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ENGLISH FOR INTERNATIONAL TRADE 1

Material researched and adapted by:

Prof. Marina Meza

Prof. Carlos Mayora

Prof. Rubena St. Louis

This edition, April, 2013

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Introduction to International trade

In ID-1123, we will look at International trade and discuss

some of the issues involved. Take a look at the list below.

These are some of the questions we will attempt to answer

in this first course:

What is International trade?

Why should nations trade with each other? What benefits are to be gained by trading?

What do we mean by a “pattern of trade”?

Who does the trading?

What types of trading exist?

What is the World Trade Organization? What benefits are to be gained by being a

member?

What is the effect of globalization on world trade and on the nations that trade?

Let’s begin by considering the character and evolution of trade. It is important to keep in

mind, first, that although we frequently talk about trade "between nations," the great

majority of international transactions today actually take place between private individuals

and private enterprises based in different countries. Governments sometimes sell things to

each other, or to individuals or corporations in other countries, but these comprise only a

small percentage of world trade.

Trade is not a modern invention. International trade today is not qualitatively different from

the exchange of goods and services that people have been conducting for thousands of years.

Before the widespread adoption of currency, people exchanged goods and some services

through bartering—trading a certain quantity of one good or service for another good or

service with the same estimated value. With the emergence of money, the exchange of

goods and services became more efficient.

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Developments in transportation and communication revolutionized economic exchange, not

only increasing its volume but also widening its geographical range. As trade expanded in

geographic scope, diversity, and quantity, the channels of trade also became more complex.

The earliest transactions were conducted by individuals in face-to-face encounters. Many

domestic transactions, and some international ones, still follow that pattern. But over time,

the producers and the buyers of goods and services became more remote from each other. A

wide variety of market actors—individuals and firms—emerged to play supportive roles in

commercial transactions. These "middlemen"—wholesalers, providers of transportation

services, providers of market information, and others—facilitate transactions that would be

too complex, distant, time-consuming, or large for individuals to conduct face-to-face in an

efficient manner.

International trade today differs from economic exchange conducted centuries ago in its

speed, volume, geographic reach, complexity, and diversity. However, it has been going on

for centuries, and its fundamental character—the exchange of goods and services for other

goods and services or for money—remains unchanged.

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1 http://www.globalization101.org/uploads/File/Trade/tradeall2010.pdf

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Getting started

Let’s begin by looking at International trade. Take a few minutes to think about these questions:

1. What is domestic trade?

2. What is International trade?

3. Can you think of examples of both types of trade?

4. What factors play a role in both types of trade?

5. Why do people need to trade?

6. How are the people who are involved in trade?

Scenario

Consider the following scenario. Rodriguez e Hijos C.A. buys coffee beans from farmers, grinds, packages and then sells coffee under the brand name of “Sabor de Los Andes” to businesses in Venezuela. When their brand becomes popular, the company decides to export coffee to countries in the English and French speaking Caribbean, as well as Aruba and Curacao.

With your classmates discuss the following:

1. What kind of trade does Rodriguez e Hijos engage in when the company is first formed?

2. What kind of trade does the company engage in when it begins to export to other countries?

3. What differences exist between these two types of trade? Think of what the company had to do to trade in the country and outside of the country? What factors did they have to take into consideration? Make a list of these factors.

In the following sessions, we will find the answers to the questions asked above. At the end of “What is International Trade?”, come back and compare your initial ideas with what you have learnt.

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International trade Let’s look at an overview of International trade. The definitions found below are taken from a number of different online sources.

Take a look at this text segment on International trade taken from Wisegeek2.

“....As its name implies, international trade is the exchange of products, services, and money across national borders; essentially trade between countries. When consumers in the U.S. purchase Swiss-made watches, Guatemalan-grown fruits, Chinese-made toys and electronics, and Japanese-manufactured automobiles, they experience the end result of international trade.

Domestic trade is the purchase and sale of products and services within a particular nation’s borders, and is inherently limiting to a modern national economy. International trade, conversely, raises national gross domestic product (GDP) by providing vastly expanded economic opportunity. It is, therefore, incumbent upon the global economic community to promote fair trade between nations. In addition, the ability of nations to trade freely with all others is also vital for profits. Free trade, fair trade, and profits are the cornerstones of global economic well-being. International trade is most commonly recognized in the exchange of goods or products. However, trading services, such as expertise in a particular field, or the ability to facilitate the trade of goods, is another common form of foreign trade.

Trading capital on the foreign exchange market (FOREX) represents a third facet of international trade. Capital, or currency, held for foreign trade fluctuates in value hourly due to political, business, weather and other conditions and factors from nation to nation. Trading currency in the international market attempts to profit from the rising value of one nation’s currency through selling the lower value of another nation’s capital. Trading capital is also the amount of money designated by a trader to pay the costs of foreign trade, such as tariffs, subsidies, transportation, etc....”

Another online source3 notes that “..Foreign trade is nothing but trade between the different countries of the world. It is also called International trade, External trade or Inter-Regional trade. It consists of imports, exports and entrepot. The inflow of goods in a country is called import trade whereas outflow of goods from a country is called export trade. Many times goods are imported for the purpose of re-export after some processing operations. This is called entrepot trade. Foreign trade basically takes places for mutual satisfaction of wants and utilities of resources.

