自考商务英语文档书

自考商务英语文档书 Lesson 1 International Business 第一课 国际商务 *International business refers to transaction between parties from different countries. Sometimes business across the borders of different customs areas of the same country is also regarded as import and export, such as business between Hong Kong and Taiwan International business involves more factors and thus is more complicated than domestic business. The following are some major differences between the two. 1). The countries involved often have different legal systems, and one or more parties will have to adjust themselves to operate in compliance with the foreign law 2). Different counties usually use different currencies and the parties concerned will have to decide which currency to use and do everything necessary as regards conversion etc. Uncertainties and even risks are often involved in the use of a foreign currency 3).Cultural differences including language, customs, traditions, religion, value, behaviour etc. often constitute challenges and even traps for people engaged in international business. 4). Countries vary in natural and economic conditions and may have different policies towards foreign trade and investment, making international business more complex than domestic business With the development of economic globalisation, few people or companies can completely stay away from international business. Some knowledge in this respect is necessary both for the benefit of enterprises and personal advancement. International business first took the form of commodity trade, i.e. exporting and importing goods produced or manufactured in one country for consumption or resale in another. This form of trade is also referred to as visible trade. Later a different kind of trade in the form of transportation, communication, banking, insurance, consulting, information etc. gradually became more and more important. This type of trade is called invisible trade. Today, the contribution of service industries of the developed countries constitutes over 60% of their gross domestic products and account for an increasing proportion of world trade. Another important form of international business is supplying capital by residents of one country to another, known as international investments. Such investments can be classified into two categories. The first kind of investments, foreign direct 1 investments or FDI for short is made for returns through controlling the enterprises or assets invested in in a host country. The host country is a foreign country where the investor operates, while the country where the headquarters of the investor is located is called the home country. The second kind of investment, portfolio investment, refers to purchases of foreign financial assets for a purpose other than controlling. Such financial assets may be stocks, bonds or certificates of deposit Stocks are also called capital stocks or bonds. Bonds are papers issued by a government or a firm with promise to pay back the money lent or invested together with interest. The maturity period of a bond is at least one year, often longer, for example five, or even ten years. Certificates of deposit generally involve large amounts, say 25 thousand US dollars Besides trade and investment, international licensing and franchising are sometimes taken as a means of entering a foreign market. In licensing, a firm leases the right to use its intellectual property to a firm in another country. Such intellectual property may be trademarks, brand names, patents, copyrights or technology. Firms choose licensing because they do not have to make cash payments to start business, and can simply receive income in the form of royalty。 Franchising can be regarded as a special form of licensing. Under franchising, a firm, called the franchisee, is allowed to operate in the name of another, called the franchiser who provides the former with trademarks, brand names, logos, and operating techniques for royalty. In comparison with the relation between the licenser and the licensee, the franchiser has more control over and provides more support for the franchisee The franchiser can develop internationally and gain access to useful information about the local market with little risk and cost, and the franchisee can easily get into a business with established products or services. Franchising is fairly popular especially in hotel and restaurant business Other forms for participating in international business are management contract, contract manufacturing, and turnkey project. *Under a management contract, one company offers managerial or other specialized services to another within a particular period for a flat payment or a percentage of the relevant business volume. 2 Sometimes bonuses based on profitability or sales growth are also specified in management contracts Government policies often have a lot to do with management contracts. When a government forbids foreign ownership in certain industries it considers to be of strategic importance but lacks the expertise for operation, management contracts may be a practical choice enabling a foreign company to operate in the industry without owning the assets. By contract manufacturing, a firm can concentrate on their strongest part in the value chain, e.g. marketing, while contracting with foreign companies for the manufacture of their products. Such firms can reduce the amount of their resources devoted to manufacture and benefit from location advantages from production in host countries. However, loss of control over the production process may give rise to problems in respect of quality and time of delivery For an international turnkey project, a firm signs a contract with a foreign purchaser and undertakes all the designing, contracting and facility equipping before handing it over to the latter upon completion. Such projects are often large and complex and take a long period to complete. Payment for a turnkey project may be made at fixed total price or on a cost plus basis. The latter way of payment shifts the burden of possible additional cost over the original budget onto the purchaser BOT is a popular variant of the turnkey project where B stands for Build, O for operate and T for transfer. For a BOT project, a firm operate a facility for a period of time after building it up before finally transferring it to a foreign company. Making profit from operating the project for a period is the major difference between BOT and the common turnkey project. Needless to say, the contractor has to bear the financial and other risks that may occur in the period of operation Transaction n.交易 customs area 关税区 in compliance with 遵从，遵照 3 conversion n.货币兑换 visible trade 有形贸易 resale n.转售 invisible trade 无形贸易 gross domestic product 国内生产总值 for short 缩写为 accout for 占….比例 headquarters n.总部 trap n.陷阱，圈套 portfolio investment 证券投资 stocks n.股票 bonds n.债券 maturity n.(票据等)到期，到期日 certificate of deposit 大额存单 other than 而不是 licensing n.许可经营 franchising 购买 trademark n.商标 advisable adj.可行的，适当的 patent n.专利 royalty n.专利使用费，许可使用费，版税 copyright n.版权 4 licensor n.给予许可的人 licensee n.接受许可的人 franchiser n.给予特许的人 franchisee n.接受特许的人 logo n.标识，标记 management contract 管理合同 expertise n.专门知识 bonus n.红利，奖金，津贴 flat adj.一律的，无变动的 contract manufacturing 承包生产 value chain 价值链 turnkey project 交钥匙工程 BOT(Build, Operate, Transfer) 建设，经营，移交 Stand for 示，代表 variant n.变形，变体 Lesson two Income Level and the World Market 第二课 收入水平和世界市场 This lesson discusses the relation between the income level and the market potential, and the features of high income, middle income and low income markets.Special analyses are made on Triad, i.e. the markets of North America, 5 European Union and Japan, as well as other markets that are closely related with China. The first two paragraphs mainly deal with GNP and GDP, two important concepts used to indicate the total size of an economy. GDP, Gross Domestic Product, stresses the place of production while GNP, Gross National Product, on the ownership of production factors. GDP is used by most countries now where as GNP was more popular before the 1990s. The actual figures of a country’s GNP and GDP are, however, quite similar in most cases and we can use whichever figure that is available. TEXT: In assessing the potential of a market, people often look at its income level since it provides clues about the purchasing power of its residents. The concepts national income and national product have roughly the same value and can be used interchangeably if our interest is in their sum total which is measured as the market value of the total output of goods and services of an economy in a given period, usually a year. The difference is only in their emphasis. The former stresses the income generated by turning out the products while the latter, the value of the products 6 themselves. Gross National Product, GNP, and Gross Domestic Product, GDP, are two important concepts used to indicate a country’s total income. GNP refers to the market value of goods and services produced by the property and labor owned by the residents of an economy. This term was used by most governments before the 1990s. GDP measures the market value of all goods and services produced within the geographic area of an economy. It has been preferred by most countries since the 1990s. The difference between GNP and GDP is that the former focuses on ownership of the factors of production while the latter concentrates on the place where production takes place. For example, the dividend returned by the subsidiary of Microsoft in China is included in the US GNP but not in its GDP. And the production of the same subsidiary is included in China’s GDP but not in its GNP. The difference between GNP and GDP can be ignored since it is very small in most cases. People can use whichever term that is more easily available and they can compare a country’s GNP and another country’s GDP without worrying that the result would be terribly distorted. For instance, in 1996, the US GNP was 7637.7 billion US Dollars and its GDP was 7636 billion US Dollars, a difference of only 0.02%. And in 1999, China’s GNP was 8042.28 billion yuan Renminbi and its GDP was 8191.09 billion yuan, with a 7 difference of 1.8%, still insignificant though larger than the US figure. The third paragraph tells us the significance of per capita income in assessing a market. The figure shows the average income level of an economy and is therefore important for marketing consumer durables. TEXT: In assessing the potential of a country as a market, people often look at per capita income. Similar to the case of national income and national product, per capita income and per capita GDP do not have much difference. So let’s use per capita GDP to illustrate an economy’s income level. It is calculated by dividing its total GDP by its population. Total GDP indicates the overall size of an economy, which is important in market assessment for durable equipment or bulk goods such as grain, steel, or cement. Percapita GDP reveals the average income level of consumers, which is important when marketing consumer durables. For example, China has a large GDP of roughly USD1.4 trillion in 2003, being the seventh largest economy in the world. If adjusted by PPP, the figure would probably be as large as USD6.4 trillion, accounting for 12% of the world’s total and ranking the second only after the USA 8 So China is not only a newly emerging producer but also an important newly emerging market. Though $1000 per capita income is believed by experts to be the level at which consumerism begins to emerge, the thChinese figure is still rather low, ranking only the 111 in the world. In contrast, Singapore has a GDP of roughly a bit over $100 billion, but a per capita income as high as $32,810. Obviously China and Singapore represent two different kinds of market. The fourth paragraph deals with the income distribution of an economy. Different industries may be interested in the respective sizes of different sections of people such as the rich and the middle income. TEXT: Business people are also concerned about the income distribution of a market i.e. the proportions of its rich, middle income and poor people. Producers of quality electrical appliances such as color TVs are interested in the size of a country’s middle class, while manufacturers of expensive cars such as Rolls-Royces may want to know the number of its millionaires. Paragraphs 5-7 set the respective standard for high-income, middle-income and low-income countries with enumeration of the specific countries under each group. Brief accounts are also made of their respective roles in trade and 9 investment. TEXT: Countries of the world are divided by the World Bank into three categories of high-income, middle-income and low-income economies. Those enjoying annual per capita income of $9386 and above are classified as high-income countries. This group comprises three types of countries. The first type includes most members of the Organization for Economic Cooperation and Development (OECD). The second type are rich oil producing countries of the Middle East such as Kuwait Saudi Arabia, and the United Arab Emirates. The third type consists of small-industrialized countries or regions such as Israel, Singapore, Hong Kong and Taiwan. High-income countries often have good infrastructure, high purchasing power, advanced technology, efficient management, and favorable environment for trade and investment. They offer prime markets for expensive consumer goods and are both attractive sources and destinations of investment Countries with annual per capita income below $9,386 but above $765 are regarded as middle-income countries. Included in this category are most East European countries and most members of the Commonwealth of Independent States, six OECD members that are not up to the level of high income countries, quite a number of Latin 10 American countries and some comparatively developed countries in Asia, such as Indonesia, Malaysia, the Philippines, and Thailand. Among the African countries, South Africa and oil-producing Libya, Nigeria and Algeria belong to this category. China with a per capita income of over $1100 is a middle-income country though it was a low income country just a few years ago. Lower income countries are those that have per capita incomes of only $765 or even less. Most African countries, some Asian countries and a few Latin American countries are included in this group These countries usually have poor infrastructure, low consumer demand and unfavorable business environment. But that does not mean they should be neglected in international business activities, because they constitute markets for lower-priced staple goods, provide cheap labor and are often rich in resources. What is more important, market is something to be developed. Once tapped, the business potential of these countries will one day become real business opportunities Paragraphs 8 – 12 deal with Triad and its extension Quad. Those are the richest and most important markets in the world. The former refers to the United States, Western Europe and Japan, and the latter is an extension of Triad to include Canada. The economic and market conditions of 11 those regions are specified in the 5 paragraphs, hopefully to give the learners an overall picture of these markets. TEXT: The term Triad refers to the three richest regions of the world the United States, the European Union and Japan that offer the most important business opportunities. Any international enterprise must bear Triad in mind if they want to be successful in the increasingly competitive world market. With a per capita income of about ,30,000 The United States is the richest country in the Western Hemisphere. Though the per capita income of a few small countries like Switzerland is much higher than that of the United States, the overall size of the U.S economy of about ,10 trillion GDP, roughly a quarter of the world total, coupled with its political stability puts the country on a unique position in the world. It accounts for about 15% of world visible and invisible trade. The U.S. dollar is the invoicing currencyfor about half of the international transactions and is an important component of foreign currency reserves of the world.The United States has been regarded by many people as a safe haven who tend to keep their wealth in US dollar when they lose confidence in the value of their own currency. 12 And for many years the country remained the largest recipient of foreign investment. Over 160 of the world’s 500 largest corporations have their headquarters in the United States including 24 of the top 100. The country’s large middle class make it an attractive market for enterprises all around the globe. The second component of Triad is Western Europe that mainly refers to the European Union. With an average per capita income of over ,20,000, all the members before its eastward expansion are classified as high income countries Its total GDP of over 10 trillion US dollars is the largest, larger than that of the United States. Germany, France, Britain and Italy are the 4 richest, most populous and developed countries of EU. These countries are each an attractive market, and combined they constitute the largest rich market in the world. In the present intensely competing world, it is necessary and beneficial to diversify our major markets, and the importance of EU as one leg of Triad cannot be overstressed Japan is the third component of Triad and the second largest economy of the world. It is an important supplier of high-tech products and a major importer of raw materials. While exports have greatly spurred Japan’s development, trade only accounts for a relatively small proportion of its GDP. Japan remained a target of criticism for engaging in unfair trade practices. The large trade surplus has enabled 13 it to invest heavily abroad and for years it has been the largest creditor country of the world. With mutually complementary economy, Japan and China are major trade partners, and the two countries are close neighbours separated only by a strip of water. Sino-Japanese business relations are therefore of great importance to both countries. Some people extend the scope of Triad to include Canada and name the broadened grouping Quad. With the world’s second largest territory, Canada is rich in natural resources, and its export accounts for nearly 40% of its GDP. The percentage is much higher than those of other members of the Group of Seven and suffices to show the importance of trade to the country. Sharing a very long common border along which most of the Canadian people live, Canada and the United States, with their respective rich market, enjoy the largest single bilateral trade in the world Paragraph 13 briefs on other markets that China should pay particular attention to. And Paragraph 14 offers the policy for developing business opportunities TEXT: So far as China is concerned, other markets we should pay particular attention to are those around us: the Four Tigers, the ASEAN countries, Russia, India, and a bit farther away Australia. These 14 countries or regions either have rich consumers and offer good business opportunities or are developing fast with very promising market potential. And their geographical proximity to China is a great advantage for us in developing business relations with them. Despite the above observations, it does not mean we can neglect other markets. Different markets offer different opportunities and it is not a good idea to tie one’s business to only a few markets. The best policy is to develop business opportunities wherever advantageous while keeping in mind the key markets. Exercise : Answer the following questions: 1、Explain the concepts of GNP and GDP respectively and point out their major difference. Can we use them interchangeably? 2、What are meant by high income, middle income, and low income countries according to the World Bank? Cite some examples for each group. 3、Why are high income countries important to trade and investment? Should we neglect low income countries in international business? 4、In what different ways are GDP and per capita income significant in assessing the potential of a particular market? 15 5、Was China a low- income country a few years ago? How about now? 6、What does the term ―TRIAD‖ refer to? What is meant by QUAD? 7、How much do you know about OECD? Please make a brief account. 8、What is the best policy for China to develop business opportunities? Fill in each of the following blanks with an appropriate word: In late 1978 the Chinese leadership began moving the economy from a s________, inefficient, Soviet-style centrally planned economy to a more market-ori______ system. Whereas the system operates within a political framework of strict control, the economic influence of non-state organizations and individual citizens has been steadily increasing. The authorities switched to a system of household and village responsibility in agriculture in place of the old collect__________, increased the authority of local officials and plant managers in industry, permitted a wide variety of small-scale enterprises in services and light manufacturing, and opened the economy to increased foreign trade and investment. The result has been a qua_________ of GDP since 1978. Measured on a purchasing power parity (PPP) basis, China in 2003 stood as the second-largest economy in the world after the US, although in per capita terms the country is still poor. 16 Agriculture and industry have posted major g________ especially in coastal areas, where foreign investment has helped spur output of both domestic and export goods. The leadership, however, often has experienced bureaucracy and lassitude as well as growing income disparities and rising unemployment. China thus has periodically backtracked, retightening central c_________ at intervals. The government has struggled to (a) sustain adequate jobs growth for tens of millions of workers ________ off from state-owned enterprises, migrants, and new entrants to the work force; (b) reduce corruption and other economic crimes; and (c) keep afloat the large state-owned enterprises, many of which had been shielded from competition by subsidies and had been losing the ability to pay full wages and p_________. Another long-term threat to growth is the deterioration in the environment. China continues to lose arable land because of erosion and economic development. Beijing says it will intensify efforts to stimulate growth through spending on infrastructure - such as water supply and power grids - and poverty relief and through rural tax reform. Ac__________ to the World Trade Organization helps strengthen its ability to maintain strong growth rates but at the same time puts additional pressure on the hybrid system of strong political controls and growing market influences. China has benefited from a 17 huge expansion in computer in________ use. Foreign investment remains a strong element in China's remarkable economic growth. Translate the following passage into Chinese: Government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (1% of GDP) helped Japan advance with extraordinary rapidity to the rank of second most technologically-powerful economy in the world after the US and third-largest economy after the US and China. One notable characteristic of the economy is the working together of manufacturers, suppliers, and distributors in closely-knit groups called keiretsu. A second basic feature has been the guarantee of lifetime employment for a substantial portion of the urban labor force. Both features are now eroding. Industry, the most important sector of the economy, is heavily dependent on imported raw materials and fuels. The much smaller agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. Usually self-sufficient in rice, Japan must import about 50% of its requirements of other grain and fodder crops. Japan maintains one of the world's largest fishing fleets and accounts for nearly 15% of the global catch. For three decades overall real economic growth had been spectacular: a 10% average in the 1960s, a 5% average in the 1970s, and a 4% average in the 1980s. 18 Growth slowed markedly in the 1990s, averaging just 1.7%, largely because of the after-effects of over-investment during the late 1980s. Government efforts to revive economic growth have met with little success and were further hampered in 2000-2003 by the slowing of the US, European, and Asian economies. Japan's huge government debt, which totals more than 150% of GDP, and the aging of the population are two major long-run problems. Robotics constitutes a key long-term economic strength with Japan possessing 410,000 of the world's 720,000 "working robots." Government efforts to revive economic growth have met with little success and were further hampered in 2000-2003 by the slowing of the US, European, and Asian economies. Japan's huge government debt, which totals more than 150% of GDP, and the aging of the population are two major long-run problems. Robotics constitutes a key long-term economic strength with Japan possessing 410,000 of the world's 720,000 "working robots." Translate the following sentences into English: 1.国民生产总值和国内生产总值是表明一国收入的两个重要概念。 区别在于前者强调的是生产要素的所属权而后者着重于进行生产 的国家。 2.要估评某一市场的潜力，人们往往要其收入水平，因为它为 那里居民的购买力高低提供了线索。 19 3.世界各国被世界银行分为三大领域:高收入国家，中等收入国家 和低收入国家。 4.中国现在的年人均收入为1100美元以上，但几年前它还是个低 收入的国家。 5.就中国来说，周围还有其它应特别关注的市场，如亚洲四小虎， 东盟国家，俄罗斯等国，这些国家都具有前景看好的市场潜力，能 为中国提供很好的商机 Lesson 3 International Trade 国际贸易 TEXT International trade can be defined as the exchange of goods and services produced in one country with those produced in another.In the complex economic world, no country can be completely self-sufficient. The distribution of natural resources is uneven. Some countries are abundant in resources, while elsewhere reserves are scarce or even nonexistent.And a country may be rich in some resources but poor in others. For instance, Britain has large reserves of coal but lacks some metal reserves Kuwait has vast oil deposits but little farm produce. And Japan relies heavily on import for most of the primary commodities. That is the reason why international trade first began. 