjoyed a career year.
Proof: 1) Revenues grew 10.2% for the 500 as a whole in 1999, well above 1998's 4% rate.
2) Profits leaped 28.7%, compared with a 1.8% decline in 1998.
3. Some characteristics of the Fortune 500 companies:
1) The fastest growth in the 500, as in the economy at large, belongs to representatives of the new economy.
2) The use of Internet benefits many of the Fortune 500 companies. Technology is giving companies more enthusiasm for beneficial result, lowering costs and fattening margins.
a. The benefits of the Internet explosion weren't limited to technology companies.
b. The companies of the 500 that get the Net are way ahead of their less Net-savvy rivals.
c. The Internet is not the only technology that counts.
3) The boom in mergers and acquisitions continued apace in 1999. This is because companies need global scale to have global production.
Example 1: Exxon's merger with Mobil
Example 2: Bankers Trust and Transamerica were swallowed up by European financial giants
Example 3: SBC's acquisition of Ameritech
Example 4: AT&T's acquisition of cable giant Telecommunications Inc.
Example 5: Qwest is acquiring US West
Example 6: MCI Worldcom buys sprint
4) An even more notable trend has been the seemingly unstoppable bull market. In 1999, earnings for securities companies in the 500 jumped a stunning 50%.
e.g. Goldman Sachs Group
5) The network communications industry is in a period of dramatic growth in importance to industry worldwide.
4. We can expect to see much more firsts in future 500s.
1. The example of Haier
It is well known in its home market for its innovative goods: washer, TV
The company just bought a historic bank building in New York City, complete with Corinthian columns, which will serve as Haier's new U.S. headquarters to replace its former one in midtown Manhattan.
2. The China boom
China boom means China's surging economy, its astounding economic growth (8 percent annually), it's mesmerizing consumer market (1.2 billion people), the investment ardor of foreign suitors ($40 billion in foreign direct investment last year alone).
3. China's foreign trade over the last 20 years:
No country has expanded its foreign trade as fast as China over the last 20 years. Japan doubled its foreign trade over 20-year period; China's foreign trade as quintupled. They've become the pre-eminent producer of labor-intensive manufacturing goods in the world.
4. There has been something missing from the dazzling China growth story--- the Chinese multinational. No major Chinese companies have yet established themselves, or their brands, on the global stage.
5. Aided by foreign alliance, Chinese firms are becoming international players. Haier, the leading appliance maker in China, is a good example, which shows things are starting to change. After 100 years of poverty and chaos, of being overshadowed by foreign countries and multinationals, Chinese industrial companies are starting to make a mark on the world.
6. A new generation of large and credible firms has emerged in China in the electronics, appliance and even high-tech sectors.
Some have reached critical mass on the mainland and are now seeking new outlets for their production--- through exports and by building Chinese factories abroad.
7. China's investment abroad is soaring ----- that's a big change. Why?
Because China has long had more of a trading mentality than an overseas-investment mentality. Now China has paid more attention to overseas-investment than only exporting her products.
8. The threat of China to other countries and areas:
ASEAN economies
Taiwan
Vietnam and Indonesia
Singapore
9. The challenges China is facing to build national companies:
1) Chinese firms have to achieve the managerial and operational expertise of Western and Japanese multinationals. For one thing, many of its best companies are still at least partially state-owned. What's more, China has a shortage of managerial talent and little notion of marketing and brand-building.
2) They have to get rid of the country's long tradition of central planning, inefficient use of capital and antiquated distribution system.
3) Local and provincial governments own many firms and use them, in many cases, as employment centers. They tend to resist mergers or sell-offs to similar companies.
10. But anyway, the Chinese are coming.
One reason is that Beijing is obsessed with building a strong domestic IT sector and insists that foreign firms share technology with their mainland partners. In this way, Chinese firms can learn how to make some fairly sophisticated products and how to manage and operate their business.
11. The current Chinese products: many Chinese products could pass for leading international brands, but others are clearly not up to current standards in industrial design or quality.
12. Chinese companies will have more and more outstanding ones and will certainly break into the Fortune 500 in the near future.
1. Introduction
1) The Treaty of Rome:
More than 45 years ago, six European countries --- France, West Germany, Italy, Belgium, the Netherlands and Luxembourg--- signed a treaty in Rome. They decided to unite and to form an international economic union in the hope of getting rid of the control politically and economically by the superpower then, and commanding a larger share in the world market. Ten months later, the founding of the union was declared.
2) At present, the European Union members are: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom.
3) The significance of the E.U.