2 http://www.wisegeek.com/what-is-international-trade.htm 3 http://kalyan-city.blogspot.com/2011/03/what-is-foreign-trade-types-and.html

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Internal trade is also known as Home trade and is conducted within the political and geopolitical boundaries of a country. It can be at local, regional or national level. Internal trade can be further sub-divided into two groups:

A. Wholesale trade which involves buying in large quantities from producers or manufacturers and selling in lots to retailers for resale to consumers and

B. Retail trade which involves buying in smaller lots from the wholesalers and selling in very small quantities to the consumers for personal use.

The graphic below illustrates the different types of trade.

Source: http://kalyan-city.blogspot.com/2011/03/what-is-foreign-trade-types-and.html

Checking your understanding of the text

Discuss the following questions with your classmates.

1. What is the difference between national/local and international trade?

2. What are the three forms of international trade mentioned in the text?

3. Why does the author of the Wisegeek article segment believe that national trade limits the national economy?

4. Under what circumstances would Entrepot trade occur?

Making the connection.

In small groups find examples of :

national companies that engage in international and home trade.

o Name the companies and the goods they produce.

wholesale and retail trade.

o Name companies that engage in this type of trade.

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Rhetorical functions: Definitions

A definition is the formal statement of the meaning of a term or a concept and describes its important characteristics. A simple sentence definition includes the concept, that is, the item being defined, the class to which it belongs and the characteristics which separates it from other similar items.

Simple definitions can be written in the following way.

Term + Verb + General class word + Special characteristics

Look at the examples below:

A multinational is a large company that sets up production facilities in several different countries.

Term verb general class special characteristics

International trade is the exchange of goods and services in the world or on the global market.

Term verb general class special characteristics

These definitions can also be written in the following manner:

1. This exchange of goods and services in the world, or global market is known as international trade.

2. International trade can be defined as the exchange of goods and services in the world or on a global market.

3. A large company that sets up production facilities in several different countries is referred to as a multinational.

4. A large company that sets up production facilities in several different countries is called a multinational.

Quickly go over the text and find at least three (3) definitions. Underline them and then re-write them in the space provided using the examples above as a guide.

1. ______________________________________________________________________

2. ______________________________________________________________________

3. ______________________________________________________________________

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Getting started

Read the quote by Morris Ng and think about the questions that follow.

"Exports are the key to the economic survival of a nation. Exports not only help a country earn money, they help create jobs, peace,

prosperity, and the power to influence."

Do you agree with him? Why? Should the government of an importing

country protect local industry? If so, how can they do this?

Think about these questions as we read the following text...

...GATEWAYS TO GLOBAL MARKETS

World markets have changed enormously in the past decade. New markets have been opened with the end of the cold war. New economic blocks have been formed. New trading alliances are shaping. Inevitably, a new way of thinking and an approach to doing business is necessary in order to survive in the fast changing economy.

Most countries realise the advantages of international trade. Countries have developed their economies, increased production of goods, and met market demands through the increase of international trade. A nation that exports more will grow stronger. The stronger a nation is, the more recognition and respect it will earn.

With the end of cold war, more resources worldwide are geared towards exporting. Exporting becomes more challenging with continued population growth and the addition of new exporters.

"Exports are the key to the economic survival of a nation. Exports not only help a country earn money, they help create jobs, peace, prosperity, and the power to influence."

Morris Ng

Exporting can provide growth and profit. It is a complex and demanding field, which may enhance every nation’s productivity.

In order to export and import products, there needs to be a system of international monetary exchange. Most products must be paid with the legal tender of the producing country. International trade involves the exchange of one currency for another. Most currencies are now exchanged on a floating rate basis. The rates fluctuate according to market forces. The exchange rate may vary

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greatly due to demand and therefore the price of currency is either rising or falling.

The comparative advantage which exporting countries enjoy sometimes changes. If transportation costs increase or currency exchange rates change, it may become cheaper to produce the product in the market country, especially if large amounts of exports are involved.

Trade surplus, favourable balance of trade, is an excess of exports over imports. Trade deficit, unfavourable balance of trade, is an excess of imports over exports. A country with a record trade surplus is often threatened with sanctions and trade barriers from a deficit importing country. A country with a record trade deficit is usually faced with the internal social disorders.

There are several reasons why governments try to control the imports and exports of a country. One reason is that a country enjoys an advantage if it exports more than it imports. Wealth accrues to the exporting country. Some countries have special programs to encourage exports. They may be programs that provide marketing information, establish trade missions, subsidise exports and provide tax benefits or incentives. Government subsidies, or money given to local producers to encourage exports, allow companies to sell products cheaply. Sometimes these subsidised companies export their products and sell them cheaply overseas. This practise is known as dumping; it is selling on a foreign market at a price below the cost of production.

Sometimes governments want to protect a domestic industry because that industry provides employment for the population. Not only the industries, but also the labour unions encourage the government to establish protectionist controls. The governments impose taxes, in the form of duties which eliminates the comparative advantage and, or quotas that restrict the import of the product altogether, to control imports.

A tariff is any tax or fee that the government collects. Tariffs are important in International trade because of trade liberalization, or the reduction on tariffs on imported goods. If goods enter the country with a low tariff, the cost of these items will be low and the cost of trade would be more profitable. Moreover, if there is an elimination of tariffs and other barriers to trade, there would be free trade. On the other hand, if there is an increase in the tariff, there will be a raise in the cost of importing the goods, which in turn will make them more expensive on the local market. Increases in tariffs are a form of protectionism.