20 With the development of manufacturing and technology, there arose another incentive for trade, i.e. international specialization----one country producing more of a commodity than it uses itself and selling the remainder to other countries.Such specialization constitutes an important basis for international trade. Where there are no differences among countries in the basic capabilities at producing goods, other basis for trade among them may still exist. First, patterns of demand may differ among nations. For example, most consumers in one country may consider dog meat a delicacy, while in another country the consumption of dog meat is abhorrent. In this case the second country may sell its dog meat to the first country. Trade will be based not on differences in the production capabilities of the two countries but on different consumption preferences. Second, trade may occur out of economies of scale, that is, the cost advantages of large-scale production.For example, Country A and Country B may have the same capability in producing cars and computers, but the cost for the production of both commodities will decrease if the goods are produced on a large scale. Both countries might find it advantageous if each were to specialize completely in the production of one commodity and import the other. 21 Third, trade takes place because of innovation or style. Even though Country A produces enough cars at reasonable costs to meet its own demand and even to export some, it may still import cars from other countries for innovation or variety of style. In reality, however, complete specialization may never occur even when it is economically advantageous. For strategic or domestic reasons, a country may continue to produce goods for which it does not have an advantage. The benefits of specialization may also be affected by transport cost. Goods and raw materials have to be transported around the world and the cost of the transport reduces the benefit of trade. The case will be more serious with transporting bulky or perishable goods.Protectionist measures which are often taken by governments are also barriers to trade, and typical examples are tariffs and quotas. Tariff barriers are the most common form of trade restriction. A tariff is a tax levied on a commodity when it crosses the boundary of a customs area which usually coincides with the area of a country. A customs area extending beyond national boundaries to include two or more independent nations is called a customs union. Import duties are tariffs levied on goods entering an area while export duties are taxes levied on goods leaving an area 22 The former type is more common than the latter as most nations want to expand export and increase their foreign exchange earnings. Import duties may be either specific, or advalorem or a combination of the two--- compound duties. The term drawback refers to duties paid on imported goods that are refunded if the goods are re-exported. The term most- favored- nation (MFN) treatment refers to a tariff treatment under which a country is required to extend to all signatories any tariff concessions granted to any participating country.However, MFN treatment is not really special but is just normal trading status. Quotas or quantitative restrictions are the most common form of non-tariff barriers. A quota limits the imports or exports of a commodity during a given period of time. The limits may be in quantity or value terms, and quotas may be on a country basis or global, without reference to countries. They may be imposed unilaterally and can also be negotiated on a so-called voluntary basis. Obviously, exporting countries do not readily agree to limit their sales. Thus, the ―voluntary‖ label generally means that the importing country has threatened to impose even worse restrictions if voluntary cooperation is not forthcoming In addition to visible trade, which involves the import and export of goods, there is also invisible trade, which involves the exchange of services between countries. 23 Transportation service across national boundaries is an important kind of invisible trade. International transportation involves different means of transport such as ocean ships, planes, trains, trucks and inland water vessels. However, the most important of them is maritime ships. When an exporter arranges shipment, he generally books space in the cargo compartment of a ship, or charter a whole vessel. Some countries such as Greece and Norway have large maritime fleets and earn a lot by way of this invisible trade. Insurance is another important kind of invisible trade. In the course of transportation, a cargo is vulnerable to many risks such as collision, pilferage, fire, storm, explosion, and even war.Goods being transported in international trade must be insured against loss or damage. Large insurance companies provide service for international trade and earn fees for insuring other nation’s foreign trade. Tourism is yet another important form of invisible trade. Many countries may have beautiful scenery, wonderful attractions, places of historical interest, or merely a mild and sunny climate. These countries attract large numbers of tourists, who spend money for traveling, hotel accommodations, meals, taxis, and so on. Some countries depend heavily on tourism for their foreign 24 exchange earnings, and many countries are making great efforts to develop their tourism. The fourth type of invisible trade meriting attention is called immigrant remittance. This refers to the money sent back to home countries by people working in a foreign land. Import and export of labor service may be undertaken by individuals, or organized by companies or even by states. And this is becoming an important kind of invisible trade for some countries. Invisible trade can be as important to some countries as visible trade is to others. In reality, the kind of trade nations engage in are varied and complex, often a mixture of visible and invisible trade. Exercises: 1.Answer the following questions: 1.How would you define international trade? 2.Why did international trade first begin? 3.What is the new incentive for trade that arose with the development of manufacturing and technology? 4.Are there other bases for trade when there are no differences among countries in production conditions? Mention some of the bases 5.What is economy of scale? What is the relation between economy of scale and trade? 25 6. What does the theory of international specialization seek to answer? 7.Will complete specialization occur in reality? Why? 8.What is meant by tariff barriers? What is a customs area and what is a customs union? 9.What is most favored nation treatment? Is it a very special treatment? Why? 10.What is the most common form of non-tariff barriers? Explain it in a few words. 11.What are the differences between visible trade and invisible trade? Give a few examples of invisible trade 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) The key development to watch_______ trade is the relationship______ the industrialized and the developing nations. Third world countries export their mineral deposits and agricultural produce, w_____ bring them desired foreign ex_____. Tourism has also been greatly responsible _______ the rapid development of some developing nations. World nations w______ high unemployment and l_______ wages have seen an emigration of workers to the de______ nations. Western Europe has received millions _______ such workers from Mediterranean countries. The developing countries pr______ when 26 these workers bring their savings and their acquired technical skills b______ home. Many developing countries benefit when Western nations establish manufacturing in their countries to take ad______ of cheap labor. 3.Translate the following passage into Chinese: MFN means most-favored –nation which is a tariff treatment. It is bilaterally given and provides for the lowest tariff in the tariff code. It is important to understand that the term most –favored –nation gives the impression that the tariffs involved are the lowest, it is in fact not the case. MFN is not really special but is just normal trading status GSP ( generalized system of preferences) establishes even lower tariffs than MFN. As a matter of fact the United States has granted MFN status to all but a few countries. MFN only gives a country the lowest tariffs in the tariffs schedule, but it is still possible to have lower tariffs. Nevertheless, it is important to have MFN since the difference between MFN tariff and the general tariff is very big. For instance one of the largest Chinese export items to the United States is toys. And the tariff on a toy doll is only 6% if a country has MFN, whereas the tariff is as high as 70%, more than ten times greater without MFN. It is quite obvious that there would be a sharp drop in Chinese exports to the United States should China lose its MFN status, and it would have a serious impact on the Chinese economy 27 4.Translate the following sentences into English: 1.一件商品的成本会因生产规模扩大而减少。 2.在实际中，即使完全的专业化在经济上有利，也可能永远不会发 生。 3.配额或者数量限制是最常见的非关税壁垒。 4.有形贸易指货物的进出口贸易，而无形贸易涉及的是国家间的劳 务交换。 5.国家从事的贸易种类是多样的、复杂的，往往是有形贸易和无形 贸易的混合。 Lesson 4 International Payment 国际贸易中的支付 TEXT Generally speaking, it is not very difficult for buyers and sellers in domestic trade to get to know each other’s financial status and other information, and payment is likely to be made in a straightforward manner, say by remittance or by debiting the debtor’s account. In international trade, however, things are far more complicated. Purchase and sale of goods and services are carried out beyond national boundaries, which makes it rather difficult for the parties concerned in the transaction to get adequate information about each other’s financial standing and creditworthiness. Therefore, mutual 28 trust is hard to build. Both the exporter and importer face risks as there is always the possibility that the other party may not fulfill the contract. For the exporter there is the risk of buyer default. The importer might fail to pay in full for the goods. He might go bankrupt. His government might, for various reasons, ban trade with the exporting country or ban imports of certain commodities. The buyer might run into difficulties getting the foreign exchange to pay for the goods. It is even possible that the buyer is not reliable and simply refuses to pay the agreed amount on various excuses On the part of the importer, there is the risk that the shipment will be delayed, and he might only receive them long after payment. The delay may be caused by problems in production or transportation, and such delays may lead to loss of business. There is also a risk that wrong goods might be sent as a result of negligence of the exporter or simply because of his lack of integrity Political risks such as war, quotas, foreign exchange control; commercial risks like market change and exchange rate fluctuations; and even language barriers all add up to the problems in international trade. Because of these problems and risks, exporters are hesitant to release their goods before receiving payment, while importers prefer to have control over the goods before parting with their money 29 Various methods of payment have been developed to cope with different situations in international trade. When the political and economic situation in the importing country makes payment uncertain or when the buyer’s credit standing is dubious, the exporter may prefer cash in advance or partial cash in advance. In this case, the importer has no guarantee that the exporter will fulfill his obligations once he has made payment by cash. If the buyer and the seller know each other well, they may decide to trade on open account. This means that no documents are involved and that legally the buyer can pay anytime. The seller loses all control over the goods once they have been shipped. Sales on this basis are usually paid for by periodic payment, and obviously the exporter must have sufficient financial strength to carry the cost of the goods until receiving payment. If the exporter wishes to retain title or ownership to the goods, he can enter into consignment transactions. This means the exporter has to send his goods abroad and will not get payment until the goods are sold. If not sold, the goods can be shipped back.. Therefore, this arrangement should only be made with full understanding of the risks involved and is preferably to be limited to stable countries where the exporter has a trusted agent to look after his interest. A lot of international transactions are paid for by means of the draft, which, also referred to as the bill of exchange, is an 30 unconditional order to a bank or a customer to pay a sum of money to someone on demand or at a fixed time in the future.The person who draws the draft, usually the exporter, is called the drawer, and the person to whom the draft is drawn is called the drawee There is yet another party payee, i.e. the person receiving the payment, who and the drawer are generally but not necessarily the same person, as the drawer can instruct the drawee either to pay ―to the order of ourselves‖ or to the order of someone else, for instance, the bank. A draft is either a sight draft or a usance draft (also called tenor draft or term draft). The former calls for immediate payment on presentation to the drawee while the latter is payable at a later date, e.g. 30, 45, 60, or 90 days after sight or date. A draft is either clean (without documents) or documentary. In the latter case, the draft is accompanied by the relevant documents such as the bill of lading, the invoice, the insurance policy etc. In documentary collection, the exporter sends the draft and the shipping documents representing title to the goods to his bank, which forwards them to another bank in the importer’s country, which in turn contacts the customer. In the case of documents against payment (D/P), documents will not be released to the importer until payment is effected. There are D/P at sight and D/P after sight The former 31 requires immediate payment by the importer to get hold of the documents. The latter gives the importer a certain period after presentation of the documents, but documents are not released to him until he actually pays for the merchandise. In the case of documents against acceptance (D/A), documents are handed over to the importer upon his acceptance of the bill of exchange drawn by the exporter. Payment will not be made until a later date. D/A is always after sight So far as the exporter’s interest is concerned, D/P at sight is more favorable than D/P after sight, and D/P is more favorable than D/A. In actual trade, payment by collection should be accepted with discretion. It is usually used when the financial standing of the importer is sound, or when the exporter wishes to push the sale of his goods, or when the transaction involves only a small quantity. Otherwise, the letter of credit is generally preferred Exercises: 1.Answer the following questions: 1. Why is it difficult to effect payment in a straight-forward manner in international trade? 2. Mention some of the risks the exporter and the importer may face in trade. 3.Explain briefly the following methods of payment: cash in advance; open account; consignment transactions. 32 4.What is a draft? Does it have another name? What are the relevant parties in relation to a draft ? 5.What is the difference between a sight draft and a usance draft and what is the difference between a clean draft and a documentary draft? 6.What is meant by documents against payment? What are D/P at sight and D/P after sight? Which is more favorable for the exporter? When does the importer get the shipping documents in the case of D/P after sight? 7.What is the difference between D/A and D/P after sight? Which is safer for the exporter? 8.Is payment by collection very common in international trade? Mention some cases when collection is used. 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) How does an exporter know if the customer can afford to pay_______ the goods? The credit- worthiness of a customer, and ______ some cases, of his country, is often difficult to assess. The ordinary credit report, which may be sufficient for home sales is usually not en_____ when considering credit terms in an export market . E______ the most willing and credit worthy customer cannot complete payment if his country runs i_____ foreign exchange 33 difficulties and imposes restrictions u_______ payment abroad. Recently most countries have exercised foreign exchange ______. The bank of China is the leading authorized bank dea_____ in foreign exchanges and implementing the regulations on foreign exchange control. In these circumstances there can______ delays in settlement or even a complete loss which might happen if the government policy regarding foreign exchange control changes abruptly in t_____ of economic recession. So the economic, financial and political situation in the country t______ is importing the goods must be t_____ into account before credit is extended abroad 3.Translate the following passage into Chinese: Documentary collection is a means of ensuring that the goods are only handed over to the buyer when the amount shown on a bill of exchange is paid or when the customer accepts the bill as a contract to pay by a specified date. The exporter send the bill of exchange and the shipping documents to his bank, which forwards them to a bank in the customer’s country. This bank, or the exporter’s agents in the country concerned, takes the documents to the customer. If it is a sight bill the customer pays the amount directly. If it is a time bill he signs the bill, which means he has ―accepted‖ it for payment within a certain specified time. In return for either payment or 34 acceptance of payment, the customer is handed the shipping documents which give title to the goods. The customer now has authority to collect the goods, which may already have arrived at the port of destination. The customer’s bank forwards the money, which it has received, to the exporter’s bank, which pays the exporter for the goods. the customer is handed the shipping documents which give title to the goods. The customer now has authority to collect the goods, which may already have arrived at the port of destination. The customer’s bank forwards the money, which it has received, to the exporter’s bank, which pays the exporter for the goods. 4.Translate the following sentences into English: 1.国际贸易中进出口双方都面临风险，因为总存在对方不履约的可 能。 2.为处理国际贸易中的不同形势，各种支付方法便发展了起来。 3.许多国际交易是通过汇票支付的， 汇票是对银行或顾客的支付 命令。 4.即期付款交单要求进口商立即付款以取得单据。 5.就出口商而言，即期付款交单比远期付款交单有利，付款交单比 承兑交单有利。 Lesson 5 Regional Economic Integration 35 区域经济一体化 Text The past decades witnessed growing importance of regional economic integration. To better enjoy the benefit of tree flow of goods, services, capital, labour and other resources, countries have signed various agreements to liberalize trade among themselves while possibly putting up barriers to economic activities with non-members. Regional economic integration falls under four types given below in the order from least to most integrative: The first and loosest form is the free trade area. Members of a free trade area removes barriers to the flow of goods and services among themselves while each member still adopts its own policy as regards to trade with outsiders. In other words different members may have different tariff rates or quota restrictions. Consequently, non-member countries may take advantage of this situation and try to enter the market of the area from the member country with the lowest barrier before selling the goods to a member with a higher barrier. The most notable free trade area is the North American Free Trade Agreement (NAFTA), the largest free market formed by the United States, Canada and Mexico in 1991 with over 360 million consumers and a total GDP of more than 6 trillion US dollars. 36 The second form is the Customs Union that goes a step further by adopting the same trade policy for all the members toward countries outside their organization in addition to abolishing trade barriers among themselves. Since imports from other countries are subject to the same tariff no matter which member they export to, it is impossible for non-members to get into the market of the customs union in a detour as they possibly do in the case of trade with a free trade area. Such an example is Mercosur formed by Argentina, Brazil, Paraguay and Uruguay in 1991. The common market is further up the scale of regional economic integration. Besides free movement of goods and services and adoption of common external trade policy, factors of production such as labour, capital and technology are free to move among members so that they can be utilized in a more efficient and productive way. The overall benefit enjoyed by all the members as a whole is quite obvious, but it is hard to say individual members will always benefit, still less to expect them to enjoy the advantage of factor mobility to the same degree.In the past, the European Community remained a common market for some years The highest form of economic integration is called the economic union which is characterized by integration of the domestic policies of its members in respect of economy, finance etc. in addition to absence 37 of trade barriers, practice of common external policy and free production factor mobility. The members of an Economic Union are required not only to harmonize their taxation, government expenditure, industry policies , etc, but also use the same currency。With the adoption of the single European currency euro by most members of the EU, we can say it is well on its way towards the realization of an economic union. It can be seen that the member countries of an economic union are required to surrender some of their national sovereignty, which is eroding the tradition of the world political system based on the autonomy and supreme power of sovereign states So people begin to talk about a still higher form of integration —— the political union, members of which will not only be integrated economically, but also harmonize their foreign policy and national defence. With that realized, the members would more or less come together and form a new political entity. The European Union is so far the most prominent example of regional economic integration in the world. Its history dates back to the early post-war years. The first community, the European Coal and Steel Community (ECSC) was established in 1952 which set the stage for more ambitious integration efforts 38 The signing of the monumental Treaty of Rome in 1957 marks the establishment of the European Economic Community with the aim of gradually realizing the free movement of goods, services, labor and capital as well as the integration of economic policies of the member countries. Ten years later in 1967, the European Community was formed by merging EEC, ECSC and the European Atomic Energy Community (EURATOM). 1992 was a landmark year in the development of the EC when it became a true common market as envisaged by the Single European Act . Then on January 1, 1994 the European Union (EU) came into beingon the strength of the Maastricht Treaty. By then EU had 12 members including the six signatories of the Treaty of Rome. France, Germany, Italy, the Benelux countries and six other countries that joined later. (Britain, Island and Denmark in 1973, Greece in 1981, Spain and Portugal in 1986). The membership increased to 15 with the participation of Austria, Finland and Sweden in 1995. From the beginning of 1999 most of the members began to use the common European currency for accounting and settlement and in 2002, euro banknotes and coins were put into circulation The European Union is a full-fledged entity.Its executive body is the European Commission composed of 20 commissioners 39 overseeing 23 departments in charge of different affairs. Though appointed by member governments, the commissioners are responsible to the Union instead of their home country. The most powerful institution of the EU is the Council of Ministers. It has the final say on all important matters. Decisions of the council are made by votes allocated to member countries on the basis of their size. Different ministers attend the council meetings depending on the matters discussed. The council even has the power to pass legislation, which is quite different from the case of all the major countries of the world. The European Parliament, despite the title, is but an advisory body with limited power. However, it is empowered to veto EU membership application and trade agreements with non-members. And it is believed the European Parliament will be more powerful in the future. The successful integration of European economies eliminated the cost of cross-border transactions, realized better economies of scale and made the European companies more efficient through more intense competition. The European Union has become an economic rival of the United States. Its total GDP has exceeded that of the American country.And though still a long way to go towards political union, the EU members 40 have begun to harmonize their foreign and security policies. It is no exaggeration to say EU will play an important role in the multi-polarization of the world. Asia-Pacific Economic Co-operation (APEC) has caught more and more attention for the past decade, especially in China since the country is playing an active role in it. APEC was set up at the Ministerial Meeting held in the Australian capital Canberra attended by 12 members of Australia, the United States, Canada, Japan, Republic of Korea, New Zealand and six ASEAN countries. As put by the ―Seoul Declaration‖ passed in 1991, its tenet and objectives are ―inter-dependence, mutual benefits, adhering to an open and multilateral trading system and reduction of regional trade barriers‖. In 1991, China joined APEC as a sovereign state while Chinese Taipei and Hong Kong joined it as territory economies. Now APEC has altogether 21 members including all the major Pacific Rim countries and regions. APEC has a five-layer organisational structure. The first is the Informal Meeting of Economic leaders held annually. China hosted the 2001 meeting in Shanghai and made a great success. The second is the Dual-Ministerial Meeting attended by foreign ministers 41 (excluding Chinese Taipei and Hong Kong) and ministers in charge of foreign trade. The third is the Meeting for Ministers Responsible for Trade. The fourth is the Senior Officials Meeting (SOM) attended by vice ministers, departmental directors or ambassadors to implement decisions by economic leaders and ministerial meetings. The fifth layer refers to the four subordinate committees under SOM, i.e. committee o Trade and Investment, Economic Committee, Economic and Technical Cooperation Sub-committee of SOM and Budget Management Committee. As its name suggests, APEC was not exactly an organization but an official forum, though the Chinese translation used that term. However, it has been developing towards being an organization since the establishment of its secretariat in Singapore that serves as an auxiliary body. APEC co-operation concentrates on trade and investment liberation and facilitation (TILF) and economic and technical cooperation (ECOTECH) that are commonly termed as ―the two wheels of APEC‖. Besides regional economic integration, countries may form a commodity cartel to control the production, pricing and sale of particular goods so as to seek higher and more stable prices for the relevant goods. The most influential commodity cartel is the Organization of Petroleum Exporting Countries (OPEC) composed of thirteen members 42 established in 1960 with headquarters at Vienna. By assigning production quotas among its members, OPEC tried to limit the overall crude oil supply of the world for the purpose of maintaining higher oil prices. Despite internal contradictions and competition from non-OPEC oil producing countries, the influence on oil prices by OPEC that accounts for 40% of the global oil production is something the world cannot afford to neglect. Exercises: 1.Answer the following questions: 1. What is a free trade area? Make a brief account of the most notable free trade area in the world. 