In 1996, their combined GDP amounted to 6,742 billion ECUs, roughly 1.17 times that of the USA and 1.8 times that of Japan, the other two large economic blocs in the world. With a total population of 373 million, as against 265 million for the USA and 125 million for Japan, the European Union is the largest economic entity in the world.
4) The European Union has adopted a range of active and effective measures and strategies such as establishing a “free and single market”, adopting common competition policies, providing exchange rate stability, etc.
2. A free and single market
1) The overall objective of the EU:
To promote a harmonious development of economic growth and to accelerate increase of welfare and standard of living in its member states.
2) The ways of the Union to plan to reach the objective:
Such an objective could be reached in different ways. However, the Union opted for the free market as its main instrument to achieve its goals in preference to planning or other state interventionist strategies.
WHY?
A large, free and competitive market is expected to create improved efficiency of production, more economies of scale, an optimal allocation of factors of production and to stimulate research and development.
3) The main tool for the achievement of a higher level of welfare: the establishment of a Common Market.
4) The basis of “the necessity of approximation of economic policies”:
The idea that harmonization of national policies is required to ensure fair competition and also avoid uncertainty in international trade relations.
e.g.: Different tax systems create unequal production costs and profit opportunities and hence discriminate between the producers of different Member States. The same applies to subsidies, environmental policies, social security policies health and safety standards and quality control.
5) Competition in the internal market will be encouraged by:
a. the removal of entrance barriers erected by national frontiers;
b. the opening up of national public procurement markets;
c. elimination or reduction of national monopolies;
d. market deregulation and liberalization, for instance in the area of financial markets.
3. Common Policies
In order to create a more competitive environment, the EU has adopted a relative strict system of competition rules.
These rules forbid: restrictive agreements and practices of firms; the abuse of a dominant position by firms; national government aid to business.
The effects of agreements such as price-fixing, market-sharing, production restrictions and exclusive purchase and distribution on competition:
They are not in favor of competition, because all these agreements will undoubtedly affect the fair competition.
4. Monetary Policy
1) The urgent call for a stable monetary policy especially after the collapse of a fixed exchange rate system: widely fluctuating currencies have a negative impact on international trade, and they make international transactions more risky.
2) After some earlier attempts to reach a common arrangement, the European Monetary System (EMS) came into force in 1979.
3) The central rates are calculated on the basis of the European Currency Unit (EUC), a basket consisting of fixed quantities of all EU currencies.
4) The criteria on which the quantities of each specific currency in European Currency Unit is fixed: the quantities of each specific currency in the basket depend on the economic weight of the country concerned in terms of (among others) GDP and intra-EU trade.
5) Measure could be taken to prevent a currency from crossing its limits set by the fluctuation margins: if a currency is inclined to cross its limits set by the margins, the Central Banks of the Member States could intervene in the currency markets by means of buying (weak) and selling (strong) currencies.
6) In case of a persistent upwards or downwards pressure on a currency, caused by economic fundamentals, it may be decided collectively to devalue or revalue a currency by changing the ECU central rate.
1. The significance of transnational corporations, especially the very large global corporations, lies mainly in three basic characteristics:
a. its control of economic activities in more than one country;
b. its ability to take advantage of geographical differences between countries and regions in factor endowments (including government policies);
c. its geographical flexibility, that is, its ability to shift its resources and operations between locations at a global scale.
2. The factors which can mould the changing shape of the global economic system:
TNCs' decision to invest or not to invest in particular geographical locations and the resulting flows of materials, components and finished products as well as of technological and organizational expertise between geographically dispersed operations are all the factors which can mould the changing shape of the global economic system.
3. Transnational corporations got their start in the early part of this century. The development of international trade is closely associated with the growth of TNCs. They are so powerful that they handle about 40 percent of the world trade now. Although the relative importance of TNCs varies considerably --- from industry to industry, form country to country and between different parts of the same country --- there are few parts of the world in which TNC influence, whether direct or indirect, is not important.
4. How to define a transnational corporation usually?
People usually define a TNC in terms of its ownership of overseas assets and activities, where such ownership confers control over the overseas operation. This is the definition used in all national statistical sources.
There are many ways ---direct and indirect, financial and non-financial ---in which a business may be regarded as transnational in its activities, behavior and influence on national and local economies.
5. A more satisfactory and more comprehensive definition of a transnational corporation is that suggested by Cowling and Sugden:
A transnational is the means of co-ordinating production from one center of strategic decision making when this co-ordination takes a firm across national boundaries.