There are two forms of import tariffs: specific and ad valorem. A specific tariff is a certain amount of tax for each unit of the product. An ad valorem tariff is based on the value of the product, for example 5% of its value. The imposition of the ad valorem tax depends upon first determining the value of the product. A tariff increases the price of the item, raises revenue for the government and controls consumption through market forces.

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A quota is the limit on the number of an item that can be imported into a country. By putting a quota on a good, a shortage is created which can cause the price of this item to increase and also allow the local producers to raise their price and to expand production. Quotas have a different effect on the market for while under a quota there may be a higher price because of a limited supply, under a tariff, a tax that creates a higher price, the supply is not limited.

There are two other ways in which governments can control trade. These are by the use of licenses and standards. Licenses are sometimes required by local importers before they can import goods. Governments can control the amount of foreign goods entering the country by reducing the number of import licenses the issue. Governments can also use standards, which are laws and regulations established by a health or safety body, to restrict trade by requiring that imported goods meet standards that are higher than locally produced items.

Finally, the imposition of trade barriers, such as import quotas and higher duties, is not the only solution to meeting the international challenge. The remedy to beat the trade imbalance is to understand foreign cultures and business practices, and to provide competitive products and services.

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Getting started

When discussing the economy of a country, we often hear terms such as

balance of payment,

balance of trade,

gross domestic product of the country. But what do they mean?

Write what you know about these concepts.

Vocabulary

Some of these special terms will appear in today’s text. Use the Internet to find the definition of each one. Write the information in the space provided.

Term Definition

levy __________________________________________________________

Special drawing Rights

__________________________________________________________

__________________________________________________________

royalty __________________________________________________________

stocks __________________________________________________________

patent __________________________________________________________

bond ___________________________________________________________

asset ___________________________________________________________

debt forgiveness ___________________________________________________________

Underline these words when you meet them in the text. Use the space below to write any other two terms you consider important.

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

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Balance of Payment, Balance of Trade & Gross National Product.

The following text contains several terms of importance to your understanding of International trade. While reading, underline the terms you find.

The balance of payments (BOP) is the method countries use to monitor all international monetary transactions at a specific period of time. Usually, the BOP is calculated every quarter and every calendar year. All trades conducted by both the private and public sectors are accounted for in the BOP in order to determine how much money is going in and out of a country. If a country has received money, this is known as a credit, and, if a country has paid or given money, the transaction is counted as a debit. Theoretically, the BOP should be zero, meaning that assets or credits and liabilities or debits, should balance. But in practice this is rarely the case and, thus, the BOP can tell the observer if a country has a deficit or a surplus and from which part of the economy the discrepancies are stemming.

The BOP is divided into sub-accounts but the most important are the current account and the financial account. Within these categories are sub-divisions, each of which accounts for a different type of international monetary transaction.

Balance of Payments Accounts Summary

Current Account Record of all international transactions for goods and services, income payments and receipts, and unilateral transfers. The current account is used in the national income identity for GNP.

Merchandise Trade Account

Record of all international transactions for goods only. Goods include physical items like autos, steel, food, clothes, appliances, furniture, etc.

Services Account Record of all international transactions for services only. Services include transportation, insurance, hotel, restaurant, legal, consulting, etc.

Goods and Services Account

Record of all international transactions for goods and services only. The goods and services account is used in the national income identity for GDP.

Financial Account

Record of all international transactions for assets. Assets include bonds, Treasury bills, bank deposits, stocks, currency, real estate, etc.

Source: Suranovic, S. ( 2010 ) International Finance: Theory and Policy.

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The Current Account

The current account is used to mark the inflow and outflow of goods and services into a country. Earnings on investments, both public and private, are also put into the current account. Within the current account are credits and debits on the trade of merchandise, which includes goods such as raw materials and manufactured goods that are bought, sold or given away (possibly in the form of aid). Services refer to receipts from tourism, transportation (like the levy that must be paid in Egypt when a ship passes through the Suez Canal), engineering, business service fees (from lawyers or management consulting, for example), and royalties from patents and copyrights. When combined, goods and services together make up a country's balance of trade (BOT). The BOT is typically the biggest bulk of a country's balance of payments as it makes up total imports and exports. If a country has a balance of trade deficit, it imports more than it exports, and if it has a balance of trade surplus, it exports more than it imports.

Receipts from income-generating assets such as stocks (in the form of dividends) are also recorded in the current account. The last component of the current account is unilateral transfers. These are credits that are mostly worker's remittances, which are salaries sent back into the home country of a national working abroad, as well as foreign aid that is directly received.

The Capital or Financial Account

The capital account is where all international capital transfers are recorded. This refers to the acquisition or disposal of non-financial assets (for example, a physical asset such as land) and non-produced assets, which are needed for production but have not been produced, like a mine used for the extraction of diamonds.

The capital account is broken down into the monetary flows branching from debt forgiveness, the transfer of goods, and financial assets by migrants leaving or entering a country, the transfer of ownership on fixed assets (assets such as equipment used in the production process to generate income), the transfer of funds received to the sale or acquisition of fixed assets, gift and inheritance taxes, death levies, and, finally, uninsured damage to fixed assets.