2. In what way is a customs union different from a free trade area? 3. What are the characteristics of a common market,Which organization remained a common market for some years in the past? 4. How much do you know about an economic union? Can members of an economic union keep all of their national sovereignty? 5. Make a brief account of the origin and development of the EU. 6. What is the most powerful institution of the EU? What is the executive body of the EU? How does it operate? 7.Explain briefly the five layer organizational structure of Asia-Pacific Economic Cooperation. 43 8. What are the tenet and objectives of APEC? What is meant by its two wheels? 9. What are the nature and objectives of OPEC 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) The vision of a unified Europe has a long history. The idea has at different times been promoted by philosophers, monarchs, politicians and religious leaders and can be traced _______ at least as far as the Roman Empire. The twentieth century saw this dream sh________ by the two world wars that ravaged the continent during the first half of the century. However, WWII served to reaffirm that "antagonistic nationalism" was a potent cause of violent conflict on the continent. Winston Churchill, in a speech de_______ in Zurich on September 19, 1946, suggested moving forward with a plan to unify Europe ______ a ―United States of Europe‖. Soon after, in 1949, the Council of Europe was founded to foster political cooperation among the countries of Europe. The two main actors in the theoretical development of European unification were Altiero Spinelli and Jean Monnet. Spinelli, an Italian federalist, advanced the idea that local, __________, national, and European authorities should ―cooperate and complement each other‖ in 44 a union. Spinelli endorsed the ―Federalist Approach‖ to European unification. Monnet, on the other hand, ad________ a ―Functionalist Approach‖ which suggested a ―gradual transfer of sovereignty‖ from the national governments to independent European political institutions. Both these approaches have been effectively combined in the contemporary vision of European integration: That vision is ________ on the conviction that ―national and regional authorities need to be matched by independent European institutions with responsibility for those areas in which joint action is more effective than action by individual states. These areas include the s_______ market, monetary policy, environmental protection, foreign and defense policy, and the cre________ of an area of freedom and justice‖. 3.Translate the following passage into Chinese: Before examining the EU-US economic relationship, a brief look into the foundations and dominant features of this profoundly important, mutually productive partnership will be taken. The United States and the European Union enjoy the world’s largest commercial relationship and are each other’s largest trade and investment partners. In 2003, two-way trade in goods and services between the EU15 and the US amounted to USD 593.2 billion. 45 EU15 investment in the US has likewise grown steadily: by the end of 2003, EU15 direct investment in the US amounted to USD 855.669 billion, or 62.1 percent of total foreign direct investment in the US. Similarly, US direct investment in the EU15 amounted to USD 844.698 billion, or 47.2 percent of total US FDI. The economic importance of the European market for American investors is enhanced by the maturing Single Market and by the single currency, the euro, which was launched on January 1, 1999 and is shared by 12 of the 25 European Union Member States. The signing of the New Transatlantic Agenda (NTA) on December 3, 1995 was an important step in consolidating the EU-US economic relationship. A key element of NTA is the expansion of world trade and closer economic relations between the EU and US. This includes steps to remove regulatory and other obstacles to trade, which not only reduces costs for consumers and producers but also opens up new areas for investment. The relationship is further enhanced by the Transatlantic Business Dialogue (TABD), a private sector initiative launched by European and American business leaders in 1995, as well as the Transatlantic Consumer Dialogue (TACD) launched in 1998 and involving representatives from consumer organizations on both sides of Atlantic. 4.Translate the following sentences into English: 46 1.过去的几十年，地区经济一体化越来越重要。 2.最著名的自由贸易区是北美自由贸易区，它是由美国、加拿大和 墨西哥于1991年建立的。 3.经济联盟的成员国不仅要在税收、政府开支、企业策略等方面保 持一致，而且还应使用同一的货币。 4.欧洲委员会是欧盟的管理机构之一，此机构将提议呈交给部长理 事会做决定，并监督各成员国根据所制定的条约履行自己的义务。 5. APEC建立于在澳大利亚首都堪培拉召开的一次部长级会议上。 当时有12位成员国出席，分别为澳大利亚、美国、加拿大、日本、 朝鲜、新西兰和东盟六国。 Lesson 6 WTO and China After 15 long years of hard negotiations, China became a formal member of the World Trade Organization on Dec. 11, 2001. People may wonder whether it pays for China to devote such a lot of time and efforts for accession to the organization. So some knowledge about the WTO as well as the opportunities it provides and the challenges it poses to China is quite necessary. The origin of the WTO can be traced back to the early post World War II years. To guard against the threat of trade wars, major trading nations sent their representatives to Havana in 1947 to create an International Trade Organization for the promotion of international trade. That objective was, however, not realized for controversy over 47 the extensiveness of the powers of the proposed ITO, mainly for the refusal by the United States to ratify the charter of the stillborn organization. Nevertheless, the General Agreement on Tariffs and Trade was formed as a conduit for multilateral negotiations on a variety of international trade issues. Headquartered in Geneva, GATT provides a framework within which international negotiations are conducted toward creating global trade rules and a consultative mechanism for resolving differences and settling disputes under those rules. It also provides technical assistance to developing countries in the form of seminars and training courses on trade policy issues. The general aims of GATT are the improvement of standards of living, full employment, a large and steadily growing volume of real income and effective demand, the full use of the world’s resources, and the expansion of production and international trade. It is the specific task of GATT to contribute to the attainment of these objectives through arrangements directed to the substantial reduction of tariffs and other trade barriers and to the elimination of discrimination. 48 Initially, GATT consisted of only three basic parts. In part 1 the basic obligations which are to be fulfilled by the contracting parties are laid down —the most-favored nation clause and the schedules of tariff concessions. Part 2 constitutes a code of fair trade and contains the essential trading rules of the Havana Charter. Part 3 deals with the applications, membership and withdrawal, amendments to the Agreement and its relation to the Havana Charter. In the years followed, the text of the General Agreement was revised, numerous amendments were reached relating mainly to the expansion of exports of less-developed countries and a part 4 was added. In the new part, the contracting parties agree that the attainment of the general aims is particularly urgent where less-developed countries are concerned. In the interest of the less-developed countries, endeavors must also be made to ensure the stabilization of commodity prices, better access to the markets of the developed countries, and the diminution of the burdens which the developing countries assume in the interest of their economic development. The Generalized System of Preferences (GSP) is meant to assist developing countries in their economic development efforts. It was established in 1968 after years of endeavors by developing countries in 49 the UNCTAD and the GATT. Under the system, developed countries grant developing countries favorable lower tariffs without granting them to developed members. And the developing countries do not have to reciprocate such favorable treatment to the developed countries. So the GSP is an important exception to the non-discriminate principle of MFN. A number of tariff negotiating conferences were held under the auspices of GATT during the course of the years GATT was functioning. Altogether 8 rounds of protracted yet fruitful multilateral trade negotiations were held since GATT entered into force in 1947 till the end of 1993 when the last round, the Uruguay Round finally concluded. The cumulative effect of the 8 rounds realized substantial reduction of tariffs. Tariff rate by the developed countries fell from an average of over 40 percent to about 3 percent in 1995. Despite GATT’s success in coordinating international trade policy, it is only an interim body without a fully defined institutional structure and with little legal enforcement power. So a big decision was made at the last Round to establish a permanent organization, the World Trade organization, to take the place of GATT. the WTO is a permanent international organization to which all the members of GATT automatically become members. It is the 50 organization’s aim to facilitate the creation of an optimal environment for international trade and further strengthen the multilateral trading system. The WTO has three major objectives: 1. To promote free trade by encouraging members to adopt nondiscriminatory, predictable trade polices; 2. To further reduce trade barriers through multilateral negotiations; 3. To establish more effective trade dispute settlement procedures. Instead of being a mere replacement of GATT, the WTO differs from its predecessor in several prominent dimensions. Firstly, as the name suggests, the GATT is only an agreement, or more exactly an interim secretariat, rather than an organizational entity in the true sense, while the WTO is a full-fledged permanent organization, with the biennial ministerial meeting as its supreme decision-making body, affording it more political clout and a higher international profile. And its subsidiary bodies specialize in different areas. Secondly, the WTO has a much broader mandate. In addition to promoting commodity trade which used to be the focus of GATT, the WTO is also responsible for service trade, international intellectual property protection and trader-related investment. Thirdly, the WTO has far greater enforcement powers. 51 Unlike GATT，the new organization has a clearly defined dispute settlement mechanism. Its verdict is binding on all its members. In this respect, the WTO is akin to an international court of justice for world trade with the institutional strength and legal mandate to implement its decisions. China’s efforts to gain accession to the WTO can be divided into two periods. During the GATT days, China made strenuous endeavors for the restoration of its status as a contracting party. Though the goal was not realized, the work laid some foundation for negotiations in the second period after the WTO came into being At the turn of the century when China was on the threshold of the WTO, the pros and cons of entry into the organization was a subject of topical interest. There were worries as well as great expectations. Now that three years have passed since China’s accession to the WTO, it is time to review China’s performance as a WTO member As a responsible large nation, China has been doing a lot in honoring its commitments for entering the WTO. In a short span of three years, China amended over 2300 laws and regulations of which over 800 were abolished. The overall tariff level was lowered from about 40% to 10.5%. Non-tariff measures including quota and import license were removed step by step. The sector of service trade has been opened further and protection of intellectual property right considerably 52 strengthened. All these efforts have produced positive results both for the other members of the WTO and for China itself who has made good use of the opportunities offered by the organization. China’s total volume of import and export doubled from 500 billion US dollars in 2001 to over 1.1 trillion US dollars in 2004, ranking the third in the world, only after the United States and Germany. For three consecutive years, the country remained the largest recipient of foreign direct investment with the average yearly figure exceeding 50 billion US dollars, showing the improvement of its investment environment in line with the requirement of the WTO. Contrary to the worry of some people that there would be trade deficit after entry into the WTO, China still enjoys a favorable balance of trade of 12 billion US dollars. And China’s foreign exchange reserve increased to 550 billion US dollars, being the second largest foreign exchange reserve next only to that of Japan, the sensitive industries liable to the impact of the WTO entry such as agriculture, automobile, retail business, banking, insurance, and telecommunication all registeredencouraging development. Despite all the achievements, China still faces big challenges. The first is the protectionist measures prevalent in some countries that place various barriers to trade. They intensified anti-dumping and countervailing measures to 53 restrict the export expansion of other countries. Among the anti-dumping investigations, as many as 380 are directed against China, constituting about one seventh of the total, making China the largest victim of such investigations. With the complete removal of textile quotas from January 1st 2005, antidumping investigations against China will be further intensified, and we must get mentally prepared and endeavor to reduce the negative effects. The second is the increasing competition faced by commercial banks and insurance enterprises from their foreign counterparts. The foreign banks already enjoy national treatment in China and they have offered over 100 items of services, tripling those by domestic banks. From Dec. 1st 2004, the number of cities where foreign banks are allowed to handle Reminbi business for enterprises increased from 13 to 18. And from 2006 Reminbi business for individuals will also be open to foreign banks. As for foreign insurance companies, all those entering the Chinese market are well-known enterprises with a long history and rich experience, constituting formidable competition against domestic insurance companies. The third is the challenge faced by agriculture China committed itself for entry into the WTO not to provide any export subsidy for its agricultural produce, and ultimately lower its 54 import tariff for farm produce to about 15%. Tariff quota will be applicable to the import of bulk produce, but the quotas are fairly large and the tariff rates within the quotas are as low as 1% to 10%. All those form great pressure on China’s agricultural production and market. Exercises: 1.Answer the following questions: 1. Make a brief account of the origin and development of WTO (including its predecessor). When did it formally start operation? 2. What is the cumulative effect of all the GATT negotiations in respect of tariffs? 3. Explain the principles of GSP. How and when was it established? 4. How many rounds of negotiations were held under GATT? What important decision was made before the conclusion of the Uruguay Round? 5. What are the three major objectives of WTO? 6. Is the WTO a mere replacement of GATT,How does WTO differ from its predecessor? 7. What has China done to honour its commitments for gaining accession to the WTO? 8. Does it pay for China to devote such a lot of efforts for WTO membership? Mention some of its major performances in respect of trade and investment. 55 9. Are all the worries before China’s entry into WTO groundless? What major challenges does China still face despite all its achievements? 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) In the initial period after China enters the WTO, people will not see the positive effects of entry, but rather the challenges presented in the process of changes to fulfill commitments. These changes will include reducing c_________ duties, eliminating non-tariff trade b________ and allowing foreign companies to compete in most of China's markets. China will not only become more international but will also s_______ its exports and imports grow. Eliminating multilateral agreements in 2005 will stimulate exports from foreign countries to China. This will create a readjustment in China's current account. Along w_______ a growth in imports, reorganization and adjustments in government departments will be inevitable. Between 1992 and 2000, the average import customs duty dr _______ from 43% to 17.5%. China reduced import customs duties on industrial products from 45% to 17% and on basic products including r_______ materials and farm products from 36% to 18%. In addition, China has substantially 56 shortened the list of taxable products. The standard deviation of tariffs has also dropped f________ 32% to 13%. Through tariff reductions, the government has already lowered import customs duties to zero for nearly 75% of all imported products. Among the items which make up this 75%, 50% are processed products, 10% are produced by joint v________ invested companies, 55% gained their duty free status through bonded warehouses and 10% fall under other customs-duty exem______ policies. Although China's reform of customs duties in the 1990s lowered the price China would pay to enter WTO, the economy will still face ch_________ in the coming years, particularly in such industries as agriculture, automotive, banking, insurance and telecom. 3.Translate the following passage into Chinese: Allowing foreign banks to enter the Chinese market will exert a positive influence on domestic banks, making Chinese banks more competitive, introducing new technology and information and providing additional funds. But in the short and not-so-long term future after foreign banks enter the Chinese market, these banks will be able to use lower prices and efficient services, including such services as tele-banking, to win over a large number of customers from domestic banks, especially prized customers. This will result in a cut in the amount of funds in the 57 hands of domestic banks. The toughest challenge the government will face will be to eliminate bad debt, implement cautious and standard risk management models, and tighten up bank administration so that domestic banks can adapt to international competition. To cope with these challenges, some domestic banks will choose to partner with foreign banks. This will allow foreign banks gain a foothold in the Chinese monetary market, allow domestic banks to learn from foreign peers and allow domestic banks to obtain a greater pool of funds from their foreign partners. 4.Translate the following sentences into English: 1.关贸总协定体系(现为世界贸易组织)是通过一系列的贸易谈判 或回合发展起来的，它最初有三个基本目标。 2.加入世界贸易组织对中国有益，因为它将促进中国的改革和发 展，提高商品和服务的质量，降低商品成本和服务费用，刺激投资 和创造就业机会，改善法制。 3.世界贸易组织的主要目的是为了促进自由贸易、进一步减少贸易 壁垒并建立更有效的贸易纠纷解决机制。 4.有形贸易指货物的进出口贸易，而无形贸易涉及的是国家间的劳 务交换。 5.国家从事的贸易种类是多样的、复杂的，往往是有形贸易和无形 贸易的混合 Lesson 7 58 Economic Globalization and Multinational Corporations 第七课 经济全球化和跨国公司 TEXT The term ―economic globalization‖ is now being used with increasing frequency in newspapers, magazines, seminars and international conferences. With the basic feature of free flow of commodity, capital, technology, service, and information in the global context for optimized allocation, economic globalization is giving new impetus and providing opportunities to world economic development and meanwhile making the various economies more and more interdependent and interactive Economy is not the only element involved in globalization since it also has an important bearing on politics, culture, value and way of life. While many people are acclaiming the benefits brought about by economic globalization, there are also loud voices of opposition, since different countries and peoples do not enjoy balanced benefits. Economic integration enables countries benefit from the boom of other countries but also makes them more vulnerable to the adverse events across globe. Maybe we can say few topics are as controversialas globalization. But like it or not, it has become an objective trend in world economic development. The best policy for us is to follow the 59 trend closely, availing the opportunities it offers to develop ourselves and avoiding its possible impacts. Such world organizations as the WTO, the World Bank and the International Monetary Fund which we shall discuss in later lessons, are, in a sense, champions of economic globalization, while the multinational corporations are directly engaged in the trend and their operations constitute the major content of economic globalization. Some knowledge of the multinationals will help us gain a better understanding of the global trend. Before World War II there were already a number of companies that would be described as multinationals. They were, however, comparatively small in number and scale. The first step in the internationalization of business after the War was simply a very rapid growth in fairly traditional terms, in the sense that more and more companies in one developed country set up their own, or bought over existing, manufacturing facilities in other countries. As development of such business activities grew rapidly, they had not only been variously defined in different studies, but also labeled with different names. However a typical multinational enterprise shall be defined as a business organization which owns (whether wholly or partly), controls and manages assets, often including productive resources, in more than one country, through its member companies incorporated separately in each of these countries. Each 60 member company is known as a multinational corporation. Each MNC purports to represent certain interests (or to fulfill certain goals) of the multinational enterprise and is linked to one another within the organizational framework of the same multinational enterprise. If the MNC is the original investing corporation, it is known as the parent MNC, which is normally also the international headquarters of the MNE. If the MNC is established as a result of investments by the MNE, whether through the parent or through another of its already established MNC, it is an affiliate MNC. A MNE may also have various regional or operational headquarters, in addition to its international headquarters. The multinationals have the following distinctive characteristics: Firstly, MNEs are generally enormous in size. For instance, General Electrics established in 1892 now has subsidiaries in over 100 countries and regions with more than 300,000 employees. In 2001 its business volume reached 126 billion US dollars. In China alone, it has 30 joint ventures or solely owned subsidiaries with over 8000 employees. There is little doubt that the size of an MNE does indicate the amount of resources it controls even though the amount of resources located in particular countries may be small. 