The conventional image of the TNC tends to be narrow and stereotyped. A broader definition of this kind is necessary to capture the increasing diversity in the forms of international involvement used by business firms. Many of these forms do not involve ownership or equity relationships but are, rather, various forms of collaboration between legally independent firms in different countries.
6. In trying to obtain an idea of the general growth and spread of TNCs we have to use the foreign direct investment data collected (very unevenly) by national governments.
7. TNCs are responsible for a disproportionate share of world employment, production and trade. Therefore, we say TNCs are an increasingly dominant force in world trade. WHY?
Because TNCs have a large share of world production. Between one-fifth and one-quarter of total world production in the world's market economies is performed by them. Such a large share of world production, together with the geographical extensiveness of their operations----their “global reach” makes them an increasingly dominant force in world trade.
8. An increasing proportion of world trade in manufactures in intra-firm, rather than inter-national trade.
Intra-firm trade is trade that takes place between parts of the same firm but across national boundaries. Unlike the kind of trade assumed in international trade theory, intra-firm trade does not take place on an “arm's length” basis. It is, therefore, not subject to external market prices but to the internal decisions of TNCs.
9. The trade of basic economic models:
The trade of basic economic models is a kind of trade in which buyers and sellers interact freely with one another (in reasonably competitive markets) to establish the volume and prices of traded goods.
10. International trade is increasingly managed by multinational corporations as part of their systems of international production and distribution.
11. There is evidence that can suggest the very important proportion of world trade which is carried on within the boundaries of TNCs. For example, more than 50 percent of the total trade (exports and imports) of both the United States and Japan consists of trade conducted within TNCs. Possibly as much as four-fifths of the United Kingdom's manufactured exports are flows of intra-firm trade either within UK enterprise with foreign affiliates or within foreign-controlled enterprises with operations in the United Kingdom.
12. Mention of the term “transnational” or “multinational” enterprise immediately evokes the picture of a gargantuan organization---- an IBM or an ICI, a Unilever or a Philips, a General Electric or a Ford---- whose activities encircle the globe and penetrate its remotest reaches. Such TNCs are, indeed, the dominant forces in the world economy. They are broadly equivalent in economic terms to some entire nations.
As Benson and Lloyd point out, of the 100 largest economic units in the world today, half are nation-states and the other half TNCs. In fact, only perhaps 4 or 5 percent of the total population of TNCs in the world can be regarded as truly global corporations.
13. The United Nations Center on Transnational Corporations (UNCTC) has identified a core of 600 transnational corporations in mining and manufacturing with annual sales of more than $1 billion in 1985.This “billion dollar club” created more than one-fifth of the total industrial and agricultural production in the world's market economies. Of the 600, a mere 74 TNCs accounted for 50 percent of the total sales.
1. The balance of international payments
1) Definition
It is a statistical classification and summary of all economic transactions between domestic and foreign residents over a stipulated period (ordinarily one year). It affords an overall view of its international economic position.
2) Dimensions/Elements
The residents of one country engage in a vast number and variety of transactions with residents of other countries---- exports and imports of merchandise and services, cash payments and receipts, gold flows, gift, loans and investments, and other transactions.
3) Significance
The balance of international payments gives a general picture of a country's international economic position. So it is directly related with a country's foreign trade. In the face of an unfavorable balance of payments, a country is most likely to impose or tighten foreign exchange control. Therefore, an international trader or investor, not to mention dealers in foreign exchange, should keep a close watch on the balance of payments of a country concerned.
4) People who are particularly concerned with the balance of payments: people working in government authorities----treasuries and central banks; domestic policy-makers; international traders and investors; dealers in foreign exchange.
5) Three principles underlying the compilation of B/P:
a. only economic transaction between domestic and foreign residents are entered in the B/P;
b. a distinction is made between debits and credit transactions;
c. it is a double-entry accounting statement.
2. The concept of residence:
1). Individuals who represent their government in foreign countries, including members of the armed forces, are always considered residents of their own country.
2). Individuals who do not represent a government are considered to be residents of that country in which they have a permanent residence.
3). A corporation is a resident of the country in which it is incorporated, but its foreign subsidiaries and branches are viewed as foreign residents.
3. International Transaction as Debits and Credits
Debit transactions: those that involve payments by domestic residents to foreign residents.
Credit transactions: those that involve receipts by domestic residents from foreign residents.
4. Double-Entry Accounting
1). The B/P is a double-entry accounting statement in which total debits and credits are always equal. Look at the example in the textbook.