The Financial Account

In the financial account, international monetary flows related to investment in business, real estate, bonds and stocks are documented. Also included are government-owned assets such as foreign reserves, gold, special drawing rights (SDRs) held with the International Monetary Fund, private assets held abroad, and direct foreign investment. Assets owned by foreigners, private and official, are also recorded in the financial account.

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The Balancing Act

The current account should be balanced against the combined-capital and financial accounts. However, as mentioned above, this rarely happens. We should also note that, with fluctuating exchange rates, the change in the value of money can add to BOP discrepancies. When there is a deficit in the current account, which is a balance of trade deficit, the difference can be borrowed or funded by the capital account. If a country has a fixed asset abroad, this borrowed amount is marked as a capital account outflow. However, the sale of that fixed asset would be considered a current account inflow (earnings from investments). The current account deficit would thus be funded.

When a country has a current account deficit that is financed by the capital account, the country is actually foregoing capital assets for more goods and services. If a country is borrowing money to fund its current account deficit, this would appear as an inflow of foreign capital in the BOP.

Gross Domestic Product vs Gross National Product

There are two ways or measuring the national income of a country: its GDP (Gross Domestic Product) and its GNP (Gross National Product). The gross domestic product represents the value of all goods and services produced within a country while the gross national product represents the value of all goods and services produced by domestic factors of production. For example, a Colombian-owned company produces goods in Venezuela and this production is counted as part of Venezuela’s GDP because the productive activity occurred in the country. However, the income generated by the Colombian company will be part of that country’s GNP.

Checking your understanding of the text.

Scenario:

You have been given a number of items to record in the corresponding accounts. Where would you put each?

Inheritance taxes.

Income from direct foreign investments.

3,000 kilos of rice imported from India.

Royalties from the sale of records and books.

Income from national companies abroad.

Income from the purchase of land.

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: Getting started

1. Discuss with your classmates your understanding of the following terms and how they relate to trade:

a. Supply

b. Demand

2. What is the difference between goods and services? Give local examples.

Terms

Here are a few terms that will appear in today’s text. Discuss with your classmates your understanding of these.

import export specialization free trade protectionism

_______________

_____________

_____________

______________

_____________

As you read the text, “What is International trade?” written by Reem Heakal4, underline additional terms that you meet. Write those you consider important in the space provided in the table above.

What Is International Trade?

International trade is the exchange of goods and services between countries. This type of trade gives rise to a world economy, in which prices, or supply and demand, affect and are affected by global events. Political change in Asia, for example, could result in an increase in the cost of labour, thereby increasing the manufacturing costs for an American sneaker company based in Malaysia, which would then result in an increase in the price that you have to pay to buy the tennis shoes at your local mall. A decrease in the cost of labour, on the other hand, would result in you having to pay less for your new shoes.

Trading globally gives consumers and countries the opportunity to be exposed to goods and services not available in their own countries. Almost every kind of product can be found on the international market: food, clothes, spare parts, oil, jewellery, wine, stocks, currencies and water. Services are also traded: tourism, banking, consulting and

4 http://www.investopedia.com/articles/03/112503.asp

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transportation. A product that is sold to the global market is an export, and a product that is bought from the global market is an import. Imports and exports are accounted for in a country's current account in the balance of payments.

Increased Efficiency of Trading Globally

Global trade allows wealthy countries to use their resources - whether labour, technology or capital - more efficiently. Because countries are endowed with different assets and natural resources (land, labour, capital and technology), some countries may produce the same good more efficiently and therefore sell it more cheaply than other countries. If a country cannot efficiently produce an item, it can obtain the item by trading with another country that can. This is known as specialization in international trade.

Let's take a simple example. Country A and Country B both produce cotton sweaters and wine. Country A produces 10 sweaters and six bottles of wine a year while Country B produces six sweaters and 10 bottles of wine a year. Both can produce a total of 16 units. Country A, however, takes three hours to produce the 10 sweaters and two hours to produce the six bottles of wine (total of five hours). Country B, on the other hand, takes one hour to produce 10 sweaters and three hours to produce six bottles of wine (total of four hours).

But these two countries realize that they could produce more by focusing on those products with which they have a comparative advantage. Country A then begins to produce only wine and Country B produces only cotton sweaters. Each country can now create a specialized output of 20 units per year and trade equal proportions of both products. As such, each country now has access to 20 units of both products.

We can see then that for both countries, the opportunity cost of producing both products is greater than the cost of specializing. More specifically, for each country, the opportunity cost of producing 16 units of both sweaters and wine is 20 units of both products (after trading). Specialization reduces their opportunity cost and therefore maximizes their efficiency in acquiring the goods they need. With the greater supply, the price of each product would decrease, thus giving an advantage to the end consumer as well.

Note that, in the example above, Country B could produce both wine and cotton more efficiently than Country A (less time). This is called an absolute advantage, and Country B may have it because of a higher level of technology. However, according to international trade theory, even if a country has an absolute advantage over another, it can still benefit from specialization.

Other Possible Benefits of Trading Globally

International trade not only results in increased efficiency but also allows countries to participate in a global economy, encouraging the opportunity of foreign direct investment (FDI), which is the amount of money that individuals invest into foreign companies and other

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assets. In theory, economies can therefore grow more efficiently and can more easily become competitive economic participants.