61 Wide geographical spread is also characteristic of MNEs. Such geographical spread of MNEs enables them to have a wide range of options in terms of decisions in areas such as sourcing and pricing. They are also more able to take advantage of changes in the international economic environment. Such multi-nationality also enables MNEs to engage in worldwide integrated production and marketing giving rise to extensive intra-MNE transactions which constitute a very significant proportion of total international trade. Another general characteristic of large MNEs is their longevity and rapid growth. Some MNEs have a history of many years and their double digit growth rate of revenue adjusted for inflation is higher than that of the GDP of many countries The behavior of MNEs is very much determined by their needs. These needs are often identified as goals.The purpose of organization is to facilitate the MNEs’ operations and the purpose of its operations is to achieve its organizational goals. Like most business organizations, MNEs are formed for profit. There is little doubt that the profit goal represents the basic need of the MNEs’ shareholders 62 It is also the need of all groups interested in the continued survival of the MNE. Yet this interest in the continued survival of the MNE expresses a second basic need --- that of security. The importance of security to any MNE cannot be doubted. Profit is useless if it cannot be secured by the MNE and transferred wherever it so desires . Its assets and investments must be secured. A favorable business environment must also be secured Without security, a MNE’s survival can never be assured. It is no wonder that MNEs have embarked on policies to grow into gigantic sizes, to control resources, and production and manufacturing processes in many countries, and even to intervene in the affairs of government in both the home and host countries, in order to ensure the security of its profits, assets, organizations and operations. The need for security includes the security of profits in the short-and-long-run, the security of the MNE’s assets and investment, and the security of other organizational needs, including a favorable business environment, the need for supplies of raw materials and other resource inputs for the production processes of the MNE, the need for effective organizational control and management, the need for transportation and communications, the need for technical improvements and the private needs of employees including managers. In our world today, the multinational enterprises are very 63 important vehicles for the transfer of resources across national boundaries. Given the organizational unity of parent and affiliates within such enterprises, and the fact that they are situated in different countries, intra-organizational resource transfers between parent and affiliate or between affiliates of the same enterprise are also international transfers. Technology, capital and ready markets are sort of benefits MNEs bring to less developed host countries. The MNE is considered to be the most effective vehicle for the promotion of global economic development. Typical parent which contro is the typical MNE is owned in the main by the home country’s citizens or residents, in spite of the fact that the MNE is multinational in terms of the worldwide derivation of its profits, the high proportion of sales and investments in many foreign countries, the large numbers of employees in foreign affiliate MNCs and the multinational derivation of its finance. The absolute majority of the members of the board of directors also originate from the home country. It is a fact that host governments can and do wield power over MNCs located within their territories. MNCs are under the legal jurisdiction of their host governments which can impose various rules, regulations, and laws on the MNCs to the extent of nationalizing all their assets. 64 Multinational Corporations can be classified into four different types according to their organization and way of operation. The first type is called multi-domestic corporation that is a group of relatively independent subsidiaries. The parent company delegates sufficient power to each subsidiary to manage the production and marketing in the host country for the needs of local customers. This is a useful approach when there are distinct differences in the specific conditions of host countries. The second type is the global corporation which operates under an opposite principle from the first type and views the world market as an integrated whole. Power and responsibility are concentrated at the headquarters that manages production and marketing to achieve the economies of scale as much as possible The third type, the transnational corporation, aims to combine the advantages of the above two ways of operation so as to achieve both efficiency and flexibility. The activities and resources of the transnational corporation are neither highly centralized as the second type nor decentralized as the first type but are integrated in an interdependent network of affiliates. The fourth type can be referred to as world companies as their national identities are blurred to a large extent. Very few companies, if any, have reached this level of internationalization. But they will be 65 great movers of economic globalization. It is interesting to imagine the situation on the globe with the increase and growth of world companies. When such companies become dominating, the possibility of conflicts among sovereign states may be greatly reduced. Possibly they will be instrumental to the realization of complete globalization. Exercises: 1.Answer the following questions: 1. What are the basic feature and major role of economic globalization? 2. Mention some of the pros and cons of economic globalization, What is the right attitude towards it? 3. What is the formal definition of a multinational enterprise? How can you tell whether a multinational corporation is a parent or just an affiliate? 4. Describe briefly the characteristics of MNEs. 5. What is the commonly recognized objective of MNEs? 6. Why is security so important to MNEs? 7. Do you think ―wide geographical spread‖ of MNEs plays a very important role in the development of their business? Why? . What is the relationship between MNEs and their host countries ? 9. What are the four types of multinational enterprises? Describe each of them briefly. 66 10. Are there many world companies at present? Imagine their future role in complete globalization 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) Successful MNCs eventually must learn____ to inter-relate their subsidiaries with the p____ company, how to delegate decision-making authority, and how to develop satisfactory methods of control and supervision. ____ most traditional organizational structure is the international division structure, in w____ communication w___ the parent company is channeled th___ an international division. In the global structure there is no international division for overseas activities; instead, the entire top management becomes involved ____ international as well as do____ matters. The global approach unifies domestic and international divisions i____ one global division. It therefore eliminates the danger of competition be____ an international division and a domestic one. 3.Translate the following passage into Chinese: Most multinational corporations are made up of vast numbers of foreign subsidiaries, companies in which over 50 percent is owned by the parent company. Like all corporations, MNCs are organized according to the goals they set for themselves. They strive to 67 retain access to the necessary resources: raw material, manpower, and capital. Furthermore, they try to grow through global cooperation by increasing their access to world resources. This leads them to expand their foreign market position, in other words, to increase their market share. MNCs grew into strong entities by reinvesting their profits prudently so as to further increase access to resources. They had to hire more and more talented local people abroad, and they had to purchase raw materials in foreign countries. 4.Translate the following sentences into English: 1.经济全球化为世界经济发展提供新的动力和机会，同时也使各经 济体更加相互依赖，相互影响。 2.跨国公司是在一个以上国家拥有、控制和经营资产的商业组织。 3.许多人欢呼经济全球化带来的好处，但同时也有强烈的反对声 音。 4. .跨国公司的内部交换占整个国际贸易的一个很大的比例。 5.尽管公司的日常管理工作下放到跨国企业的子公司，但重要决 策，如有关公司目标和新投资等都由母公司来决定。 6.无论人们是否喜欢，经济全球化已成为世界经济发展中的一个客 观趋势。 Lesson 8 The Business Contract 第八课 合同 68 TEXT: A contract is an agreement which sets forth binding obligations of the relevant parties. It is enforceable by law, and any party that fails to fulfill his contractual obligations may be sued and forced to make compensation, though most contracts do not give rise to disputes. The contract is based on agreement, which is the result of business negotiations. There are two types of business negotiations: oral and written. The former refers to direct discussions conducted at trade fairs or by sending trade groups abroad or by inviting foreign customers. Business discussions through international trunk calls are also included in this category Written negotiations often begin with enquiries made by the buyer to get information about the goods to be ordered such as quantity, specifications, prices, time of shipment and other terms. An enquiry is made without engagement on the part of the enquirer. In case of a first enquiry, that is, an enquiry sent to an exporter whom the importer has never dealt with, information should be given in the enquiry as to how the name and address of the exporter have been obtained, the business line and usual practice of the importer, etc. so as to facilitate the exporter’s work. 69 In response to an enquiry, a quotation may be sent by the exporter which should include all the necessary information required by the enquiry.Sometimes, the exporter may make an offer to an importer voluntarily. A firm offer is a promise to sell goods at a stated price. In making a firm offer, mention should be made of the time of shipment and the mode of payment desired in addition to an exact description of the goods including the quantity, quality, specifications, packing, etc. The validity period is indispensable to a firm offer. An offer is considered open until after a stipulated time or until it is accepted or rejected. The offeree may find part of the offer unacceptable and may raise for further discussions his own proposals which constitute a counter-offer. A counter-offer may be made in relation to the price, terms of payment, time of shipment or other terms and conditions of the offer. That is to say, a legitimate contract can be either in written or oral form. In business practice however, a written contract is generally prepared and signed as the proof of the agreement and as the basis for its execution.When the contract is made by the seller, it is called a sales contract, and when made by the buyer, a purchase contract.A sales or purchase confirmation is less detailed than a contract, covering 70 only the essential terms of the transaction. It is usually used for smaller deals or between familiar trade partners The setting up of a contract is similar to that of a trade agreement or any other type of formal agreements. It generally contains the following items : 1.The title. The type of the contract is indicated in the title such as Sales Contract, Purchase Contract, Consignment contract，etc. The number of the contract and the date are given bellow the title to the right side. 2.The contract proper.This part includes A. the full name and address of the buyer and seller. B. The commodities involved including quantity, quality, specifications, packing, etc. C. All the terms and conditions agreed upon such as the price, total amount, terms of payment, transportation, insurance etc. D. indication of the number of original copiesof the contract, the languages used, the term of validity and possible extensions of the contract. 3.The signatures of the contracting parties indicating their status as the seller or the buyer. 4. The stipulations on the back of the contract are constituent parts of the contract and are equally binding upon the contracting parties. These 71 may include the shipping documents required, force majeure, arbitration, claims etc. Lesson 9 Incoterms 第九课 国际贸易术语解释通则 TEXT: Sending goods from one country to another, as part of commercial transaction, can be a risky business. If they are lost or damaged, or if delivery does not take place for some other reason, the climate of confidence between parties may degenerate to the point where a law suit is brought. Therefore, above all, sellers and buyers in international contracts want their deals to be successfully completed. If, when drawing up their contract, buyer and seller have some commonly understood rules to specifically refer to, they can be sure of defining their respective responsibilities simply and safely. In so doing they eliminate any possibility of misunderstanding and subsequent dispute. The purpose of Incoterms is to provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade Thus, the uncertainties of different interpretations of such terms in different countries can be avoided or at least reduced to a considerable degree. 72 Frequently parties to a contract are unaware of the different trading practices in the respective countries of their partners. This can give rise to misunderstandings, disputes and litigation with all the waste of time and money that this entails. In order to remedy these problems, the International Chamber of Commerce first published in 1936 a set of international rules for the interpretation of trade terms. These rules were known as Incoterms 1936. Amendments and additions were later made in 1953,1967,1976,1980,1990 and presently 2000 in order to bring the rules in line with current international trade practices. Incoterms have been revised to take account of changes in transportation techniques, such as the unitization of cargo in containers, multimodal transport and roll on-roll off traffic with road vehicles and railway wagons in “short-sea” maritime transport----- certain terms have been consolidated and rearranged-----and to render them fully compatible with new developments in electronic data interchange (EDI). The main reason for the 1990 revision of Incoterms was the desire to adapt terms to the increasing use of electronic data interchange. In the 1990 version of Incoterms this is possible when the parties have to provide various documents (such as commercial 73 invoices, documents needed for customs clearance as well as transport documents). Particular problems arise when the seller has to present a negotiable transport document and notably the bill of lading which is frequently used for the purpose of selling the goods while they are being carried. In these it is of vital importance, when using EDI messages, to ensure that the buyer has the same legal position as he would have obtained if he had received a bill of lading from the seller. The 2000 revision of Incoterms took account of the spread of customs-free zones, the increased use of electronic communication, and the changes in transport practices. The new version offers a simpler and clearer presentation of the definitions of all the terms. As in the previous version, the trade terms of Incoterms 2000 are presented in a format which allows seller and buyer to follow a step-by-step process to determine their respective obligations. The terms have been grouped in four basically different categories; namely starting with the only term whereby the seller makes the goods available to the buyer at the seller’s own premises ( the E-term, Ex works ); followed by the second group whereby the seller is called upon to deliver the goods to a carrier appointed by the buyer (the F-terms FCA, FAS and FOB ); 74 continuing with the C-terms where the seller has to contract for carriage, but without assuming the risk of loss of or damage to the goods or additional costs due to events occurring after shipment and dispatch (CFR, CIF, CPT and CIP ); and, finally, the D-terms whereby the seller has to bear all costs and risks needed to bring the goods to the country of destination (DAF, DES, DEQ, DDU and DDP ). The terms have been grouped in four basically different categories; namely starting with the only term whereby the seller makes the goods available to the buyer at the seller’s own premises ( the E-term, Ex works ); followed by the second group whereby the seller is called upon to deliver the goods to a carrier appointed by the buyer (the F-terms FCA, FAS and FOB ); continuing with the C-terms where the seller has to contract for carriage, but without assuming the risk of loss of or damage to the goods or additional costs due to events occurring after shipment and dispatch (CFR, CIF, CPT and CIP ); and, finally, the D-terms whereby the seller has to bear all costs and risks needed to bring the goods to the country of destination (DAF, DES, DEQ, DDU and DDP ). Further, under all terms, the respective obligations of the parties have been grouped under 10 headings where each heading on the seller’s side mirrors the position of the buyer with respect to the same subject matter. Thus, if for instance, according to A.3. the seller has to 75 arrange and pay for the contract of carriage we find the words ―No obligation‖ under the heading ―Contract of carriage‖ in B/3. setting forth the buyer position. However, with respect to the division between the parties of duties, taxes and other official charges, as well as the costs of carrying out customs formalities, the terms explain for the sake of clarity how such costs are divided between the parties although, of course, the seller might not have any interest at all in the buyer’s further disposal of the goods after they have been delivered to him. Conversely, under some terms such as the D-terms, the buyer is not interested in costs which the seller might incur in order to bring the goods all the way to an agreed destination point. Following is a chart setting out the classification of Incoterms 2000. Incoterms 2000 Group E EXW EX Works (Departure) Group F FCA Free Carrier (Main FAS Free Alongside Ship carriage Unpaid) FOB Free On Board Group C CFR Cost and Freight (Main CIF Cost, Insurance and Freight carriage CPT Carriage Paid To 76 Paid) CIP Carriage and Insurance Paid To Incoterms 2000 Group D DAF Delivered At Frontier (Arrival) DES Delivered EX Ship DEQ Delivered Ex Quay DDU Delivered Duty Unpaid DDP Delivered Duty Paid Compared with the former version, Incoterms 2000 seem to have few changes. That shows the wide recognition of the Incoterms which makes it necessary to consolidate on the recognition without making many changes. However, substantive changes have been made in the following areas: 1. the customs clearance and payment of duty obligations under FAS and DEQ; 2. the loading and unloading obligations under FCA. Exercises: 1.Answer the following questions: 1. What sort of risks can arise when goods are being moved from one place to another? If risks do occur, what consequences would they bring about? 77 2. Why is it necessary to have Incoterms? And what is the purpose of making amendments and additions to Incoterms? 3. Do you know anything about container transport? Is it a revolutionary innovation in transportation techniques? Give your reasons. 4. Can you explain the word ―negotiable‖ in the phrase ―negotiable transport document‖? 5. What are the main characteristics of Incoterms 1990? 6. What are the four different categories of terms in Incoterms 2000? 7. How do you understand the first sentence of Paragraph 6? Try to put it into Chinese and then paraphrase it in English. 8. Why should the compilers of Incoterms 2000 take the trouble to set forth in detail the division of duties, taxes, costs and charges etc. of both sellers and buyers, as some of them are irrelevant to either the seller or the buyer? 9. Explain briefly the terms FOB, CFR and CIF. 10. In what areas are substantive changes made with Incoterms2000? 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) The risk for loss of or damage t______ the goods, as w______ as the obligation to bear the costs rel______ to the goods, passes from the seller to the buyer a_______ the seller has fulfilled his 78 obligation to deliver the goods. Since the buyer should not be given the possibility to delay the tran______ of the risks and costs, all terms stipulate that the passing of risks and costs sh_______ occur even before delivery, if the ________ does not take delivery as agreed or fails to give instructions (with respect to time for shipment and/ or place for delivery) as the seller may require in ________ to fulfill his obligation to sh_______ the goods. This requirement is m_______ important under EXW, since under all other terms the goods would normally have been identified as intended for the buyer when measures have been taken for their dispatch. 3.Translate the following passage into Chinese: Traditionally, the on board bill of lading has been the only acceptable document to be presented by the seller under the terms CFR and CIF. The bill of lading fulfills three important functions, namely: Proof of delivery of the goods on board the vessel, Evidence of the contract of carriage , and A means of transferring right to the goods in transit by the transfer of the paper document to another party. It is customary to issue bills of lading in several originals but it is, of course, of vital importance for a buyer or a bank acting upon his instructions in paying the seller to ensure that all originals are 79 surrendered by the seller. This is also a requirement under the ICC Rules for Documentary Credits. The transport document must evidence not only delivery of the goods to the carrier but also that the goods were received in good order and condition Any notation on the transport document which would indicate that the goods had not been in such condition would make it ―unclean‖ and thus unacceptable . In spite of the particular legal nature of the bill of lading it is expected that it will be replaced by EDI procedures in the near future. The 1990 version of Incoterms has taken this expected development into proper account. 4.Translate the following sentences into English: 1.包装需要按运输的要求进行，在大多数情况下，卖方明确知道把 货物安全地运倒目的地所需要的包装。 2.在许多情况下，应买方在卖方将货物启运之时或之前安排验 货。除非合同另有规定，否则买方必须支付为其自身利益而安排的 验货费用。 3.进口商可以通过可转让的运输单据将货物在运输途中卖给新的 买方，这类可转让单据用起来非常方便。 4.在所有条款中，买卖双方各自的义务排列在10 项标题下。 5. 2000年对国际贸易术语解释通则的修改考虑了无关税区的发展， 商务活动中电子通讯使用的增加，以及运输方式的变化。 80 Lesson 10 Modes of Trade 第十课 贸易形式 TEXT: The bulk of international trade is done in the general mode of buying and selling of goods and services by means of money and the market. Under specific conditions, however, special modes of transactions may be adopted to better realize one’s business purposes. Among them, counter trade and its variants are perhaps the most popular modes of trade. Counter trade is a peculiar form of transaction allegedly popular in less developed countries and in centrally planned economies . It has become the generic term to describe a set of cross-border contracts that link a seller’s exports to imports from the buyer, and it is often associated with policy objectives of relevant economies like dealing with foreign exchange shortages and promotion of exports. The terminology counter trade employed today can be traced to the pre- World War II years when normal trade relations were breaking down. Following German hyperinflation，competitive devaluations and protectionism meant a global collapse in trade and in international financial and banking markets. Unwilling to see Germany cut off from its traditional raw material supplies in the Balkans, the Reichsbank agreed to the establishment of 81 a clearing system that settled only net positions --- and only once a year --- a measure that permitted traditional trade flows between Germany and the Balkans to continue. These arrangements were called compensation trade. Another term used in the context of such bilateral clearing operations was ―counter trade‖. During and after World War II, when financial markets were in disarray, Britain used similar bilateral arrangements, as did Western Europe when setting up the European Payment Union. Subsequently the countries of centrally planned economies copied such clearing systems and used them among themselves and also in trade with neighboring countries like Finland. Conceptually, all these arrangements are trade credit accounts between familiar trading partners exchanging unrelated goods. In the 1970s and 1980s counter trade was different from the old practice although some similarities remained. Current counter trade partners are not necessarily familiar partners and goods exchanged are sometimes vertically related. Current counter trade can be categorized as follows: Barter: The direct exchange of goods and services which is completed in a short period of time, e. g., an exchange of frozen lamb from New Zealand for Iran crude oil. 82 Counter purchase: The assumption by an exporter of a transferable obligation through separate but linked contract to accept as full or partial payment goods and services from the importer or importing country. The contract is usually stipulated to be fulfilled within a given period of time, e. g. , 5 years, and the goods or services received in return are usually pre-specified in a list and are subject to availability and changes made by the original importing country. In essence, then, counter purchase is an intertemporal direct exchange of goods and services. For example, in 1977 Volkswagen sold 10,000 cars to the former East Germany and agreed to purchase goods from a list set up by the importer over the next 2 years, up to the value of the cars sold to the former East Germany. Buyback: An agreement by an exporter of plant and equipment to take back in the future part of the output produced by these goods as full or partial payment.The important difference between counter purchase and buyback is that in buyback the goods and services taken back are tied to the original goods exported whereas that is not the case in counter purchase. Another important difference is that a buyback deal usually stretches over a longer period of time (as long as 15 to 20 years) than a counter 83 purchase deal. For instance, the Xerox Corporation sold to China the plant and technology for the production of low-volume photocopying machines, and contractually committed to repurchase a very large portion of the photocopy machines produced in the Chinese plant. The intriguing features common to barter, counter purchase, and buyback is “bundling”: the exchanges of goods and services are bundled together (the exchanges are implemented either concurrently or intertemporally). In normal market transaction buying and selling of goods and services is unbundled, an arrangement made possible by the use of money and the ―market‖ as an institution. Thus, an individual can sell goods and services to obtain monetary income and can then use the income for other desired goods and services. Such unbundling greatly facilitates transaction and allows more efficient economic exchanges. While counter trade does not represent an extreme form of bundling, and money as a unit of account is not totally bypassed --- in many counter trade deals, only a fraction of the initial purchase is paid for in goods and services --- the question remains why a significant part of the buying and selling of goods and services should be bundled together. The impression one gets is that bundled trade takes place where the market institution is imperfect. It can be said to generally take place between mature market economies and economies with a less 84 sophisticated market system.Under such circumstance there are several presumed advantages in counter trade. 1. Counter trade is implemented because it helps a country to deal with foreign exchange shortages. 2. Counter trade can be used to promote exports. 3. Counter trade can be used to reduce uncertainty regarding export receipts. 