2). The main items in a country's B/P: current account, capital account, official reserve account.
1. Foreign trade and foreign exchange trading are twins in international business. They are interdependent and interwoven. A qualified foreign trade worker must be familiar with the knowledge of foreign exchange trading. Otherwise, he or she will find himself (herself) handicapped in work.
2. The history of the development of foreign exchange trading
1 st phase: (before 19 th century) Most trade was based on gold.
The Greeks and Romans used gold as a medium of exchange.
2 nd phase: (19 th C.---before World War I, After World War I---1971) the gold standard system
The governments introduced a par value of their respective local currencies in gold. The gold standard system determined the value of all currencies based on gold.
3 rd phase: (1944---1960s/70s) the system of fixed exchange rate
1944 Bretton Woods Agreement: all member countries could express the value of their currencies in gold. Central banks were required to intervene in the foreign exchange markets to keep the value of their currencies within 1 percent of the par value. A given currency could never rise above or fall below the intervention points.
4 th phase: (after 70s) a floating exchange rate system/snake
Reserving the fixed-rated system but allowed a widening of the intervention points to within 2.25 percent of the par value of the currencies.
3. The nature of foreign exchange market
It is the mechanism through which foreign currencies are traded. It is not an actual market-place but a system of telephone and telex communications between banks, customers, and middlemen.
1. The generalization of two organizations
Both are the two most important institutions in international finance.
The World Bank: formed to provide sound long-term loans for reconstruction and development projects
The International Monetary Fund: concerned with short-term credit to countries having trouble in international payment balance and the cooperative management of foreign exchange rates.
2. The International Bank for reconstruction and development
1) Definition of the World Bank:
The lending nations subscribe towards its capital stock in proportion to their economic importance. The Bank can use its capital to make international loans to people or countries whose projects seem economically sound but who cannot get private loans at reasonably low interest rates.
2) The importance of the World Bank:
More than the loans it can make out of its capital, it can float bonds and use the proceeds to make loans. The bonds are safe because they are backed by the credit of all the nations. Also, the Bank can insure loans in return for a small premium; private parties can then put up the money, knowing the Bank's credit is squarely behind the loan.
3) The situations of the loans:
a. If sound, these loans will be repaid in full.
b. If some go sour, the loss will be paid out of the Bank's interest or premium earnings.
c. If still more go sour, the loss will be spread over all the member nations.
4). The financial success of the Bank.
Decidedly. Since 1960s, the Bank has stepped up the scale of its activities sharply. An increasing proportion of its financing now goes through the International Development Agency, set up by the Bank to make “soft loans” to nations for education, roads, hospitals, etc; and through its International Finance Corporation, established to make loans to foreign development banks for financing private investment projects.
For the 1980s, McNamara has shifted the Bank's focus toward a concern for the very poorest in the developing countries. The best private commercial banks, by their nature, cannot have such a concern for human hunger and disease, for minimum life standards and the mitigation of mitigation of inequality of opportunity and position.
3. The International Monetary Fund
1) The hope of the IMF
a. It hoped to secure the advantages of the gold standard (stable) without its disadvantages: 1) envisaging exchange rates to be relatively stable to unpeg parities that represented clear under valuation or overvaluation by orderly ways; 2) International cooperation was to replace the previous automatic mechanism; 3) countries were to be spared the need to make adjustments by painfully deflating themselves into drastic unemployment.
b. It still hopes to lessen the need for import controls.
2) The operation of IMF
An example of UK: buy IMF's dollars using British currency, after improvement of B/P, buy back with gold or dollars.
3) The trying of IMF
Keep exchange rates pegged most of the time. But it failed: pegged exchange rates were replaced by a system of “managed floating-exchange rates”.
1. The prosperity of Japan's sogo shosha
1) For more than one century, the shosha have been the major force behind the country's foreign trade.
a. They are middlemen of Japan, moving goods from one end of the globe to the other.
b. They handle 3/4 of Japan's imports, half its exports and 40% of its domestic sales---fully 3% of the whole world's trade in 1984.
c. With more than 1200 branches overseas, many firms are Japan's most visible international emissaries, acting as cultural go-between to the outside world.
2) Acting as agents for Japan, they imported foreign culture, knowledge and ideas. At the same time, the shosha protected Japan's budding markets from inroads by foreign competitors. And after World War II, the shosha led Japan's push into international trade, scouring the world for business partners.
3) Trading is only one source of shosha income; ever since the high economic growth days of the 1960s and 1970s, they have been making loans and stock purchases---- and earning far more than the profits from imports and exports.