For the receiving government, FDI is a means by which foreign currency and expertise can enter the country. These raise employment levels and, theoretically, lead to a growth in the gross domestic product. For the investor, FDI offers company expansion and growth, which means higher revenues.

Free Trade vs. Protectionism

As with other theories, there are opposing views. International trade has two contrasting views regarding the level of control placed on trade: free trade and protectionism. Free trade is the simpler of the two theories: a laissez-faire approach, with no restrictions on trade. The main idea is that supply and demand factors, operating on a global scale, will ensure that production happens efficiently. Therefore, nothing needs to be done to protect or promote trade and growth because market forces will do so automatically.

In contrast, protectionism holds that regulation of international trade is important to ensure that markets function properly. Advocates of this theory believe that market inefficiencies may hamper the benefits of international trade and they aim to guide the market accordingly. Protectionism exists in many different forms, but the most common are tariffs, subsidies and quotas. These strategies attempt to correct any inefficiency in the international market.

Conclusion

As it opens up the opportunity for specialization and therefore more efficient use of resources, international trade has potential to maximize a country's capacity to produce and acquire goods. Opponents of global free trade have argued, however, that international trade still allows for inefficiencies that leave developing nations compromised. What is certain is that the global economy is in a state of continual change and, as it develops, so too must all of its participants.

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Rhetorical functions: Cause and Effect

Many events that occur around us have an effect on others. The reason something happens (the cause) results in another action occurring (the effect). One event can have various effects. One effect, can then in turn, become the cause of another event. We see many examples of cause and effect in the texts read in International trade. Let’s look at the example in paragraph 1.

Political change in Asia, for example, could result in an increase in the cost of labour, thereby increasing the manufacturing costs for an American sneaker company based in Malaysia, which would then result in an increase in the price that you have to pay to buy the tennis shoes at your local mall. A decrease in the cost of labour, on the other hand, would result in you having to pay less for your new shoes.

Cause Effect

Political change in Asia an increase in the cost of labour

an increase in the cost of labour increase in manufacturing cost

increase in manufacturing cost increase in the price you have to pay

for tennis shoes at your local mall.

There are several connectives (words that connect two grammatical units together) or indictors, that we can use to show cause and effect.

These words indicate that the information that follows is the cause of the event.

Due to political change in Asia, there was an increase in the cost of labour.

Owing to an increase in the cost of labour, there was an increase in manufacturing cost.

As a result of an increase in manufacturing cost, the price of the tennis shoes rose.

An increase in the labour costs was caused by political change in Asia.

Because of political change in Asia, there was an increase in labour cost.

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You can also find words that indicate that what follows is the result of an action.

An increase in manufacturing costs lead to an increase in the cost of the tennis shoes.

An increase in the cost of labour causes an increase in manufacturing costs.

So ,

There was political unrest in Asia. Consequently, there was an increase in labour costs.

For this reason,

Exercise A.

The following sentences show a cause and effect relationship. Circle the indicators and indicate by writing C (Cause) and/or E (Effect) above the examples of this relationship in the sentence.

1. The rates fluctuate according to market forces. The exchange rate may vary greatly due to demand and therefore the price of currency is either rising or falling.

2. If transportation costs increase or currency exchange rates change, it may become cheaper to produce the product in the market country, especially if large amounts of exports are involved.

3. Countries have developed their economies, increased production of goods, and met market demands through the increase of international trade.

Exercise B.

1. Scan the text “What is International Trade” for indicators of cause and effect. Circle the indicators and indicate by writing C (cause) and/or E (effect) above the examples of this relationship in the sentence.

2. Then represent this relationship graphically using arrows.

3. Use the information in the graphic organizer and write sentences showing the cause and effect relationship. Use as many different indicators as possible.

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Looking at the Topic and the Main Idea

The topic of an article is the general theme or idea that the writer wants to convey to the reader while the main idea is most important point that the writer wants to make. The writer often starts with a thesis statement and then develops this throughout the text which is made up of a number of different paragraphs. The writer introduces his idea, develops it in the body of the text with arguments or evidence to support his idea and then concludes, emphasizing his main point.

Each individual paragraph has a main idea that the writer later develops through the use of details. Sometimes the main idea can be found at the beginning of the paragraph but this not always so. The writer can also begin with an introduction, and then state the main idea and finish with details or the writer can give the details and finish by stating the main idea. Sometimes the main idea is explicitly stated but sometimes it is not and the reader has to deduce it from the text.

A. Read the following paragraphs below and underline the main idea.

1. World markets have changed enormously in the past decade. New markets have been opened with the end of the cold war. New economic blocks have been formed. New trading alliances are shaping. Inevitably, a new way of thinking and an approach to doing business is necessary in order to survive in the fast changing economy.

2. With the end of cold war, more resources worldwide are geared towards exporting. Exporting becomes more challenging with continued population growth and the addition of new exporters.

"Exports are the key to the economic survival of a nation. Exports not only help a country earn money, they help create jobs, peace, prosperity, and the power to influence."

Morris Ng

Exporting can provide growth and profit. It is a complex and demanding field, which may enhance every nation’s productivity.

3. Trade is not a modern invention. International trade today is not qualitatively different from the exchange of goods and services that people have been conducting for thousands of years. Before the widespread adoption of currency, people exchanged goods and some services through bartering—trading a certain quantity of one good or service for another good or service with the same estimated value. With the emergence of money, the exchange of goods and services became more efficient.