4. Counter trade is used to bypass an international price agreement like, for example, that of OPEC. 5. Counter trade may help those nations with serious debt problems to continue to import goods while, in effect, concealing export earnings from creditors. However, counter trade can be very risky business. By concealing the real prices and costs of transactions it may conceal and help perpetuate economic inefficiencies in the market place. Companies may suffer losses because they could not get rid of products of poor quality. Finally, counter trade may be considered as a form of protectionism. Among other modes of trade are processing trade, consignment, leasing trade, agency etc. Exercises: 1.Answer the following questions: 1. What is counter trade? Why has it attracted so much attention? 85 2. How did counter trade originate? And what was the nature of early counter trade? 3. Why should Britain use bilateral clearing arrangements after World War II? 4. What are the main features of the current counter trade? Can you summarize the categories briefly under current counter trade? 5. What are the major differences between counter purchase and buyback? 6. What is meant by bundling? What is the opposite way of doing business? 7.Since bundling is not an efficient way of getting business done, why should a significant part of the international trade of goods as well as services still be bundled? 8. What are the advantages and disadvantages of counte3r trade? 9. What are the basic conditions for counter trade to exist? 10. What are the other modes of trade mentioned the text? 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) Apparently, counter trade can be used to promote ex_______, Barter and counter purchase deals can be seen as sales of dom______ goods for bundles of foreign. The exc______ makes use of the comparative advantage of a foreign firm in marketing and re_______ 86 the domestic producer’s market making and research costs. Presumably, then, exports are expanded. However, when for_______ firm’s marketing skills are used, the domestic producers do______ acquire much market knowledge. Using counter trade to promote or stimulate is a short-cut that s_______ marketing costs on the one hand but sacrifices learning on the other. This strategy may t________ have undesirable long-run implications. In any case, if export promotion is the underlying r_______ for counter trade, we would expect counter trade activities to decline o_______ time as a nation’s exports establish a foothold in the world market. 3.Translate the following passage into Chinese: Counter trade is more popular in centrally planned economies and in less developed countries. As these economies lack mature and competitive markets, the role of counter trade becomes even more important. In such an environment counter trade can be viewed as a national form of contracting to deal with transaction difficulties. The practical advantage exist due to the peculiar environment within which counter trade usually takes place. They quite likely disappear when the environment changes as is happening now in many countries. Restructuring and the development of markets may therefore mean that the environment within which 87 counter trade usually takes place is changing so as to reduce its frequency. Reduced ownership restrictions are likely to shift the organizational forms toward joint ventures and wholly owned production facilities. Improved knowledge, experience, and legal enforcement of contractual obligations will likely mean increasing prevalence of longer term and more sophisticated explicit transaction contracts. 4.Translate the following sentences into English: 1.对销贸易一般是与有关国家的政策目标相互联系的，如应对外汇 短缺和扩大达出口之类的问题。 2.实质上，反向贸易指的是各种货物和服务的直接交换。 3.回购贸易和互购贸易之间另一个重要的区别在于回购贸易一般 比互购贸易要延续更长一段时间。 4.在正常的市场交易中，由于使用货币及市场手段，货物的买与卖 是分别进行的。 5.尽管有很多好处，反向贸易可能是风险很大的事。 6.在其他贸易方式中还有加工贸易、寄售、租赁贸易、代理等 。 Lesson 11 The Letter of Credit(1) 第十一课 信用证 (1) TEXT: In international trade it is almost impossible to mach payment with physical delivery of the goods, which constitutes 88 conflicting problems for trade, since the exporter prefers to get paid before releasing the goods and the importer prefers to gain control over the goods before paying the money. The letter of credit is an effective means to solve these problems. Its objective is to facilitate international payment by means of the credit-worthiness of the bank. This method of payment offers security to both the seller and the buyer. The former has the security to get paid provided he presents impeccable documents while the latter has the security to get the goods required through the documents he stipulates in the credit. This bilateral security is the unique and characteristic feature of the letter of credit. ―Letter of credit‖ is often shortened as L/C or L.C. and is sometimes referred to as “banker’s commercial letter of credit”, ―banker’s credit‖, ―commercial credit‖ or simply ―credit‖. Modern thcredits were introduced in the second half of the 19 century and had substantial development after the First World War. The credit is a letter issued by a bank at the request of the importer in which the bank promises to pay upon presentation of the relevant documents. It is actually a conditional bank undertaking of payment. The operation of the letter of credit starts with the importer. He instructs his bank to issue an L/C in favor of the seller 89 for the amount of the purchase. Here the importer is called the applicant, or opener, principal etc., the bank that issues the credit is called the opening bank, the issuing bank or the establishing bank, and the exporter in whose favor the credit is opened is called the beneficiary. The opening bank sends the credit to its correspondent bank in the exporter’s country, who will, after examining the credit, advise the exporter of its receipt. Here the correspondent bank is called the advising bank. The exporter or beneficiary will make a careful examination of all the contents of the credit and will request the opener to make amendments to any discrepancies in the credit so as to ensure safe and timely payment. Sometimes the exporter may require a confirmed letter of credit either because the credit amount is too large, or because he does not fully trust the opening bank. The bank that adds its confirmation to the credit is called the confirming bank which is undertaken either by the advising bank or another prime bank. When everything with the credit is in order, the exporter will prepare the relevant documents based on the credit and dispatch the goods to the importer. Then he will present the draft and the accompanying documents to the advising bank that pays or accepts or negotiates the bill of exchange. The advising bank then also becomes the paying bank which acts as the agent of the opening bank and gets reimbursed by the opening bank 90 after paying the beneficiary. If a bank, either nominated by the opening bank or at its own choice, buys the exporter’s draft submitted to it under a credit, it is called a negotiating bank. The draft and the documents will then be sent to the opening bank for reimbursement. Letters of credit are varied in form, length, language, and stipulations. Generally speaking, however, they include the following contents: 1. The number of the credit and the place and time of its establishment. 2. The type of the credit. 3. The contract on which it is based. 4. The major parties relevant to the credit, such as the applicant, opening bank, beneficiary, advising bank. etc. 5. The amount or value of the credit. 6. The place and date on which the credit expires. 7. The description of the goods including name of commodity, quantity, specifications, packing, unit price, price terms, etc. 8. Transportation clause including the port of shipment, the port of destination, the time of shipment, whether allowing partial shipments or transshipment. 9. Stipulations relating to the draft. 10. Stipulations concerning the shipping documents required. 91 11. Certain special clauses if any. e.g. restrictions on the carrying vessel and the route. 12. Instructions to the negotiating bank. 13. The seal or signature of the opening bank. 14. Whether the credit follows “the uniform customs and practice for documentary credit”. The letter of credit provides security to both the exporter and the importer. However, it only assures payment to the beneficiary provided the terms and conditions of the credit are fulfilled. It does not guarantee that the goods purchased will be those invoiced or shipped. It is stipulated in Article 4 of the uniform customs and practice for documentary credit that ― in credit operations all parties concerned deal in documents, and not in goods, services and /or other performance to which the documents may relate‖. That is to say the banks are only concerned with the documents representing the goods instead of the underlying contracts. They have no legal obligation whether the goods comply with the contract. They will be considered as having fulfilled their responsibility so long as all the documents comply with the stipulations of the credit. The quality and quantity of merchandise shipped, although specified in the documents, ultimately depend on the seller who has manufactured, packaged, and arranged shipment for the goods. If the importer finds any problems with the goods, e.g. inferior 92 quality or insufficient quantity, he has to contact or even take legal action against the exporter instead of the bank so long as the documents are ―proper‖ on their face. Exercises: 1.Answer the following questions: 1.What constitutes conflicting problems for international trade in respect of payment? Why? 2. What is the unique feature of the letter of credit? How does it offer security to the buyer and the seller? 3. When was the modern letter of credit introduced and when did it have substantial development? What are the other names of the letter of credit? 4. Explain briefly the following terms: A. applicant; principal; B. opening bank; issuing bank; establishing bank; C. beneficially; D. advising bank; E. confirming bank. 5. Why does the exporter sometimes require a confirmed letter of credit? Who usually adds confirmation to the credit? 6. What are the main contents of a letter of credit? Mention at least 10 items. 7. What are the banks concerned with in credit operations? Does a credit guarantee that the goods invoiced are those purchased? 93 8. In case of problems with the quality or quantity of the goods, who shall the buyer contact so long as the documents comply with the terms and conditions of the credit? 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) A documentary credit is a letter is______ by a bank_______ the request of an importer of goods in w______ the bank promises to pay a ben______( usually, though not always, the exporter of the goods) upon pre______ of documents relating to the dis________ of the goods. _______letter of credit is sometimes just called credit, or L/C _____ short. The com_____ letter of credit is always documentary credit in that it specifies the documents required such_____ a bill of lading, an invoice and an insurance document plus one _______ two other documents. If these documents are in or______ and shipment has been m______ as specified in the credit, the bank will pay for the consignment in exchange _____ the documents or will accept a bill of ex_____ and, possibly, negotiate it. 3.Translate the following passage into Chinese: It should be noted, however,, that the existence of a letter of credit is not a guarantee of payment to anyone. Its existence only assures payment to the beneficiary if the terms and conditions of the 94 letter of credit are fulfilled. In addition, a letter of credit does not insure that the materials purchased will be those invoiced or shipped. Banks issuing letters of credit deal in documents not in merchandise. They have no legal obligation to inspect the actual merchandise. The quality and quantity of merchandise shipped, although specified in the documents submitted to the bank as required by the letter of credit terms, ultimately depends on the honesty and integrity of the seller who has manufactured, packaged, and arranged for shipment of the merchandise. If the buyer discovers that the merchandise has been mislabeled or the cartons are empty, he must sue the seller, not the bank. 4.Translate the following sentences into English: 1.在国际贸易中几乎不可能使付款和实际交货同时进行。 2.信用证付款方式对买卖双方都提供保障。 3.现代信用证在19世纪后半叶开始采用，第一次世界大战后得到 了实质性的发展。 4.要么因为信用证金额过大，要么因为对开证行不完全信任，出口 商有时可能要保兑的信用证。 5.信用证的形式、长短、语言和规定各不相同。 Lesson 12 The Letter of Credit(2) 第十二课 信用证 (2) TEXT: 95 Letters of credit fall under several categories depending on their function, form and mechanism. Here are the major types of credit: 1. Clean credit and documentary credit: Credits that only require clean draft, i.e. draft not accompanied with shipping documents, for payment are clean credit. They are generally used in non-trade settlement or in payment in advance by means of the L/C. Most of the credits used in international trade are documentary credits, i.e. credits that require shipping documents to be presented together with the draft. 2. Revocable credit and irrevocable credit: This classification is based on the certainty of the commitment to pay on the part of the applicant and the issuing bank. The credit is a revocable one if such commitments can be altered or even canceled without consulting with the beneficiary. It is quite obvious that the exporter has little assurance to get payment, and therefore this type of credits are rarely used. Irrevocable credits are those that cannot be amended or revoked without the consent of all the parties concerned. Safe and reliable, this type is extensively used in world trade. It must be noted that if there is no specific indication 96 whether a credit is revocable or irrevocable, it should be regarded as irrevocable. 3. Confirmed credit and unconfirmed credit: If a credit is confirmed by a bank other than the issuing bank, it becomes a confirmed credit. The confirmation is undertaken either by the advising bank or by another leading bank. Under a confirmed credit, the beneficiary is given double assurance of payment since the confirming bank has added its own undertaking to that of the opening bank. If the credit is not confirmed by another bank, it is an unconfirmed letter of credit. Though a confirmed credit is considered to be able to provide the greatest degree of security to the beneficiary, it involves additional cost as a result of the confirmation. Therefore if the establishing bank is a reliable prime bank, confirmation may not be necessary. 4. Sight credit and usance credit: A sight credit is one by which payment can be made upon presentation of the draft and impeccable documents by the beneficiary to the bank. It gives the beneficiary better security and helps him speed up his capital turnover. Most of China’s export contracts stipulate for sight credit in payment terms. Obviously, a sight credit calls for a sight draft. A usance credit, also referred to as term credit or time credit, is 97 one by which payment cannot be made until a specific date or a specific time after the date or after sight. The usance varies from 30, 60, 90, days to as long as 180 days or even longer. It is also clear that this type of credit requires a usance draft. If the beneficiary wishes to get payment before the maturity of the draft, he can ask the bank to discount the acceptance, and immediately pay him the net proceeds, i. e. the face value of the draft minus the discount charges. 5. Transferable credit and non-transferable credit: If a credit can be transferred by the original beneficiary to one or more parties, it is a transferable credit. The original beneficiary is called the first beneficiary and the party (or parties) the credit is transferred to is called the second beneficiary. It is usually used when the first beneficiary is a middleman and does not supply the goods himself. A credit can be transferred only once. But transferring a credit to more than one party at the same time is allowed provided partial shipments are permitted. If a credit does not specify whether it is transferable, it should be regarded as a non-transferable document according to the credit stipulation 6. Non-draft credit: There is a modern tendency for payment to be made by presentation of the documents without the formality of drawing and 98 presenting a draft. Such credits are non-draft credit. They mainly include payment credit and deferred payment credit which are respectively similar to sight credit and usance credit with the difference that no draft is drawn and presented in the case of non-draft credit. 7. Revolving credit: If a credit stipulated that its amount can be renewed or reinstated without specific amendment to the credit being made, it is then a revolving credit. It is particularly useful when the buyer and seller have regular trading relationship and deal in a specific quantity of goods each month or any particular period of time. It has already been mentioned that the letter of credit has greatly facilitated and promoted international trade. However, like any other methods of payment, it is not perfect. It cannot provide absolute security for the contracting parties. The seller may sustain losses because of the buyer’s delay even failure in the establishment of credit. The buyer may suffer losses as a result of the documents presented by the seller which do not truly represent the goods shipped. And it is not absolutely avoidable that the bank may become insolvent or bankrupt. Besides, it is more expensive to use the letter of credit than remittance or collection as the bank will charge its client for all the services it provides. So the letter of credit may not be the most ideal method of payment for a particular transaction, and the 99 contracting parties should make their best choice according to the specific conditions. Exercises: 1.Answer the following questions: 1. Explain the difference between clean credit and documentary credit. Where is the former generally used? 2. What is an irrevocable letter of credit? If a credit is not specified as revocable or irrevocable, what type should it be regarded? 3. By whom confirmation undertaken in the case of a confirmed letter of credit? 4. Since a confirmed credit provides the greatest degree of security to the beneficiary, it should be used for all transaction. Is this statement right? Why? 5. What is the advantage of a letter of credit to the beneficiary? 6. What does the beneficiary do in the case of a usance credit if he wishes to get payment before the maturity of the draft? 7. How many times and to how many parties can credit be transferred? 8. In what situation is a revolving letter of credit most useful? 9. Can the letter of credit provide absolute security for the contracting parties? What losses may the seller or the buyer still sustain? 10. What is a non-draft credit? How many types can it be classified into? 100 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) The letter of credit is an important method of payment in international trade. It is a kind of b_______ credit instead of commercial credit like remittance or collection. The L/C is a wr_______ document issued to the exporter by the bank at the re______ of the importer. The bank sh______ guarantee the payment. The credit can assure the seller that he will be paid, and the buyer will not _______ to pay until the merchandise has been shipped. In practice of international trade, after the contract is signed by the seller and buyer, the buyer will apply ______ his bank for a letter of credit. P______ that the bank is sure of the buyer’s reasonable credit and the financial sta_______, it will open a credit to the seller, and promise to pay ag_____ documents. The seller then makes the shipment of the goods and prepares the necessary documents. He also draws a draft, attached to the documents, and presents it to the bank _______ payment. 3.Translate the following passage into Chinese: The transferable credit is designed to meet the requirements of international trade. It enables a middleman who is receiving payment from a buyer under a documentary credit to transfer his claim 101 under that credit to his own supplier. In this way he can carry out transactions with only a limited outlay of his own funds. A transferable credit may only be transferred once. The second beneficiary may not further transfer it unless there is an express provision to this effect in the original credit. This limit on transferability is intended to prevent abuse. On the other hand, the first beneficiary can transfer fractions of the original credit to several suppliers, provided that partial shipments are allowed. The aggregate of these partial transfers constitutes one transfer. 4.Translate the following sentences into English: 1.信用证按其作用、形式 和机制分不同的种类。 2.光票信用证主要用于非贸易结算，而在商品贸易中一般使用跟单 信用证付款。 3.在即期信用证情况下，提示汇票和正确无误的单据后便立即付 款。 4.远期信用证显然要使用远期汇票。付款期限可为30天、60天甚 至可长达180天。 5.如果信用证可以由原受益人转让给另一个或几个人，那么这种信 用证即为可转让信用证。原受益人称作第一受益人，接受转让的人 称作第二受益人。 6.对于一笔具体交易来说，信用证不一定是最理想的付款方式。缔 约双方应根据具体情况作出最好的选择。 102 Lesson 13 Major Documents Required in World Trade 第十三课 国际贸易中主要单据 TEXT: One of the major differences between domestic trade and foreign trade is documentation. Every shipment must be accompanied by a number of correct documents. If they are not the correct ones, the importer will have difficulties in taking delivery of the goods, and delays caused by incorrect documentation may affect future business relations between the trading partners. In the case of documentary letter of credit, any discrepancy, even in minor details, between the documents presented and those specified in the credit may lead to refusal by the bank to make payment. Different documents are required for different transactions, depending on the nature of the deal, the term of delivery, the type of commodity, stipulations of credit, regulations and practices in different countries, etc. However, most transactions require the following major documents. The commercial invoice:Generally called ―the invoice‖ for short, this document is the general description of the quality and quantity of the goods and the unit and total price. It constitutes the basis on which other documents are to be prepared, and the banks check the conformity between credit terms and documents and the 103 conformity between the documents. A commercial invoice normally include the following contents: Invoice number and the date; name and address of the buyer and the seller; contract number and credit number; description of the goods including name of the commodity, quantity, specifications, etc.; unit price, total price, price terms, and commission and discount if any; terms of delivery and terms of payment; packing, shipping marks, etc.; and seal or signature of the exporter. It should be noted that the description of the goods in the invoice must comply with the credit while in other documents the goods can be described in general terms, and that the total invoice value should not exceed the total amount of the covering L/C. The packing list gives information such as the number, date, name and description of the goods, shipping marks, packing, number of packages, specific contents of each package and its net weight and gross weight etc. Sometimes the credit stipulates for specification list which is similar to the packing list but emphasizes the description of the specifications of the goods. The weight list, weight note, or weight memo are also similar to the packing list in content and function but emphasis on the weight of the goods and are generally used for goods which are based on the weight for price calculation. The Bill of lading is one of the most important documents and has three major functions: 104 1. It serves as a cargo receipt signed by the carrier and issued to the shipper or consignor; 2. It constitutes a contract of carriage between the carrier and the consignor; 3. It is a document of title to the goods, and the legal holder of the bill of lading is the owner of the goods it covers. The major contents of the bill of lading include: 1. the carrier, i. e. the shipping company ; 2. the shipper or consignor, it is normally the exporter ; 3. the consignee. It is generally either the importer or made out “to order” ; 4. the notify party, i. e. the party to be advised after arrival of the goods at the port of destination. It is often the agent of the consignee or the consignee himself.; 5. a general description of the goods including the name, number of packages, weight, measurement etc ; 6. shipping marks ; 7. the port of shipment and the port of destination ; 8. the freight, for CIF and CFR it should be ―freight prepaid‖, or ―freight paid‖, for FOB it should be “freight to collect”, or “freight to be paid”, or “freight payable at destination” ; 9. the place where the bill of lading is issued ; 105 10. the date when the bill of lading is issued which is regarded as the time of shipment and can by no means be later than that stipulated in the credit. There are quite a few types of bills of lading classified in several ways. However, most letters of credit stipulate for “clean, on board bill of lading”. A clean bill of lading is one which states that the goods have been shipped in apparent good order and condition. It is meant that the document is devoid of any qualifying remarks concerning the packing and the outer appearance of the goods. And the carrier admits full liability for the goods described in the bill of lading and is bound to carry the goods and deliver them in like condition in which he has received them. An on board bill of lading indicates that the shipment has been actually loaded on the carrying vessel bound for the port of destination。Traditionally, this has been the only acceptable type to be presented by the seller under the term CFR and CIF. The document similar to the ocean bill of lading is called airway bill for air transportation and railway bill, cargo receipt etc. for railway transportation. The insurance policy and the insurance certificate are similar in function, the only difference being that the latter is a bit simpler than the former. The main contents of such insurance documents include: 106 1. the insured. Under CIF terms, the insured is generally the beneficiary of the credit unless otherwise specified, while under CFR and FOB terms，the insured is usually the importer. 2. cargo description including name, quantity, weight, shipping marks etc . 