2. Grim future of shosha
Now the shosha are in trouble. Their profits are shrinking, their share prices are slumping.
1) They are suffering fro a structural malaise.
a. close too much Japan's sunset industries.
b. beside Japan's high-tech entrepreneurs, their bureaucracies are cumbersome.
c. a telecommunication revolution threatens to end their monopoly on global information services.
d. the margin on sales has dropped more than 30% in last 5 years.
2) In the 1950s and 1960s, the shosha misread the market for automobile and electronics and decided not to act as middlemen. This vacuum was filled by Japan's manufacturers, which can sell their products directly.
3) The shosha were left to trade mainly in raw materials and semi-finished goods, but neither field is lucrative.
4) Now even the investment side is turning sour.
5) Their strongest suit--- elaborate communication networks are also in serious trouble. Under new law, the Japanese companies can trade through computers and which may lessen their need for middlemen to perform such functions for them.
3. The ways to solve problems
1) reduce 20% personnel
2) diversify into a plethora of new fields
a. earning non trade income from leasing aircraft, ships and robots, etc.
b. other traders have stepped up third country transactions to avoid protectionist pressures in key market.
3) hire large umbers of science and engineering graduates to expand their high-tech divisions.
4) forge ties with a cavalcade of high-growth companies and turning to far-flung parts of the developing world for new markets.
I. A Prelude
1. The World Trade Organization(WTO) came into being in 1995, the successor to the General Agreement on Tariffs and Trade (GATT) established in the wake of the Second World War.
The object of the WTO is to establish a complete, more active and permanent multilateral trading system to consolidate the efforts made by the GATT for trade liberalization and all achievements in multilateral trade negotiations in the Uruguay Round. The formal establishment of the World Trade Organization and its replacement of the GATT signify a new age of the trade and economic cooperation between nations. From the GATT to the WTO, a system for settling trade disputes and a set of multinational trading rules which are broader and more complete have been established.
2. The past 50 years have seen an exceptional growth in world trade.
Merchandise exports grew on average by 6% annually.
Total trade in 1997 was 14 times the level of 1950.
GATT and WTO have helped to create a strong and prosperous trading system contributing to unprecedented growth.
3. The system was developed through a series of trade negotiations, or rounds, held under GATT. The first rounds dealt mainly with tariff reductions but later negotiations included other areas such as anti-dumping and non-tariff measures. The latest round ---- the 1986-1994 Uruguay Round --- led to the WTO's creation.
4. The negotiations did not end there. Some continued after the end of the Uruguay Round. In February 1997 agreement was reached on telecommunications services, with 69 governments agreeing to wide-ranging liberalization measures that went beyond those agreed in the Uruguay Round.
In the same year 40 governments successfully concluded negotiations for tariff-free trade in information technology products, and 70 members concluded a financial services deal covering more than 95% of trade in banking, insurance securities and financial information.
5. The Doha WTO meeting
November 2001, Doha, Qatar, a new round of talks to open markets was agreed upon. Trade ministers from more than 140 member countries of WTO agreed to launch a new series of talks to liberalize global commerce, aiming to lift millions from poverty and boost the world's tottering economy.
II. An exercise in compromise
One example: India, a vocal defender of its national interest, settled for a statement explicitly acknowledging its reservations about opening talks on competition codes, investment rules and other areas it fears would put poor countries at a disadvantage.
Another example: France. To get an agreement, nations had to swallow politically painful compromises. France eventually dropped its fierce opposition to language pointing to the eventual abolition of agricultural export subsidies dear to Europe's politically potent farmers. France settled for the addition of a deftly drafted caveat that the outcome of the talks would not be pre-judged.
One problem still unsolved---a second failure for ministers:
The problem was the spawning bilateral trade deals and mutually hostile regional blocs, which ministers feared would have hobbled international trade growth.
The outcome of new trade round will affect the world economy: it will affect the price and availability of goods in shops around the world. Millions of workers could lose their jobs, and millions of others could find work.
Also November 2001, Doha, Qatar, China was welcomed into WTO. The end of China's long quest to join the WTO will inevitably make a widespread and far-reaching impact on the country's economy and on the world economy. China's WTO membership is expected to promote the country's own reform, opening-up and economic development, boost confidence in the global economic growth and secure the development of the multilateral trade mechanism.
Principle 1 “Being responsible sometimes means pissing people off.”
Good leadership involves responsibility to the welfare of the group, which means that some people will get angry at your actions and decisions.