Look at the title of the article that follows. What do you think is the topic? What do you think the author will discuss?

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Getting Started

1. Discuss with your classmates, and then make a list of the reasons

countries trade.

2. While reading the text, check and see if the reasons given by the

author are similar to yours.

WHY NATIONS TRADE5

Nations trade a lot, but it is not quite evident why they do so. Put differently, why do private individuals and firms take the trouble of conducting business with people who live far away, speak different languages, and operate under different legal and economic systems, when they can trade with fellow citizens without having to overcome any of those obstacles?

Why Do Nations Export?

Exports are easier to explain than imports. At least since the beginning of the industrial era almost three centuries ago, countries have tended to sell things to other countries either because:

1. Individuals and firms have been able to produce more of certain goods and services than can be consumed at home. This prompted a search for foreign opportunities to sell the "excess" production;

2. Individuals and firms have been able to sell goods or services to other countries at prices higher than the prices they can obtain domestically.

In today's global economy, exporting serves somewhat different purposes for developing and industrial countries. Although the economies of developing countries are typically not as economically productive as the economies of industrial countries, developing countries nonetheless produce some goods and services in amounts they are unable to use or consume at home, called a production surplus. For example, some developing countries

5 http://www.globalization101.org/issue_sub/Trade_and_Globalization/inttrade/why_nations_trade

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produce vast quantities of agricultural products, like cocoa in Cote d’Ivoire and coffee in Latin America, which their own populations are not large enough to consume. Other developing countries produce quantities of industrially valuable minerals, like oil or iron ore, that their own economies are too small or insufficiently industrialized to use.

But for many developing countries, exports also serve the purpose of earning foreign currency with which they can buy essential imports—foreign products that they are not able to manufacture, mine, or grow at home. Developing countries, in other words, sell exports, in part, so they can import. Exporting goods and services can also further advance developing nations' domestic economies.

Interconnectivity through global trade can also be problematic. For example, up until 2008, Japan had a booming export business with the United States. When American consumers became unable to buy Japanese products, Japanese companies lost that business.1

Why Do Nations Import?

The reasons that explain why countries import products and services from other countries are perhaps less obvious. As with exports, the purposes served by imports vary from country to country. It is reasonable to ask why a country such as the United States, with its massive and extraordinarily diverse economy, needs to buy anything from other countries. In fact, there are only a handful of goods or services that the United States absolutely must import from other countries. With a land area spanning several climatic zones, immense natural resources, and a dynamic workforce, the United States is able to produce, mine, or grow almost every item its citizens need to lead reasonably prosperous lives.

Yet no country today, including the United States, can be totally self sufficient at a cost that would be tolerable to its citizens. All countries need to—or choose to—import at least some goods and services for the following reasons:

1. Goods or services that are either essential to economic well-being or that

consumers desire are simply not naturally available or cannot be produced at

home; and,

2. Goods or services that satisfy domestic needs or wants can be produced

more inexpensively or efficiently by other countries, and therefore sold at lower

prices.

It is helpful to illustrate these points by looking at the case of the United States, precisely because it comes closer to being self-sufficient than any other country. Coal, copper, iron, silver, and nickel are just a few of the natural resources the United States possesses in large quantities that other countries do not possess. But there are some

24

economically essential items, such as tungsten and oil, which the United States either does not produce at all or does not produce in sufficient quantities to serve current needs at a reasonable price.

The United States cannot now meet its oil consumption needs exclusively through domestically produced oil; as of 2007, the U.S. ranks third in total oil production (8,457,000 barrels/day), but also first in oil consumption (20,680,000 barrels/day).(1 ) In fact, since Hurricanes Katrina and Rita in 2005, U.S. oil production has been on the decline.(2) As a result, the United States today imports 59 percent of the oil it consumes.(3) Most of these imports come from Saudi Arabia, Mexico, Canada, Nigeria, and Venezuela. In 2008, the United States imported 3.58 billion barrels of crude oil.(4)

The United States could, in theory, abandon foreign oil imports, but it would constitute a very costly step because it is not clear that domestic reserves of oil, both those that are known and those that have yet to be discovered, could satisfy current domestic demand; and even if U.S. oil reserves were adequate, generating the extra production necessary to fill the gap now filled by imported oil would be extremely costly.

Many foreign countries are able to produce oil much more cheaply. Besides, accessing the additional U.S. reserves would require many years of research and development; other energy sources—for example, coal, nuclear power, or hydro-electric power—could conceivably be substituted for oil imports, but complying with the associated environmental regulations, along with the cost of producing additional energy from these sources, would be very expensive. After all, oil currently satisfies more than 40 percent of America’s energy needs (including more than 99 percent of the fuel for cars and trucks) precisely because other domestic sources of energy are either not sufficiently abundant to cover demand or are more expensive to exploit than oil.(5)

Of course, energy conservation measures could also reduce the need for oil imports by decreasing energy consumption of the average American citizen. Energy conservation would be prudent, regardless of which energy supply the United States favors in the future; however, foreign producers would still be able to produce the oil more cheaply, regardless of the level of production. In addition, the scale of energy-saving measures needed to substantially reduce U.S. imports of oil would require costly changes in economic activity and lifestyles and have thus far proven to be politically unsustainable.