3. the amount insured and the risks covered. It should be noted that the currency of the amount insured should be the same as that of the credit. 4. contents concerning transportation including the carrying vessel, the port of shipment and the port of destination, the sailing date etc. 5. the place where claims are to be settled. Unless otherwise specified in the credit, the port of destination is taken as the place for settling claims. 6. the date on which the document is issued. It can be made earlier but by no means later than the date of the bill of lading. Various certificates may be required depending on the nature of the commodity and the stipulations of the specific countries. The major types are certificate of quality; certificate of weight; certificate of quantity; certificate of health; certificate of disinfection; veterinary certificate; certificate of origin;etc. Other documents that may be required are customs invoice, consular invoice, consular visa, shipping advice etc. 107 Exercises: 1.Answer the following questions: 1. What are the possible consequences of incorrect documentation? 2. What factors decide the types of documents required for a particular transaction? 3. What is a commercial invoice? What is the relation between the commercial invoice and other documents? Mention some of the major contents to be included in a commercial invoice. 4. Mention 2 types of shipping documents that are similar in function to the packing list. What is the difference between them and the packing list? 5. What are the 3 major functions of the bill of lading? 6. Define the meaning of ―the consignee‖. Who is possibly to be the consignee in a bill of lading? 7. What is a clean on board bill of lading? Is a foul ( not clean) bill of lading acceptable? 8. Give the names of the counterparts of the ocean bill of lading in the case of air transportation and railway transportation. 9. In what currency should the goods be insured? Where are insurance claims to be settled? 10. Is it acceptable for the date of the insurance document to be later the date of the Bill of Lading ? Why? 108 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) The exporter should always it a firm rule of business policy only to issue completely true and co______ invoices. In practice ,t exporter is sometimes requested by the buyer abroad to insert inaccurate particulars _______ the invoice. The buyer may ask for a reduction of the pr______ for the goods in the invoice and a corresponding augmentation of the charges for ins______ and freight. because import d________ in his country is calculated on the value of goods and does not contain these charges. The buyer may ask that the invoice price be increased above the tr_______ purchase price so that he may transfer the excess to an account outside his ______ country, thus evading local control on the transfer of funds abroad. F_______ invoicing always has different but importer motives. A contract accompanied by issuance of a false ______ is enforceable in 1_______. 3.Translate the following passage into Chinese: A straight bill of lading is made out so that only the named consignee is entitled to take delivery of the goods under the bill. This consignee is designated by the shipper. The carrier has to hand over the cargo to the named consignee, not to any third party in possession of the bill. This kind of bill of lading is not transferable. 109 The shipper can’t pass the bill to a third party by endorsement. Because of the limited functions, this bill is in very restricted application. When goods are shipped on a non-commercial basis, such as samples or exhibits, or when the goods are extremely valuable, a straight bill of lading is generally issued. 4.Translate the following sentences into English: 1.在国际贸易中使用正确的单据很重要，否则进口商提货时会遇到 困难。 2.商业发票，一般称―发票‖， 这种单据对货物的质量和数量以及单 价和总价进行概括性描述。 3.货物在运输过程中可能发生风险损失，需要办理货物保险。 4.已装船提单表明货物已实际装上开往目的港的承运船只。 5.清洁提单指货物在表面状态良好的情况下装船，这意味着提单上 未加任何有关包装或货物外表不良的批注。 Lesson 14 International Transportation 第十四课 国际贸易中的运输 TEXT: Transportation is fundamental to the development and operation of an industrial society. It permits the specialization of work effort necessary to achieve efficiency and productivity. Geographically distant resources become accessible with transportation. 110 The economic growth of any society in any part of the world is directly related to the availability of transportation. A society without an advanced transportation system remains primitive. In a broad sense, transportation is defined as the movement of freight and passengers from one location to another. The important common element in any definition of transportation, however, is movement: changing the physical location of freight or passengers. Products must be moved to the location where they are needed and wanted, such as groceries moved to a supermarket. You, in turn, must use some form of movement to get to the supermarket to buy the groceries you want and need. In a formal sense, freight transportation is defined as the economic movement of commodities and products and the effect of such movement on the development and advancement of business. The freight system includes several distinct forms of transportation, called modes. The modes differ in terms of operating characteristics and capabilities, giving them comparative advantages and disadvantages. The five major modes are water, rail, truck, pipeline, and air. Each mode enjoys what might be called natural product provinces. For example, water transportation is usually used to move goods of low-value, and in large quantity. Low value reduces the transportation urgency, and the large quantity is especially suited for 111 the volume loading and unloading machinery used at dockside. All the modes and their representative carriers play important roles in the overall transportation system. Three types of carrier ownership are legal forms of transportation: 1) common carriers, 2) contract carriers, and 3) private carriers. Common carriers are privately or publicly owned companies committed to performing a movement service of the same quality for all shippers on an equal basis and without discrimination. Individual contracts may be arranged between transportation users and carriers. With the formal agreement, the transportation company becomes a contract carrier. The contract usually covers a specific time period and includes a description of the products to be transported and the locations to be serviced. The past decade has seen an increasing tendency among business firms to provide their own transportation capability and become private carriers. The primary mode of private transport is truck. Peculiarities in operations，desires for total distribution control, cost economies, and stringent service requirements are the major reasons for this trend. Transportation plays a major role in the production process. It allows the entrepreneur to assemble more easily the raw material and labor inputs needed to make 112 a specific product. The same transportation system moved intermediate products to other producers for subsequent use in their production process, and moves finished products to consumers. The most important contribution that transportation has made to the production process is that, by widening the market areas that a producer can reach, it has encouraged the introduction of more efficient, larger-scale production techniques. Substantial economies of scale have been achieved, and these have resulted in reduced unit production costs. This saving in per-unit production costs has often more than offset the per-unit transportation cost involved in reaching more distant markets. As a society, we enjoy a richer and more leisurely life than we would if small communities had to be totally self-sufficient. Transportation has also allowed us to trade with countries throughout the world; and this commercial intercourse has helped to eliminate many barriers between nations. One thing that makes international transportation different from domestic transportation is that movements between countries are accompanied by many more documents than is the case for domestic shipments. The amount of documentation required is determined by the product being shipped, its origin, and its destination. 113 Transportation is an exciting and dynamic aspect of our economy. It has been changing at an ever-accelerating pace since the 1980s. Every indication was that this trend has continued. There are four factors that are substantially changing the transportation industry. Transportation Deregulation Before deregulation, government regulatory agencies, in effect, controlled carriers rates and the service offerings that carriers made available to the public. Innovation was not encouraged. Now that deregulation has removed the shackles of control, both shippers and carriers are free to negotiate the best rate and service packages to meet the needs of both parties. Hence, both shippers and carriers are now free to innovate as much as their imagination allows. Just-in-Time Inventory Systems A second factor that has thrust the transportation function into the limelight in recent years is the growing utilization of just-in-time inventory systems. They are based on a production approach in which the firm maintains very small quantities of production inputs. The utilization of this system has placed great pressure on the supplier’s transportation system because the supplier must be able to deliver products exactly when the customer requires them. Competition Based on High Levels of Customer Service 114 Many areas of business are mature, which means that product innovations do not take place frequently. Therefore, from a marketing point of view, competition often shifts to price considerations. Another alternative is to compete on the level of customer service that is provided to each customer. This service involves ensuring that the product will arrive when wanted, in the right quantities, and in undamaged condition. Globalization of Business A final factor that has had a positive impact on the transportation function is the globalization of business. More and more companies purchase their production inputs anywhere in the world where the best quality for the price can be found.The entire world is a potential market for their products. In this worldwide environment, the transportation of both production inputs and finished products presents a special challenge to distribution managers, and for all the companies the need to competitively serve world markets will require a more sophisticated logistics system. Exercises: 1.Answer the following questions: 1. Do you agree that a society without an advanced transportation system would remain primitive? Can you give one example? 115 2. What are the major modes of the modern freight transportation system? 3. What is ―contract carriers‖? 4. What is the most important contribution of transportation to the3 society? 5. What is the difference between domestic transportation and international transportation mentioned in the text? 6. What are the factors that determine the amount of documentation required? 7. What are the major reasons for the trend among business firms to provide their own transportation capability? 8. Can you summarize briefly the factors that have caused the changes in the transportation industry? 9. What is the meaning of transportation deregulation? Give one of the results of the deregulation. 10. The globalization of business has not only made transportation more important but also promoted the development of this industry. Do you agree to the above statement? Could you give some examples to illustrate the viewpoint? 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) 116 In spite _______ a shrinking share of total transportation, railroads re_______ the nation’s largest transportation carrier, accounting f______ 30 percent of the nation’s total cargo ton-miles. Rail-roads are one of the ______ cost-effective modes for shipping carload quantities of bulk products such as coal, sand, minerals, farm and forest products o_____ long land distance. The rate costs for shipping merchandise are quite complex. The lowest r_______ comes from shipping carload rather t_______ less-than-carload quantities. Manufacturers will attempt to combine shipments ______ common destinations to take adv______ of lower carload rates. Railroads have recently begun to increase customer-oriente3d services. They have designed new equipment to ha_______ special categories of merchandise more efficiently, provided flatcars for carrying truck trailers by rail, and provided in-transit services s_______ as diversion of shipped goods to other destinations en rout and processing goods en route. 3.Translate the following passage into Chinese: In choosing a transportation mode for a particular product, shipper consider as many as six criteria: speed, frequency, dependability, capability, availability and cost. Thus if a shipper seeks speed, air and truck are the prime contenders. If the goal is low cost, then water and pipeline are the prime contenders. Shipper are 117 increasingly combining two or more transportation modes, thanks to containerization. Containerization consists of putting the goods in boxes or trailers that are easy to transfer between two transportation modes. 4.Translate the following sentences into English: 1.毫无疑问，一个没有先进的运输系统的社会仍然是一个原始落后 的社会。 2.这些方式在运作特点和性能方面不同，从而使他们各有比较优势 和劣势，五种运输方式分别是 :水路、铁路、公路、管道及航空。 3.过去10年,公司自己提供运输能力的倾向越来越大。 4.作为一个社会,我们现在的生活比完全自给足时更富裕、更消闲。 5.最近几年运输功能引人注目的另一个因素就是越来越多地使用 零库存系统。这种系统是以公司保持很少数量的生产投入的生产方 式为基础的。 Lesson 15 Insurance (1) 第十五课 保险(1) TEXT: A brief survey of insurance literature reveals differences of opinion concerning how the term should be defined. In whatever way the term is defined, insurance is a social device in which a group of individuals transfer risk and provides for payment of losses from funds 118 contributed by all members who transferred risk. Those who transfer risk are called insureds. Those who assume risk are called insurers. Insurance is a risk transfer mechanism, whereby the individual or the business enterprise can shift some of the uncertainty of life onto the shoulders of others. In return for a known premium, usually a very small amount compared with the potential loss, the cost of that loss can be transferred to an insurer. Without insurance, there would be a great deal of uncertainty experienced by an individual or an enterprise, not only as to whether a loss would occur, but also as to what size it would be if it did occur. For example, a house-owner will realize that each year several hundred houses are damaged by fire. His uncertainty is whether in the coming year his house will be one of those damaged, and he is also uncertain whether, given that he will be one of the unlucky ones, his loss will amount to a hundred dollars or so for the redecoration of his kitchen or whether the house will be gutted and cost him thousands of dollars to repair. Even though the probability of his house becoming one of the loss statistics is extremely low, the average house-owner will nevertheless select to spend, say $ 50 to $ 60 on house insurance, rather than face the extremely remote possibility of losing a house worth $ 200,000. 119 In the case of business enterprises, the values exposed to loss are usually much higher, and the premium charged is likely to be substantially higher than that for a house. Even in these circumstances the majority of firms prefer to pay a known cost or premium for the transfer of risk, rather than face the uncertainty of carrying the risk of loss. The insured’s premium is received by the insurer into a fund or pool for that type of risk, and the claims of those suffering losses are paid out of the common pool. Because of the large number of clients in any particular fund or pool the insurance company can predict, with reasonable accuracy, the amount of claims likely to be incurred in the coming year. There will be some variation in claims costs from year to year and the premiums include a small margin to build up a reserve upon which the company can draw in bad years. The main stimulus to enterprise is the release of funds, now available for investment in the productive side of a business, which would otherwise need to be held in easily accessible reserves if the firm had not transferred the risk to an insurer. Medium and large firms would probably create reserve funds for emergencies which might put their whole future viability in jeopardy.The premium payable to an insurer, however, would only be 120 a small proportion of the fund required because of the pooling arrangements, and so most of this money could be invested in new plants, building or stock. In overseas trade the geographical gaps are great, and the transport multi-modal---that is to say, we must combine road, rail, sea and air in almost all cargo movements to some extent. Similarly the time lag is great between production and consumption. In bridging both the geographical gap and the time gap serious risks have to be run. And it is in this framework that the insurance underwriters operate to carry the risks which otherwise would have to be borne by the producers. Cargo insurance is one of the main branches of insurance. These are usually listed as fire, marine, and accident. The term ―marine‖ used to refer to insurance of ships and their cargoes. Today the movement of cargoes is frequently effected partly by other modes of transport. Where cargo is concerned ―transportation insurance‖ seems a better term to use today than marine insurance. Goods do not go overseas solely by sea—air transport takes an increasing share of cargo these days. Similarly export cargo moves to the docks by road, rail and inland waterway, while import cargo moves to the hinterland in the same way. 121 Cargo insurance therefore is an activity aimed at moving the burden of risk from the shoulders of the exporters and importers, and placing it upon the shoulders of specialist risk-bearing underwriters. The important point to realize about transportation insurance is that it is ―the handmaiden of commerce‖. Trade would not cease if there was no method of insurance available, but the losses would be suffered by those who were unfortunate, and not shared out equally among all traders. By paying a premium into an insurance pool, the assured earns the right to claim compensation from the pool should he suffer loss. He does not want to ―scoop the pool‖--- he would prefer his cargoes to reach their destination safely---- but being insured he feels easier about trading: his risks are covered to some extent at least. Exercises: 1.Answer the following questions: 1. What is meant by ―potential loss‖ in the second paragraph? 2. Without insurance what kind of uncertainty may be experienced by an individual or an enterprise? 3. ― There will be some variation in claim costs from year to year and the premiums include a small margin to build up a reserve upon which the company can draw in bad years.‖ Paraphrase the above sentence and explain especially the implication of ―bad years‖. 4. What are the functions of insurance? 122 5.What is transportation insurance? Why is it so important? 6.Do you think it is necessary to change the term ―marine insurance‖ into ―transportation insurance‖? Why and why not? 7.Why do businessmen like to pay a premium into an insurance pool even though trade did exist when there was no method of insurance available in the past? 8. Explain the underlined expression in the sentence ― he does not want to scoop the pool‖. 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) Implied Warranties The word ― implied‖ means that the law will regard these warranties _______ having been incorporated into the contract wh______ in fact an actual stipulation on the point was made or ______ . There are two implied warranties in marine insurance. One is the warranty that at the commencement of the risk the venture is legal and in so far as the assured can control it, will re______ legal throughout the duration of the insurance; _______ breach of this warranty will render the policy void. The o______ is the implied warranty that the vessel is seaworthy. Although seaworthiness does not mean the vessel is ― absolutely safe‖ but only that it is fit for the proposed voyage it is about to undertake, breach ______ an implied warranty of seaworthiness in a voyage 123 policy w_______ allow the insurance to avoid the contract f_______ the moment the vessel sails in an unseaworthy condition. In a policy issues for a period of time, which usually relates to the insurance of the v______ rather than , the cargo it is carrying, the position is somewhat different, and if the vessel sails in an unseaworthy c______, insurance will not be responsible for any ______ attributable to the unseaworthiness. 3.Translate the following passage into Chinese: The order is the instruction to the broker to effect insurance. It may be communicated orally, directly or by telephone, or in written form by letter or telex. It will include all the information necessary to effect the insurance, and enable the broker to disclose with the utmost good faith the nature and extent of the risk. Proposal forms are not customary in cargo insurance, but many firms do use a transit application form which lists the information they require. Since the fullest information reduces the possibility of any breach of utmost good faith, it is better to supply full details than to restrict oneself to the bare minimum. Failure to disclose a material matter may result in the policy being avoided by the insurer. Every material circumstance must be disclosed and what is ―material‖ will depend upon the facts of every consignment. 4.Translate the following sentences into English: 124 1.保险是一种风险转移机制。通过保险个人或企业可以将生活中一些不确定因素转移给其他人。 2.即使在这种情况下，大多数公司宁可付已知的费用即保险费来转移风险，而不愿面对不确定的风险损失。 3.对企业来说损失的价值要比个人高很多。因此保险费也比一栋房子或一辆车高出许多。 4.企业投保的主要刺激是他们可以腾出资金， 进行其他项目的投资。 5.因此，货物保险是一种目的在于把风险从进口商和出口商的肩上转移到承担风险的保险人一方的活动。 4. Key to exercises : 1.Answer the following questions:从略。 2.Fill in each of the following blanks with an appropriate word: As, whether, not, remain, any, other, of, will, from, vessel, condition, loss. 3.Translate the following passage into Chinese: 保险书是让经纪人进行投保的指令，它可以直接通过口头传达或通过电话传达，也可以通过书信或电传以书面形式传达。 授权书包括投保所需的所有信息并能使经纪人以最大诚信公开风险的性质和程度。 货物保险习惯上虽不使用建议书，但许多 125 公司的确使用过渡性的申请书列出他们所需的信息因为越详细的情 况就越有减少违反最大诚信原则的可能。因此，最好是提供充分的信 息而不要只局限于提供最低限度的情况。必须公开每个实质性的事项 并根据每一批货物的情况来决定―实质性的‖事项是什么。 4.Translate the following sentences into English: 1. Insurance is a risk transfer mechanism, by which the individual or the business enterprise can shift some of the uncertainty of life to the shoulders of others. 2. Even under these circumstances, most of the firms prefer to pay a known cost or premium for the transfer of risk, rather than face the uncertainty of carrying the risk of loss. 3. In the case of business enterprise, the values exposed to loss are usually much higher and the premium charged is substantially higher than that for a house or a car. 4. The main stimulus to the enterprise is the release of funds for investment in the production of other items. 5. Therefore, cargo insurance is an activity aiming at moving the burden of risk from the exporters and importers to the underwriters. Lesson 16 Insurance (2) 第十六课 保险(2) TEXT: 126 Transportation insurance, like all forms of insurance, conforms to certain basic principles. When firms seek cover for goods and units of carriage they must follow these principles. There are three main principles of insurance, two subsidiary principles and a doctrine. Insurable interest holds that no one may insure anything unless he has an interest in it, which means that if the thing insured is preserved he will derive a benefit from its preservation, but if it is in any way damaged or lost the assured will be adversely affected. You can insure your own car, for if it is damaged you will have to pay for it to be repaired and consequently you will suffer a loss. You cannot insure your neighbor’s car, for if it is damaged you will not suffer any loss. For this reason the insuring of anything by people who are not “interested” in it is held to be ―against public policy’. This means that crime would be encouraged. Every contract of insurance requires an insurable interest to support it, or otherwise it is invalid and any claim made upon it will not be entertained. The time of an event may be crucial to the question of insurable interest. The interest passes with the documents. In cargo insurance we know who has an interest in the cargo at any particular point of time, if we know the terms of sale which have been arranged. We can work out 127 who will suffer loss by discovering at what point the property passes from one person to another. The person who is going to suffer the loss is the one who has the insurable interest at any moment. This means that goods may be shipped at the port of origin by a shipper or freight forwarder under a policy taken out to cover them, and the buyer takes over the policy which has been issued when he takes over the ownership of the goods. If they fail to complete the voyage undamaged, he can claim on the insurance even though it was not in his name. Utmost good faith is a very important principle. The people who decide what premium is fair for a particular cover do so on the basis of written statements made in a proposal form. If this statement is untrue, then the premium agreed on will not be a fair one. Suppose I say that a crate contains copper, when in fact it contains platinum. The premium required to cover the cheaper metal will be an unfair premium for the more valuable cargo. The mis-statement is a fraud, and the policy is voidable by the party who is misled. Even if the mis-statement was unintentional, the underwriter would still be deceived and the policy voidable. Indemnity holds that a contract of insurance is one which restores a person who suffered a loss into the same position as he was in before the loss occurred. A person with a third-hand Ford car will receive sufficient compensation to buy another third-hand Ford car, not enough to buy a brand new Ford car. 128 This principle cannot apply to life or personal accident insurance—for of course a life, or a limb, cannot be restored. In a normal policy of insurance the compensation payable is sufficient only to restore the insured to the position he was in before the loss occurred — not to a better position. Cargo policies are often issued for an agreed value and are therefore called “valued” policies. The idea is that the compensation payable will be at an agreed figure, often at invoiced cost plus freight and forwarding charges plus the insurance premium plus an agreed percentage such as 10 percent. This represents a profit that could have been earned on the capital tied up in the transaction. Contribution is a sub-principle which is associated with indemnity. It holds that a person cannot be allowed to insure twice for the same risk, and claim compensation from both insurers. To do so would amount to restoring the insured to a better position than he was in when the loss occurred. It would be a breach of indemnity, and against public policy. Therefore, if two policies do cover the same event, the insurance companies contribute pro rata to the loss, and the insured is only restored to the indemnity position. This is unlikely to happen very frequently in cargo insurance. Subrogation, the sub-principle, also relating to indemnity, is of enormous importance in cargo insurance. The word ―subrogate‖ 129 means ―to take the place of another‖. Imagine a situation where A has insured his cargo with B and it is damaged by C’s negligence. A will naturally claim against B, who will pay up for the loss suffered. However, because C was negligent, a legal action by A against C would almost certainly lead to an award of damages against C. A would thus be compensated twice, and this would be a breach of the principle of indemnity. To prevent this happening, B, the insurer, is substituted for A, the assured, in any legal action against C. The insurer is entitled to the advantage of every right of the assured which will diminish the loss he has been forced to bear. The doctrine of proximate cause — when an insurance policy is made out to cover a certain risk, a claim becomes payable only if that risk occurred as the proximate (closest) cause of the loss suffered. The proximate cause is the direct cause of the loss. Exercises: 1.Answer the following questions: 1. What are the basic principles of insurance that firms must follow when they seek cover for goods? 