By procrastinating on the difficult choices, by trying not to get anyone mad, and by treating everyone equally “nicely” regardless of their contributions, you'll simply ensure that the only people you'll wind up angering are the most creative and productive people in the organization.
Principle 2 The day soldiers stop bring you their problems is the day you have stopped leading them. They have either lost confidence that you can help them or concluded that you do not care. Either case is a failure of leadership.
The majority of CEOs would fail. Why?
One, they build so many barriers to upward communication that the very idea of someone lower in the hierarchy looking up to the leader for help is ludicrous. Two, the corporate culture they foster often defines asking for help as weakness or failure, so people cover up their gaps, and organization suffers accordingly.
Real leaders make themselves accessible and available. They show concern for the efforts and challenges faced by underlings, even as they demand high standards. Accordingly, they are more likely to create an environment where problems analysis replaces blame.
Principle 3 Don't be buffaloed by experts and elites. Experts often possess more data than judgment. Elites can become so inbred that they produce hemophiliacs who bleed to death as soon as they are nicked by the real world.
As companies get bigger, they often forget who “brought them to the dance”: things like all-hands involvement, egalitarianism, informality, market intimacy, daring, risk, speed, agility.
Policies that emanate from ivory towers often have an adverse impact on the people out in the field who are fighting the wars or bringing in the revenues. Why?
Because policy-makers are usually experts and elites or CEOs who have no longer produced or contributed to bottom-line results, so they may lack information or are not familiar with what happens in the grass-root units.
Real leaders are vigilant, and combative, in the face of these trends.
Principle 4 Don't be afraid to challenge the pros, even in their own backyard.
Learn from the pros, observe them, seek them out as mentors and partners. Even the pros may have leveled out in terms of their learning and skills. Sometimes even the pros can become complacent and lazy.
Leadership does not emerge from blind obedience to anyone. Good leadership encourages everyone's evolution.
Principle 5 Never neglect details. When everyone's mind is dulled or distracted the leader must be doubly vigilant.
Strategy equals execution.
Good leaders delegate and empower others liberally, but they pay attention to details, every day.
Bad ones, even those who fancy themselves as progressive “visionaries,” think they're somehow “above” operational details.
Good leaders understand something else: an obsessive routine in carrying out the details begets conformity and complacency, which in turn dulls everyone's mind. That is why even as they pay attention to details, they continually encourage people to challenge the process.
The Job of a leader is not to be the chief organizer, but the chief dis-organizer.
Principle 6 You don't know what you can get away with until you try.
Good leaders don't wait for official blessing to try things out. They're prudent, not reckless.
The moral is: don't ask.
Less effective middle managers endorsed the sentiment, “If I haven't explicitly been told ‘yes', I can't do it,” whereas the good ones believed, “If I haven't explicitly been told ‘no', I can.”
Principle 7 Keep looking below surface appearances. Don't shrink from doing so (just) because you might not like what you find.
“If it ain't broke, don't fix it” is the slogan of the complacent, the arrogant or the scared. It's an excuse for inaction, a call to non-arms. It's a mind-set that assumes or hopes that today's realities will continue tomorrow in a tidy, linear and predictable fashion.
Don't invest in these companies.
Principle 8 Organization doesn't really accomplish anything. Plans don't accomplish anything, either. Theories of management don't much matter. Endeavors succeed or fail because of the people involved. Only by attracting the best people will you accomplish great deeds.
In a brain-based economy, your best assets are people.
Leaders should endeavor to create an environment where the best, the brightest, the most creative are attracted, retained and most important, unleashed.
Principle 9 Organization charts and fancy titles count for next to nothing.
In well-run organizations, titles are also pretty meaningless. At best, they advertise some authority, an official status conferring the ability to give orders and induce obedience. But titles mean little in terms of real power, which is the capacity to influence and inspire.
The real power, also the real capacity to influence and inspire, is whether you possess pizzazz, drive, expertise and whether you really care for your teammates and your products.
Principle 10 Never let your ego get so close to your position that when your position goes, your ego goes with it.
Change is stifled by people who cling to familiar turfs and job descriptions.
Even large organizations wither. One reason is that managers won't challenge old, comfortable ways of doing things.
Real leaders understand that, nowadays, every one of our jobs is becoming obsolete. The proper response is to obsolete our activities before someone else does.
Effective leaders create a climate where people's worth is determined by their willingness to learn new skills and grab new responsibilities, thus perpetually reinventing their jobs.
The most important question in performance evaluation becomes “How much did you change your job?”