Text I. INTERNATIONAL TRADE AND INTERNATIONAL BUSINESS

International trade is the system in which countries exchange goods and services. It occurs when a firm exports goods and services to consumers in another country.

    International trade allows a country to specialize in the goods and services that it can produce at a relatively low cost and export those goods in return for imports, whose domestic production is relatively costly. International trade enables the country – and the world – to consume and produce more than would be possible without trade.

    Aside from the tangible benefit of increasing the world’s output of goods and services, trade has intangible benefits as well.

· Trade offers diversity to our lives and work. The advantages of particular climates and lands are shared: the United States imports oil from the hot desert of Saudi Arabia to drive cars in cool comfort. Ukrainians can enjoy coffee, bananas, and spices without living in the tropics; and we can have the economy and durability of Japanese cars without driving in hectic Tokyo. Thus, international trade enables us to enjoy a more diverse menu of goods and services than would be possible without trade.

· World trade also encourages the diffusion of knowledge and culture because trade serves as a point of contact between people of different lands.

An international business is any firm that engages in international trade or investment. The task of managing an international business differs from a domestic business in many ways.

International business is different from domestic business for at least four reason:

1. Countries are different (in their culture, political systems, economic systems, legal systems and level of economic development).

 2. The range of problems confronted by a manager in international business is wider and the problems themselves more complex than those confronted by a manager in a domestic business.

International business must decide:

· Which foreign markets to enter and which to avoid;

· Where to site its production activities to minimize cost and to maximize value added;

· How best to coordinate and control its globally dispersed production activities;

· How to choose the appropriate mode for entering a particular foreign country.

3. International business must find ways to work within the limits imposed by government intervention in the international trade and investment system.

International business:

· Involves transactions across national borders;

· Must deal with government restrictions on international trade and investment;

· Must find ways within the limits imposed by specific government interventions in the sphere of international trade and investment;

· Has to regulate cross-border trade and investment and to develop strategies and policies for dealing with restrictions.

4. International transactions involve converting money into different currencies.

Cross- border transactions require:

· That money be converted from the firm’s home currency into a foreign currency and vice versa;

· International business must develop policies for dealing with exchange rate movements since currency exchange rates are not stable over time and vary to changing economic conditions.

 

Vocabulary notes

international trade – международная торговля

domestic trade – внутренняя торговля

international business – международный бизнес (международная коммерческая деятельность)

goods and services – товары и услуги

to produce goods – изготавливать товары

to consume goods – использовать товары

tangible benefits – материальная выгода

intangible benefits – нематериальная выгода

to offer diversity – предлагать, разнообразие

to encourage diffusion – поощрять распространению

to enter а market – появляться на рынке

to avoid а market – увиливать от вхождения на рынок

government intervention – вторжение государства

international transactions – международные денежные операции

cross- border trade – пограничная торговля

currency – валюта

currency exchange rate – обменный курс валют

to convert into foreign currency – конвертировать в иностранную валюту

to minimize cost – уменьшать расходы

value added – надбавочная стоимость

value added tax – налог на набавочную стоимость

 

Comprehension and discussion questions:

1. What is the difference between international trade and international business?

2. When does international trade occur?

3. What are the tangible and intangible benefits of international trade?

4. What is international business?

5. What are the main reasons in which international business is different from domestic one?

6. Which problems should a manager in international business solve?

7. What do international transactions solve?

 

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