2. Can you give some examples to illustrate ―insurable interest‖? 3. How important is insurance interest? 4. What is the most important fact about ―utmost good faith‖? 5. How are cargo policies usually calculated for values to be covered? 130 6. Can you briefly describe subrogation? 7. Will the insure compensate the claim for loss for which the risk covered is not the proximate cause? 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) The broker will now approach further underwriters and try to persuade them to accept a share of the risk at the same rate as the leader. This may be easy--- since all under writers are ke______ to add their names to a ―good ship‖ where under writers have already taken up w_____ they consider to be a prudent amount of a particular class of insurance. A certain amount of ―obliging‖ takes pl______ in such circumstances, an underwriter helping out a broker who is having difficulties, in return no doubt ________ a chance to get better business o_______ some future occasion. It is usual to ―overplace‖ the risk. This means that the broker invited more underwriters to accept the risk than are really ne_______. It enables him to repay his obligations to underwriters who have helped him previously on a difficult risk, and expands his connections for fu______ occasions when the cover to be obtained is of a similar type but larger in value. The result of overplacing is that, when the final policy is drawn ______ and the ―risk closed‖, aafter notification of shipment the actual lines written will be reduced to conform w______ the actual value to be covered. This 131 ―reducing a line‖ is an inevitable process in any event, for an actual sh______ will usually vary from the cover originally arranged. 3.Translate the following passage into Chinese: (There are three types of insurance in marine transportation: ) 1.F. P. A. (Free from Particular Average) (平安险) This is a very limited cover confining the insurer’s liability, strictly speaking, to only total loss of the insured cargo, and partial loss of or damage to the cargo is answerable only where the carrying vessel is grounded, sunk or burnt. 2.W, A. ( or W. P. A. ) ( With Particular Average ) (水渍险) This type has a wider coverage than the F. P. A. Partial loss of or damage to the insured goods is excluded only where the loss is under a specified percentage. Any loss exceeding such a percentage is answerable by the insurer in full. 3.All Risk ( 全险,综合险) This cover is the most comprehensive of the three. The insurer is responsible for total or partial loss or damage to the insured goods arising from natural elements or from sea perils, including all losses caused by accidents to the carrying vessels or craft or by any external causes. But it does not, as its name suggests, really cover all risks. It does not include coverage against war, strikes, riots etc. 4.Translate the following sentences into English: 132 1.没有可保利益的保险合同是无效的。而任何根据这类合同提出的索赔都不会被受理。 2.尽管错误的陈述是无意的，但保险人还是受到欺骗。从而保险合同无效。 3.将受损失人的利益恢复到损害发生前的状况的合同就是保险合同。 4.赔偿金额一般包括发票金额加上运输费用及保险费再加上一个商定的百分比，为10%。 5.如果投保的险别不是造成损失的直接原因,保险公司将不予赔偿. 4. Key to exercises : 1.Answer the following questions:从略。 2.Fill in each of the following blanks with an appropriate word: Keen, what, place, for, on, necessary, future, up, with, shipment. 3.Translate the following passage into Chinese: 海洋运输中有三种基本险别: 1.平安险 这是一种保险范围很受局限的险别。严格地说，承包人只负责赔偿被保货物的全损。只有货运船只搁浅、沉没或焚毁而造成的货物部分损失保险人才负责赔偿。 2.水渍险 133 此险别比―平安险‖的责任范围大，只有被保货物的部分损失在特定 的百分比之下时，承保人才不负责赔偿。若部分损失超过这一比例， 承保人则负责全部赔偿。 3.一切险 (全险，综合险) 这是三种险别中责任范围最为广泛的一种。在一切险别下，承保人 负责承担被保货物由于自然灾害或海难而遭受的部分损失或全部 损失。这些损失包括货运工具因意外事故或外来原因所致的所有损 失。但一切险并不像其名称所示，真的包括了一切险别。它并不包 括战争 、罢工、动乱等风险。 4.Translate the following sentences into English: 1. An insurance contract without an insurable interest to support it is invalid and any claim made upon it will not be entertained. 2. Even though the mis-statement is unintentional, the underwriter will still be deceived and the policy voidable. 3. A contract of insurance is one which restores a person who has suffered a loss into the same position as he was in before the loss occurred. 4. The compensation payable generally includes the invoiced cost plus freight, the insurance premium, and an agreed percentage, say 10%. 5. The insurance company will not entertain the claim if the risk covered is not the proximate cause of the loss. 134 Lesson 17 The International Monetary System and Exchange Rate 第十七课 世界货币体系及汇率 TEXT: The earliest international monetary system was known as the gold standard under which countries pledged to change their paper currencies into gold when requested to do so. The gold standard created a fixed exchange rate system as each country pegged establish thits par value. For most of the 19 century till the end of the 1st World War, major trading countries followed this system and the British Pound was the most important currency in international business as a result of the economic, political and military power of the United Kingdom, hence the term sterling-based gold standard. The pressure caused by the 1st World War on economy coupled with the impact of the Great Depression put an end to the fixed exchange rate system. The Bank of England was no longer able to redeem its paper currency for gold at par value and allowed its value to be determined by supply and demand. With Britain abandoning the gold standard, there appeared different areas in the world. Some countries pegged their currencies to the sterling, some countries to the US dollar and some to the French Franc, forming the ―sterling area‖, 135 ―dollar area‖ and ―franc area‖. This period witnessed the degeneration of the international monetary system as some major countries vied to devaluate their currencies to make their export goods more competitive. The benefits brought about by their devaluation were, needless to say, offset by what their competitors did. International trade contracted and economic conflict finally led to the 2nd World War. Towards the end of the Second World War representatives of 44 countries gathered at Bretton Woods to renew the gold standard on a greatly modified basis. ne important fruit of the conference is the creation of the International Bank for Reconstruction and Development and the International Monetary Fund. The Bretton Woods Conference established a US dollar based gold standard. Because of the dominating economic and political influence of the United States, the dollar replaced the sterling as the major vehicle for international settlement. Though all the Bretton Woods participants agreed to peg their currencies to gold, only the United States pledged to redeem the dollar for gold at the request of the central bank of a foreign country. Under the new fixed exchange rate system, each participant promised to maintain the par value of its currency, allowing a fluctuation of only one percent. The country concerned had to intervene if the market value of its currency goes beyond the range. 136 Under special circumstances, a country was allowed to adjust the par value of its currency. Thus the Bretton Woods system is said to be using an adjustable peg. The new system was also called by some people the ―New Gold Standard System.‖ This relative stability in exchange rates facilitated international business till the beginning of 1970s. Under the Bretton Woods System, people would hold dollars so long as they trusted the convertibility of the dollar into gold. With the increase of foreign dollar holdings to finance trade expansion, the faith of dollar holders decreased in the ability of the United States to redeem the dollar for gold. To reduce the demand for the dollar as a reserve currency, the special drawing right was created. Used to settle official transactions at the IMF, SDRs are sometimes called paper gold. Despite the new liquidity injected by SDRs into the international monetary system, United States was still unable to meet the demands of foreign dollar holders for gold. On August 15, 1971 the US Administration announced severing link between the dollar and gold, signifying the collapse of the Bretton Woods system. Since then, international business has relied increasingly on the flexible exchange rate system. Most major currencies began to float in the foreign exchange market. Other currencies followed a fixed exchange rate by pegging themselves to a major currency such as the dollar, or the 137 French Franc and float with it. From 1976 countries ceased to stipulate gold par value to their paper currencies leaving the price of their respective currency to be decided by the interaction of supply and demand. Factors influencing the exchange rate include the following: 1. International balance of payment. It has a direct bearing on the supply and demand of foreign exchange. The value of one’s own currency will go up with favorable balance of payment and drop with BOP deficit. 2. Inflation. It is closely related to the real value of the currency and the competitiveness of the commodity. When inflation intensifies, the value of the currency will drop relative to foreign currencies and vice versa. 3.Interest rate. Under specific conditions, high interest rate will attract short term international fund, increasing the exchange rate of one’s own currency and vice versa. The above factors may work alone or collectively. Sometimes their influences may offset each other. Generally speaking, however, international balance of payment is the most important factor in deciding the trend of exchange rate. In addition, foreign exchange policies, political events and speculation activities may also have a role to play in the fluctuations of exchange rate. 138 The flexible exchange rate system has never been clean float or free float. The central banks take various measures to intervene in the price of its currency. So the current practice is often called a managed float or dirty float. The common measures taken for intervention are: 1. When the price of a foreign exchange goes too high, the central bank may increase its supply by selling it out of its foreign exchange reserves. And in the opposite case, it can buy the currency in the market to increase its reserves. 2.When the price of a foreign exchange goes too high, the government may raise the discount rate to absorb foreign fund to increase foreign exchange income of the country and vice versa. 3.In case of acute exchange rate fluctuation, a government may have to resort to foreign exchange control or raise foreign loans to make up its balance of payment deficit and lower the demand for foreign exchange. The two different exchange rate systems each has its own advantages. The fixed exchange rate system reduces the riskiness of international business and is also an important measure to curb inflation. However the system is vulnerable to disorderly changes in currency value. The most recent example is the Asian Financial Crisis of 1997—1998 when the fixed exchange rate adopted by some Southeast Asian countries like Thailand and Indonesia collapsed and dealt a heavy blow to the economy. 139 Under the flexible exchange rate system fluctuations of the exchange rate within a definite period of time will not immediately affect domestic money circulation and is helpful to the stability of the economy. Flexible exchange rate can also protect domestic currency from the impact of foreign idle funds and helps to prevent the drain of foreign exchange reserve. But frequent wild swings of the value of currencies will increase the riskiness of trade and affect international investment. Exchange rates are published daily in two different ways. A direct exchange rate is the price of a foreign currency in terms of the home currency. In a direct quote, an amount of foreign currency, usually one unit or one hundred units is taken as the standard and the equivalent amount of home currency is marked after it. An indirect exchange rate is the price of home currency in terms of a foreign currency. In an indirect quote one unit or one hundred units home currency is taken as the standard and the equivalent of foreign currency is given. For instance 100 USD/826.57RMB (or 826.57RMB/100USD) is direct exchange rate from the Chinese perspective and indirect exchange rate from the American perspective. The two different quotes are used in different countries or regions mainly as a tradition or for convenience. Most countries or regions including China use the direct quote, but the United States and Britain use the indirect quote. 140 There are three types of foreign exchange price. The buying rate refers to the rate by which a commercial bank buys a currency. The selling rate is the rate by which a bank sells a currency. The medial rate is the average of the two. It is used in transactions between the banks and is not applicable to common customers. The difference between the buying rate and the selling rate varies from 1 per mil to 5 per mil which constitutes the profit of the bank. In the case of direct quote, the first figure after the fixed amount of foreign currency is the buying rate and the second figure is the selling rate. And in the case of indirect quote the first figure after the fixed amount of home currency is the selling rate and the second figure is the buying rate. Exercises: 1.Answer the following questions: 1. Explain briefly the meaning of the gold standard? What kind of exchange rate system did it create? 2. How much can you tell about the Bretton Woods Conference? What is meant by ―adjustable peg? 3. What is the Special Drawing Right? How was it created? 4. What are the major factors that may influence the exchange rate? Explain briefly. 141 5. What is meant by clean float and dirty float? What are the common measures taken for intervention in exchange rate? 6. Illustrate the respective advantages and disadvantages of the flexible exchange rate system and the fixed exchange rate system. 7. How are exchange rates published daily? What quote does China use? How about the other major countries? 8. What are the three types of foreign exchange price? Where are the buying rate and the selling rate marked in the respective case of direct quote and indirect quote? 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) The Conference at Bretton Woods has considered matters of international money and finance important for peace and pros_______. The Conference has agreed on the problems needing attention, the measures that should be t________, and the forms of international co_________ or organization required. The agreements reached on these large and complex matters are without precedent in the history of international economic relations. Since foreign trade affects the standard of life of every people, all countries have a vital interest in the system of exchange of national currencies and the re_________ and conditions that govern its working. Because these monetary transactions are international exchanges, the 142 nations must agree on the basic rules that govern the exchanges if the system is to work smoothly. When they do not agree, and when single nations and small groups of nations attempt by special and different regulations of the foreign ex_________ to gain trade advantages, the result is instability, a reduced volume of foreign trade, and damage to national economies. This course of action is likely to lead to economic warfare and to en_______ world peace. The Conference has therefore agreed that broad international action is necessary to maintain an international m________ system that will promote foreign trade. The nations should consult with each other, and should outlaw practices that are agreed to be harmful to world prosperity, and they should assist each other to overcome s_______ term exchange difficulties. The Conference has agreed that the nations here represented should establish for these purposes a p_________ international body, The International Monetary Fund, with powers and resources adequate to perform the tasks assigned to it. Agreement has been reached concerning these powers and resources and the additional obligations which the m_________ countries should undertake. Draft Articles of Agreement on these points have been prepared. 3.Translate the following passage into Chinese: It is in the interest of all nations that post-war reconstruction should be rapid. Likewise, the development of the resources of 143 particular regions is in the general economic interest. Programs of reconstruction and development will speed economic progress everywhere, aid political stability and foster peace. The Bretton Woods Conference has agreed that expanded international investment is essential to provide a portion of the capital necessary for reconstruction and development. The Conference has further agreed that the nations should cooperate to increase the volume of foreign investment for these purposes, made through normal business channels. It is especially important that the nations should cooperate to share the risks of such foreign investment. The Conference has agreed that the nations should establish a permanent international body to perform these functions, to be called The Inter-national Bank for Reconstruction and Development. It has been agreed that the Bank should assist in providing capital through normal channels at reasonable rates of interest and for long periods for projects that will raise the productivity of the borrowing country. The Conference has agreed on the powers and resources which the Bank must have and on the obligations which the member countries must assume, and has prepared draft Articles of Agreement accordingly. The Conference has recommended that in carrying out the policies, special consideration should be given to the needs of countries which have suffered from enemy occupation and hostilities. 144 4.Translate the following sentences into English: 1.第一次世界大战以前，金本位制建立了固定汇率制，每个国家通过将本国货币与黄金挂钩来确定其货币的平价。 2. 1944年44国在美国布雷顿森林举行会议签署了协议，计划在世界贸易和货币方面实现更好的合作。 3.弹性汇率制从没有真正地―干净‖或自由地浮动过。因为中央银行为了稳定汇率采取了各种对货币价格进行干涉。 4.在特定条件下，提高利率可以吸引国外短期资金，提高一国的外汇汇率。 5.外汇汇率有三种形式，即:买进汇率，售出汇率和两者的平均值——中间汇率。 4. Key to exercises : 1.Answer the following questions:从略。 2.Fill in each of the following blanks with an appropriate word: Prosperity, taken, cooperation, regulations, exchanges, endanger, monetary, short, permanent, member. 3.Translate the following passage into Chinese: 加快战后重建工作符合所有国家的利益。同样，在某些地区，开发资源也符合经济发展的总体利益。重建及开发计划将加快各国经济发展，有助于政治稳定和足进和平。 145 布雷顿森林会议一致认为扩大国际投资至关重要，可以为战后重建和 开发提供一部分必要的资金。 会议还同意各国应通过正常商务渠道来增加对外投资以实现以 上目标。特别重要的是各国应共同分担这些对外投资的风险。 会议还同意各国建立一个永久性的国际机构来行使这些职责，机 构的名称就叫做国际复兴开发银行，此银行应通过正常渠道为能提高 借款国生产力的项目提供长期低息贷款。会议还就该银行必须掌握的 权利和资源，以及成员国应履行的义务达成了一致意见，并起草了相 关的协议条款。 会议还建议在执行这些政策的过程中给予那些遭受敌国侵害的 国家以特别关注。 4.Translate the following sentences into English: 1. Before the First World War, the gold standard created a fixed exchange rate system as each country pegged the value of its currency to gold to establish its par value. 2. In 1944, 44 nations held a conference at Bretton Woods, U.S.A., to plan better cooperation in world trade and currency matter. 3. The flexible exchange rate system has never been clean float or free float, because the central bank takes various measures to intervwne in the price of its currency in order to stabilize the exchange rate. 4. Under specific conditions, high interest rate will attract short-term international fund, increasing the exchange rate of one’s own currency. 146 5. There are three types of foreign exchange price namely: the buying rate, the selling rate and the average of the previous two the medial rate. Lesson 18 Foreign Direct Investment 第十八课 国外直接投资 TEXT: Foreign direct investment is the major form of international investment, whereby residents of one country acquire assets in a foreign country for the purpose of controlling and managing them. Why does FDI occur? An instinctive answer to the question by many people may be that the rates of investment returns are higher in a foreign country. This answer, though seemingly plausible, is actually farfetched. Just think of the fact that Britain is both a major source of FDI in the United States and an important destination for FDI from the country. We cannot say the rates of investment returns in the United States is at the same time higher than those in Britain which explains investment into it and lower which justifies capital flow to the opposite direction.We should therefore look for more specific factors influencing a firm’s decision to undertake FDI. Controlling costs is the first major motivation for engaging in FDI. And lowering production costs is an important consideration. A 147 foreign country may have lower land prices, tax rates or cost of labor, all of which will reduce the production costs to a considerable degree, making foreign locations more attractive. Transportation cost which may be very significant for some products such as beverages will also encourage an enterprise to engage in production in the foreign market through FDI to save the fees for long distance transportation. Gaining access to natural resources is another major motivation for firms to undertake FDI. Integrated oil companies, for example, often invest abroad to obtain access to new oil deposits when domestic reserves are decreasing. Some international enterprises negotiate with host governments for availability of raw materials in return for FDI. For instance, a Philippine company invested in building tuna canneries on an Indonesian island as part of a deal with the Indonesian government to allow some Philippine tuna boats to fish its seas. Sometimes it may be more advantageous to invest in foreign firms for the purpose of utilizing their existing advanced technology than to engage in research for the development of similar technologies. That is also a motive for making direct investment abroad. Such examples are Swiss pharmaceutical factories investing in American biogenetics companies to make use of their biotechnology. This type of investment occurs mostly between an enterprise that has sufficient 148 capital but is in urgent need of the necessary technology and one that is in requirement of fund for expansion. In addition to the above supply factors, there are also some factors on the demand side encouraging enterprises to make investment abroad. The first of these factors is the necessity to have a physical presence in the market that provides easy access to customers. It is hard to imagine Quanjude Restaurant to sell Beijing roast duck to Japanese consumers from the Chinese capital. Similarly it is next to impossible for a British insurance company to market life insurance to continental customers.If such enterprises want to be competitive in foreign markets, it is advisable for them to make foreign direct investment. Operating directly abroad enhances the visibility of a firm’s products, making local customers feel more assured about the things they buy. Manufacturing in an overseas market will enable the investor to have a better knowledge of the specific requirement of foreign consumers and adapt their products better to their needs, which will help expand its sales volume in the host market. The buy-local attitude common among host governments greatly facilitates the marketing efforts of the enterprise. These, together with more convenient after-sale service, form marketing advantages encouraging enterprises to engage in FDI instead of selling their products by way of exportation. The success of 149 vehicle manufacturer like German Volkswagen in China is a good example of taking marketing advantages by way of FDI. Another motivation for FDI is customer mobility. When an important client of a company engages in FDI and starts a factory in a foreign market, the firm, either a parts supplier or service provider, may very likely follow its client and make FDI overseas so as not to lose the business to its competitors. The building of factories and warehouses by Japanese parts suppliers in the United States following the construction of auto assembly plants by major Japanese automakers in the country is an example of such kind of FDI. The introduction of JIT inventory management system increases the necessity of such investment, since the system is meant to minimize the inventory to increase efficiency, putting the suppliers at disadvantage to make supply from a distant foreign country. Two political factors may also be at work in a firm’s choice to operate directly abroad through FDI. The first is to get around trade barriers such as quotas set by foreign countries or even VER imposed by one’s home country. Saving tariff, the major form of trade barrier, is needless to say, an obvious motivation for undertaking FDI. Favorable investment policies practised by host governments such as tax reduction or tax holidays, rebated land-use fee etc. are an important 150 incentive for FDI. An illustrating example is China that attracted large amounts of foreign capital largely through preferential policies. FDI is mainly practised in three forms: Building new enterprises, purchasing existing facilities and forming joint ventures. Building new enterprises is often called ―the green field strategy‖. The firm builds new facilities on land bought or leased in a foreign country before starting its new operation. Such a firm can make its own choice in respect of the site, and install up-to-date facilities. The relevant costs are often lower because of the incentives offered by the local government. Moreover, the new enterprise operates free from such troubles as existing debts, backward equipment and outmoded management procedures. But of course, such a wholly foreign-own enterprise will have some difficulties to operate all on its own efforts. It has to face the local culture such as laws, regulations and practices, and has to recruit and train local employees. Purchasing existing facilities is known as acquisition. This is a common means of entering a new market. The assets of the acquired firm such as equipment, technology, employees, brand names and distribution networks are all there for use. The purchaser simply integrates all these into its overall strategy before gradually transforming them to suit its own purposes. It does not have to start from scratch and face the difficulties in the 151 greenfield strategy. But it has to take responsibilities for all the liabilities of the purchased firm, and deal with existing problems in management, labor relations, environmental protection, obligations etc. Forming joint ventures with foreign firms is a popular form of FDI. A joint venture is an independent business entity founded and owned by two or more partners called parents. The proportions of ownership between the partners may be equal or unequal depending on their respective investments that are mostly in the form of capital but may also be in land, equipment, or intellectual property. As a separate legal entity, the joint venture has a formal organizational structure, making this form of alliance more stable and broader in business scope. It reduces the cost of market entry of a foreign firm since working together with a host country partner will help overcome some major obstacles such as entrenched competition, unfavourable government regulations, and cultural barriers. The strategic alliance also enables the partners to share risks in business and helps them to gain knowledge and expertise from each other. These advantages combined will create synergy for the collaborating firms, making them more efficient and competitive than engaging in business otherwise. For all the benefits that can be gained through joint ventures, some pitfalls should be guarded against such as incompatibility of partners; 152 disputes in distribution of earnings, possible loss of autonomy, and problems arising out of changing circumstances. Exercises: 1.Answer the following questions: 1. How do you understand FDI? Please explain it with one or two specific examples. 