In the end, it is clear that the United States will depend upon imports to meet its energy needs into the foreseeable future. This is not the same as saying that the United States has no choice but to import oil from other countries. As the preceding discussion suggests, there are alternatives. But those alternatives are less economically and politically feasible than simply continuing to import oil from countries endowed with generous petroleum reserves.

The same logic applies to a number of other resources or products whose domestic supply is limited: the United States—-though not most other countries—-can often find ways

25

to increase production of a commodity, reduce consumption, or identify domestic substitutes. But these alternatives will often prove more costly than continuing to import from other countries.

Moreover, the United States and other nations choose to import many other products that, unlike oil, are not economically essential, but differ in quality or features from equivalent products made at home. One prominent example is foreign-made cars, which, starting in 2007, accounted for more than 50 percent of all cars sold in the United States.(6) Americans do not buy imported foreign cars because foreign manufacturers produce certain kinds of vehicles that American manufacturers do not; U.S. car makers produce an extraordinary range of vehicles at a wide range of price levels. But many Americans have concluded that Asian and European car manufacturers produce vehicles with a combination of qualities or features that satisfy their preferences more so than vehicles manufactured by U.S. car makers. The same holds true for much simpler products like wine, or cheese, or shoes. All of these and thousands of other items that the United States imports from other countries are still made at home, but some American consumers believe imported versions of these items offer satisfactions that American varieties do not.

The United States has almost entirely stopped producing other goods because of foreign competitive efficiency, in other words, firms in other countries are better able to produce these goods. This is the case with many types of clothing because clothes can be produced at a much lower cost in countries where labor is cheap; most clothes are produced in developing countries.

It is worth noting that the country where a good is produced need not be the same as the country where the corporation that manufactures and sells the good is established. Several American clothing companies, such as Gap, manufacture most of their clothes in developing countries.

The goods that the United States have almost ceased to produce because of foreign competitive efficiency include not only low-tech products, but also some electronic equipment. For example, the United States used to produce VCRs, but it completely abandoned their production because of the superior efficiency of foreign competitors (most notably the producers in Japan).

http://www.globalization101.org/index.php?file=issue&pass1=subs&id=8

26

Checking your understanding of the text.

Discuss with your classmates the following questions:

1. Why, according to the author, do developing nations export goods? Give two of your own examples to illustrate this point.

2. Why, according to the author, do developed nations import goods? What examples does he use to illustrate his point? Is this also true of developing nations? If so, what examples can be used to illustrate this?

3. What arguments does the author use to explain the reason the U.S continues importing oil? Do you agree with the reasons?

4. The author states that many types of clothing are produced in developing countries? Why is this so? What countries are primary manufacturers of clothes? What advantages or disadvantages can this bring to the country?

Summarizing the text in your own words.

Re-read the text and find the main idea of each of the paragraphs. You can underline them if you wish.

Then find details to support each of the points the author makes.

Use this information to write a paragraph summarizing the information in the text.

Give your summary a title.

27

Getting started

Discuss the questions below with your group and then do the exercise which

follows them.

1. What are the different types of trade discussed so far?

2. Who are the different people involved in this trade?

3. What role would they play in the process?

Vocabulary

Look at the terms below. Using what you have learnt about definitions, can you write one

for each term? Write the definitions for the following terms in your own words. Then check

your answers as you read the text. Do not use the text to find the definitions.

Term Definition

1 Export trading company ______________________________________________

______________________________________________

2 Export management company

______________________________________________

3 Distributor

______________________________________________

______________________________________________

4 Retailer

______________________________________________

______________________________________________

5 Import export agent

______________________________________________

______________________________________________

6 Sales representative

______________________________________________

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Export traders

Trade has existed ever

since Man recognized the

need to look for and obtain

resources to fulfill his

needs. From early man

trading skins and salt with

neighboring tribes to Marco

Polo bringing silks, spices

and technology from the

Far East to the Western world, to modern conglomerates trading millions of dollars on the

stock exchange, trade has been an essential part of our lives. Countries engage in trade for

many reasons. These include product availability, competitive prices and product image. But

for the goods to reach the customer, they must go through the import/export process and

pass through the hands of different players along the way.

The word import comes from the Medieval Latin importare which means to bring in

which, in essence, is done when goods are brought in from a foreign country, while export is

the process by which goods are shipped from one country to another. There are two main

methods of export: direct and indirect exporting. In direct exporting, the manufacturer,

assembler or processor of an exported good is in charge of the entire marketing and

distribution of the product and sells directly to companies, known as direct merchants, in the

foreign market. The direct merchant then sells these goods on their domestic market.

These merchants usually offer complementary services such as maintenance, spare parts and

technical support to their customers.

However, a cheaper and less risky export route is through indirect export where the

manufacturer hires a local agent to find and deliver its goods to buyers abroad. An example

of indirect exporting is through an Export management company (EMC) which handles trade

for a domestic company which wants to sell its product abroad. The EMC hires the dealers,

distributors and representatives, manages the advertising, marketing and promoting of the

product, oversees marking and packaging, and arranges the shipping. An Export

29

management company can specialize in one type of product, foreign market or both and is

usually paid by commission, salary or a retainer plus commission.