2. What are the possible factors on the supply side that influence a firm’s decision to undertake FDI? 3. Is controlling costs a major motivation for firms to undertake FDI? Why? 4. Are there any factors on the demand side encouraging enterprises to make investment abroad? What are they? 5. What is meant by JIT? How does it affect the turnover of the supply of the goods? 6. Does a firm have to put the political factors into consideration when making choice of investment overseas? What are these factors? 7. Illustrate with examples what ―the greenfield strategy‖ is? 8. What is acquisition? What is a joint venture? Please explain their respective advantages and pitfalls? 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) 153 Promotional efforts to attract foreign direct investment (FDI) have become the focal point of competition among ___________ and developing countries. This competition is maintained even when countries are pursuing economic in__________ at another level. And it often extends to the sub-national level, with different regional authorities pursuing their own strategies and assembling their own basket of incentives to attract new in_________. While some see countries lowering standards to attract FDI in a "race to the bottom"，others praise FDI for raising standards and welfare in recipient countries. Several trends are reinforcing traditional impulses for foreign direct investment, such as a________ to natural resources, markets, and low-cost labor. With the rise of glo_________, technological progress allows for the separation of production into more discrete phases, often across national barriers. Information and communication technologies, together with improved log_________, allow for production to be close to markets while taking advantage of the specific characteristics of individual production locations. The resources gathered under this topic look at the many different methods used by policymakers to attract FDI, and their effectiveness. Some countries rely on targeted financial incentives, such as tax c__________, cash grants and specific subsidies. Others 154 have chosen a broader approach that focuses ________ improving their domestic infrastructure to meet the demands and expectations of foreign investors. And still __________ have sought to improve the general business climate of a country by decreasing administrative b__________ and red tape. Many governments have created state agencies to help investors through this administrative paperwork, as well as to promote FDI broadly. 3.Translate the following passage into Chinese: To start with, the scope of efforts to attract FDI must encompass all economic sectors. The tendency in the past was to focus almost exclusively on infrastructure and on efficiency-seeking and tariff-jumping FDI in manufacturing. In the future more and more FDI will be market seeking investment in service sectors as well as investment in tourism and offshore services. Most developing countries continue to restrict FDI in service sectors. For example, India does not allow FDI in retail, yet is ready to waste fortunes to attract efficiency-seeking FDI for manufacturing in an uphill battle against China. Lesson 19 International Financial Organizations 第十九课 国际金融组织 TEXT: The most important international financial organizations are the World Bank and the International Monetary Fund both of which were created by the Bretton Woods Conference. Both are institutions under the United Nations and both are headquartered at Washington DC. 155 The official name of the World Bank is the International Bank for Reconstruction and Development (IBRD). The Bank and its three affiliates, the International Development Association (IDA), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA), are sometimes referred to as the World Bank Group. The common objective of these institutions is to help raise standards of living in developing countries by channeling financial resources to them from developed countries. The International Bank for Reconstruction and Development, established in 1945, is owned by the governments of 180 member countries. The IBRD, whose capital is subscribed by its members, finances its lending operations primarily from its own borrowings in the world capital markets. A substantial contribution to the IBRD’s resources also comes from its retained earnings and the flow of repayments on its loans. IBRD loans generally have a grace period of five years and are repayable over fifteen to twenty years. They are directed toward developing countries at more advanced stages of economic and social growth. The interest rate the IBRD charges on its loans is calculated in accordance with a guideline related to its cost of borrowing. 156 The IBRD’s charter spells out certain basic rules that govern its operations. It must lend only for productive purposes and must stimulate economic growth in the developing countries in which it lends. The bank cannot finance a trade deficit, but can finance an infrastructure project. It must pay due regard to the prospects of repayment. Such loans with good repayment prospects are called “hard loans”. Each loan is made to a government or must be guaranteed by the government concerned. The use of loans cannot be restricted to purchases in any particular member country. And the IBRD’s decisions to lend must be based on economic considerations alone. The International Development Association was established in 1960 to provide assistance for the same purposes as the IBRD, but primarily in the poorer developing countries and on terms that would bear less heavily on their balance of payments than would IBRD loans. It offers soft loans, i.e. loans with significant risk of not being repaid. Membership in IDA is open to all members of the IBRD. The funds used by IDA, called credits to distinguish them from IBRD loans, come mostly in the form of subscriptions, general replenishments from IDA’s more industrialized and developed 157 members, and transfers from the net earnings of the IBRD. The terms of IDA credits, which are traditionally made only to governments, are ten-year grace periods, thirty-five- or forty-year maturities, and without interest. The IFC was established in 1956. Its function is to assist the economic development of less-developed countries by promoting growth in the private sector of their economies and helping to mobilize domestic and foreign capital for this purpose. Membership in the IBRD is a prerequisite for membership in the IFC. Legally and financially, the IFC and the IBRD are separate entities. The IFC has its own operating and legal staff, but draws upon the Bank for administrative and other services. MIGA, established in 1988, has a specialized mandate: to encourage equity investment and other direct investment flows to developing countries through the mitigation of noncommercial investment barriers.To carry out this mandate, MIGA offers investors guarantees against noncommercial risks; advises developing member governments on the design and implementation of policies, programs, and procedures related to foreign investments; and sponsors a dialogue between the international business community and host governments on investment issues. 158 The Bank’s efforts to reduce poverty cut across sectoral lines and include investments to improve education, ensure environmental protection, expand economic opportunities for women, strengthen population planning, health, and nutrition services, and develop the private sector. The Bank’s support of economic restructuring in many of its borrowing member countries is based on the knowledge that the precondition for restoring economic growth—the cornerstone of successful development and poverty reduction—is structural adjustment. The International Monetary Fund was created in December 1945 to oversee the functioning of the international monetary system. Any country accepting its rules and regulations is eligible for membership. The deposit paid by each member to the Fund is called a quota that generally reflects the importance of a member’s economy. The quota is very important as it determines a member’s voting power in and borrowing power from the IMF，and serves as part of its official reserves. In 1967, the special drawing right was created to settle official transactions at the IFM in addition to the common drawing right of the IMF members. The major function of the IMF is in the area of providing temporary financing for countries suffering cyclical, seasonal or random shocks that would weaken its currency. 159 When necessary, a member country is allowed to borrow up to its gold tranche contribution, now called reserve tranche contribution automatically and an additional 100 percent of its contribution in 4 steps, each with additionally stringent conditions established by IMF. Over the years, IMF’s lending facilities have been expanded with the establishment of permanent as well as temporary credit facilities. In 1952, standby arrangements were introduced, making funds available ahead of the need. Exercises: 1.Answer the following questions: 1. What institutions does the World Bank Group consist of ? 2. What are the principles governing the lending of the International Bank for Reconstruction and Development? 3. What is meant by hard loans and soft loans? What institutions are they associated with respectively? 4. Why are the funds used by IDA called credits? What are the major sources of the credits? 5. What is the function of IFC? What is the prerequisite for a country to be a member of IFC? 6. What is MIGA? What are its functions? 7. Please find out from the text the paramount task of the World Bank? 160 8. In what aspects does the World Bank make efforts to reduce the poverty of developing countries? . What is the objective of the International Monetary Fund? What is the relation between the IMF and the United Nations? 10. What is the quota of the International Monetary Fund? Is it important? Why? 11. Explain briefly how a member borrows from the International Monetary Fund? 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) In addition _____ multilateral aid institutions l_____ the World Bank and its af_____ and regional development banks, the industrialized nations engage _____ bilateral aid. The first massive bilateral aid program was the 1974 Marshall Plan. In this case one country (the United States) gave aid _____ individual European Nations (e.g., France, or Italy, or Holland). In 1961 the Agency for International Development (AID) was c_____ to centralize administration of foreign _____ given by the United States government. AID m_____ grants as well as development loans available. Before 1969 it stipulated that the proceeds of l_____ could only buy United States manufactured products. In 1969 this restriction ______ abolished for Latin America. 161 3.Translate the following passage into Chinese: The Bank for International Settlement (BIS) is a unique institution. Many of its operations are of types normally performed by a commercial bank, but it is owned principally by central banks, and managed by central banks and its principal customers are central banks. The objects of BIS are to promote the cooperation among central banks and to provide additional facilities for international operations. The BIS holds deposits for about 80 central banks and some 10% of the world foreign exchange reserves are managed through its facilities. It is generally engaged in a wide range of banking transactions and operations for its own accounts or as agent or correspondent of central banks. The Bank has helped to solve the debt problems of some developing countries and assisted global monetary cooperation. The BIS, in addition to performing financial operations, also engages in research, both general research on monetary matters and research requested by central bank clients. The annual reports of the BIS are widely read for the information and insight it provides and have been influential on government policy in many countries. 4.Translate the following sentences into English: 1.这些机构的共同目标是通过把发达国家的资金输送到发展中国家帮助 这些国家提高生活水平。 162 2.国际复兴开发银行的资金有相当大一部分来自它的留存赢余以及偿还贷款的不断流入。 3.该银行的贷款是向处于经济和社会发展较高阶段的发展中国家提供的。 4.国际货币基金组织旨在向那些在付款方面有困难的基金会员国提供中期贷款。 5.为了承担这项使命，多边投资担保机构向投资者提供担保以防范非商业性风险，向发展中成员国政府提供咨询，并为国际商业界与东道国政府就投资问题安排对话。 Key to exercises : 1.Answer the following questions:从略。 2.Fill in each of the following blanks with an appropriate word: To, like, affiliates, in, to, created, aid, makes, loans, was. 3.Translate the following passage into Chinese: 国际结算银行(BIS)是一家很独特的机构。虽然它的许多种业务是商业银行的业务，但是它主要由中央银行所有，由中央银行管理，它的主要客户也是中央银行。 BIS的目标在于促进中央银行间的合作，为他们从事国际业务提供更多的便利。BIS有80家中央银行的存款，并通过其机构经营着全世界10%的外汇储备。它广泛地从事银行间的交易和业务，有时为自己，有时是作为代理人或中央银行的往来行。BIS 帮助解 163 决了一些发展中国家的债务问题，为全球金融合作提供了帮助。除 了从事金融业务外，BIS叶从事研究工作。BIS的年报广受欢迎， 它既富含信息也深具洞察力，影响了许多国家政策的制定. 4.Translate the following sentences into English: 1. the common objective of these institutions to help raise standards of living in developing countries by channeling financial resources to them from developed countries. 2. A substantial contribution to the IBRD’s resources comes from its retained earnings and the flow of repayments on its loans. 3. The loans of IBRD are directed toward developing countries at more advanced stages of economic and social growth. 4. The purpose of IMF is to provide medium term loans to those members with payment difficulties. 5. To undertake this mission, MIG offers investors guarantees against noncommercial risks, advises developing member governments on policies and sponsors dialogues between the international business community and host governments on investment issues. Lesson 20 The United Nations Conference on Trade and Development 第二十课 联合国贸易和发展会议 TEXT: 164 At the perennial insistence of the new states, the United Nations General Assembly proclaimed the 1960s as the first development decade, and in 1962 it decided to convene a United Nations Conference on Trade and Development. While the discussions could have taken place within the framework of ECOSOC or GATT, the less-developed countries urged the creation of a new institution. They argued that the problems discussed by these two bodies mainly concerned the economic interests of the developed countries and considered GATT as a ―rich men’s club‖. At that time the GATT rules were based on the non-discrimination principle. However, even after the principle of a differential treatment had gradually come to be accepted, the less-developed countries’ criticisms did not cease. Although in 1963 there were 43 international organizations dealing with commodity and other trade problems, the less-developed countries wanted a more satisfactory forum for an examination of their difficulties. Finally, the first United Nations Conference on Trade and Development was held in Geneva from 23 March to 16 June 1964. Although no specific objectives were laid down at the first conference, the general function of UNCTAD is to formulate, negotiate and implement measures to improve the development process. 165 The specific standpoints and aims of the less-developed countries or the majority of the participating countries may be summarized as follows: 1. The share of the less-developed countries in world trade is decreasing. Their terms of trade with the developed countries are constantly deteriorating. More commodity agreements therefore need to be concluded, but in a new spirit, with the primary intention of helping the new countries. In the absence of effective agreements, compulsory and automatic compensatory measures should be introduced as soon as there is a decline in export earnings; the resources for this purpose should be provided by the developed countries. In GATT, only the less-developed countries should be allowed to invoke escape clauses. 2. In order to facilitate the industrialization of the less-developed countries, the western nations must open up their markets to the manufactured products of the new states, even to the extent of giving them preference over the products of the industrial countries. The provisions of GATT need be adjusted in order to make this possible. 3. Although the aid given by the developed countries to the less-developed countries has increased, the latter consider it to 166 be inadequate. They need to be provided with 6000 million dollars more each year. The western nations would, indeed, also have an economic interest in bringing greater prosperity to the low-income countries, since their exports to these territories would thus be stepped up. Moreover, support along these lines might be some kind of compensation for the ―exploitation‖ of the former colonies. In fact, the target at which the less-developed countries are aiming is what they describe as ―a new international economic order‖. As early as 1974, the UN General Assembly had drafted an action program for the establishment of such a ―new order‖, which would give more consideration to the interests of the less-developed countries. The new international economic order consists mainly in a demand for more cash and trade concessions from the developed countries. The international monetary system would have to be adapted in such a way that the less-developed countries would have more Special Drawing Rights at their disposal. Aid to less-developed countries, however, has nothing to do with the international monetary system. Furthermore, the less-developed countries have insisted on a maximum of assistance with the industrialization 167 process, e.g. by supplying capital, transmitting technology and granting preferential customs tariffs. The Conference was established as a permanent organ of the General Assembly. It is convened every 4 years. The eleventh and the latest session of the conference was held in June, 2004 in Sao Paulo, Brazil with the theme of coordinating development strategies for the promotion of the economic development of the world especially of the developing countries. All member states of the United Nations and of its specialized agencies are members of the Conference. China became a member of the Conference in 1972. The less-developed countries of UNCTAD are known as the “Group of 77” which was created on 15 June 1964 and at present includes more than 130 members. Conference decisions require a two-thirds majority but procedural matters a simple majority. Board decisions are taken on a simple majority. A Trade and Development Board is the permanent organ of the Conference. Its 126 members are elected at each conference on a geographical basis, but with representation of the principal trading countries ensured. 168 The Board’s main committees examine commodities, manufactures, invisibles and financing related to trade, transfer of technology and economic cooperation among less-developed countries. There is also a special committee on preferences. An International Trade Center has been operated, jointly with WTO. A permanent Secretariat operates in Geneva. Exercises: 1.Answer the following questions: 1. Why should the developing countries urge the creation of a new institution when ECOSOC and GATT had already been there? 2. What is the meaning of non-discrimination principle? 3. What does ―commodity‖ exactly refer to in the following sentence: ―Although in 1963 there were 43 international organizations dealing with commodity and other trade problems…? th4. What is the theme of the 11 session of UNCTAD? 5. Could the developed countries benefit from giving aid to developing countries ? Why? 6. What do you know about the Group of 77? 7. How do you understand the sentence ― support along these lines might be some kind of compensation for the ―exploitation‖ of the former colonies? 169 8. What are the specific aims of developing countries demand for more cash and trade concessions from the developed countries? 9. What is the meaning of ― at their disposal‖? Could you find a similar expression to replace it? 10. How are conference decisions and board decisions made? 2.Fill in each of the following blanks with an appropriate word: (Some words are given the first letter or letters.) In order to adapt ______ the new situation and better play its role, UNCTAD and its secretariat should carry ______ certain reforms and adjustments in line _____ its mandate. However, the reform of UNCTAD must pro_____ in stricta ____ with its mission and its objective of strengthening and improving functions so as to offer developing countries better services ____ trade and development. UNCTAD and WTO are sup____ to each other in international economic cooperation. The special terms of reference of UNCTAD can not be sub____ by any existing international organizations. N____ should the functions of UNCTAD be weakened in the n____ of reform. We believe that with the convocation of this session, the political will and joint effort of all member states should and will surely i____ to strengthened functions of UNCTAD. 3.Translate the following passage into Chinese: 170 UNCTAD is the intergovernmental body within the Un system for comprehensive review of trade, development and other related issues. UNCTAD is designed to promote trade and economic development of all countries, particularly developing countries. Over the 40-plus years since its founding, UNCTAD has played an important role in fostering North-South dialogue and cooperation, promoting trade and economic development of the developing countries and assisting them in speeding up integration into the multilateral trading economy. 4.Translate the following sentences into English: 1.尽管第一次会议没有制定出具体目标，联合国贸易和发展会议的总任 务是制定、协商和实施改善发展进程的措施。 2.在没有有效协议的情况下，一旦出口收入下降，应立即采用强制的和 自动的补救措施。 3.实际上西方国家在使低收入国家繁荣起来的同时，其对这些国家的出 口将增加，因此也能获得经济效益。 4.国际经济性秩序主要是要求发达国家提供更多的现金和贸易方面的优 惠。 5.贸易和发展理事会是联合国贸易和发展会议的常设机构 Key to exercises : 1.Answer the following questions:从略。 171 2.Fill in each of the following blanks with an appropriate word: To, out, with, proceed, accordance, for, supplementary, substituted, Never, name, lead. 3.Translate the following passage into Chinese: 4.Translate the following sentences into English: 1. Although no specific objectives were laid down at the first conference, the general target of UNCTAD is to formulate, negotiate and implement measures to improve the development process. 2. In the absence of effective agreements, compulsory and automatic compensatory measures should be introduced as soon as there is a decline in export earnings. 3. The western nations would, in fact, also have an economic interest when they are bringing prosperity to the low-income countries, since their exports to these countries would thus be stepped up. 4. The new international economic order is mainly a demand for more cash and trade concessions from the developed countries. 5. A Trade and Development Board is permanent organ of the United Nations Conference on Trade and Development. 172 173