Another type of indirect trading agent is the Export trading company (ETC) which

looks for potential buyers by identifying the needs of the foreign market and then supplying

domestic sources willing to fill this need. It can either take title to the goods or work on a

commission basis. An Import/Export company, on the other hand, purchases goods directly

from a domestic or international client and then packs, ships and resells these goods.

There are also a number of intermediary players. For example, an import export

agent is one who rarely invests capital in inventory or deals in the merchandise, products or

services directly. Instead, this agent acts as an intermediary between manufacturers and

distributors in one country and buyers in another, finding the appropriate market for the

goods, making a solid connection and solidifying a business relationship between both

parties. They are paid a commission which is usually 10% of the transaction. Manufacturers

may also decide to have their own representative who is an expert in their particular

industry and can give technical support. This specialization may differentiate them from the

sales representative who simply promotes the product and then passes the sale to the

seller. A distributor buys the imported product and then sells it to another for further

distribution to the buying public. Finally, there is the retailer who then sells the

merchandise to the customer.

There are many different kinds of agents involved in the import and export trade and

the best type would depend on the needs, and capabilities of the manufacturer who whishes

to place his product on an international market. From export management companies to

individual sales representatives, there is a group of qualified individuals able to help in this

process.

Reference

http://www.entrepreneur.com/startingabusiness/businessideas/startupkits/article41846.html

30

Checking your understanding of the text

1. Form three groups. Each group has to do the following:

1. Write six (6) questions based on the text. Remember to check the grammatical

structure of your question.

2. Give your questions to members of the 2nd group for them to answer.

3. Give the answers to members of the 3rd group for them to be corrected.

4. Discuss the answers with the entire class.

Scenarios:

With your classmates, discuss the following scenarios and propose a solution. Hand in your

solution to your teacher at the end of the session.

La Bella Dama, C.A., imports a large quantity of beauty care products for women.

However, they have no outlets in any of the major cities. What kind of trade, on a

national level, should they engage in? How should they get their products sold?

Rodriguez e Hijos would like to export their product “Sabor de los Andes” to Central

America and the Caribbean. But they have no business contacts in these regions. What

would be the best type of export for them to engage in? How should they get their

products sold?

Your company needs to hire different types of traders for your Export division. Based on the

information in the text, write the profile for two (2) traders. Consider what special

characteristics each should have for their job. Why are these characteristics important?

1. import/export agent

2. sales representative

3. manufacturer’s representative

31

32

Getting started Let’s now look at a type of commerce that affects almost everyone

in the world. Take a few minutes to think about the following:

What do you understand by “Electronic commerce”?

What inventions were necessary for E-commerce to emerge?

How has electronic commerce changed the way in which we

trade?

What aspects of E-commerce would be of concern to

customers and businesses?

Discuss these questions with your class. Write your ideas in the space

below.

33

E-commerce

“...E-commerce is the most recent step in the evolution of business transactions.”

Derek Slater

The availability of Internet has led to the development of E-commerce which is

becoming very popular these days. Most people think that E-Commerce is just purchasing

something on the Internet but this is a misconception. E-commerce has been a part of global

economic growth in one way or another. Even though e-commerce has been around for years,

it is a very broad term to define.

The term "electronic commerce" has evolved from its inadequate notion of electronic

shopping to mean all aspects of business and market processes enabled by the Internet and

the World Wide Web technologies.

What is E-Commerce?

Electronic Commerce (e-Commerce) is a general concept covering any

form of business transaction or information exchange executed using

information and communication technologies (ICTs). E-Commerce takes

place between companies, between companies and their customers, or

between companies and public administrations. Electronic Commerce

includes electronic trading of goods, services and electronic material.

The best definitions view EC as a strategy to support the total delivery of products

and services to the customer, rather than just another set of tools and technologies. EC

offers fundamentally new ways of doing business, rather than mere extensions of existing

practices. It is, in the end, the strategic deployment of computer-mediated business tools

and information technologies to satisfy business objectives.

Laudon and Laudon, authors of Essentials of Management Information Systems define E-

commerce as “…The process of buying and selling goods and services electronically involving

transactions using the Internet, networks, and other digital technologies...” Electronic

commerce is a means of enabling and supporting such changes on a global scale. It enables

companies to be more efficient and flexible in their internal operations, to work more

closely with their suppliers, and to be more responsive to the needs and expectations of

34

their customers. It allows companies to select the best suppliers regardless of their

geographical location and to sell to a global market. It is the fastest growing segment of our

economy. It allows even the smallest business to reach a global audience with its product or

message with minimal cost. It includes commercial transactions on the Internet but their

scope is much wider than this. E-commerce also requires an extensive and reliable

technology infrastructure. The technology includes the hardware, software and related

technology underlying the business. So the performance of the technological infrastructure

can make or break an online business.

The scope of ecommerce

"...Ecommerce services are the silver bullet that will enable companies to take

advantage of the true business opportunities on the Web..."

Traci Gere, Analyst, The New York Times

Electronic Commerce (e-Commerce) is a term popularized by the advent of

commercial services on the Internet. Internet e- Commerce is however, only one part of the

overall sphere of e-Commerce. The commercial use of the Internet is perhaps typified by

once-off sales to consumers. Other types of transactions use other technologies. Electronic

Markets (EMs) are in use in a number of trade segments with an emphasis on search facilities

and Electronic Data Interchange (EDI) is used for regular and standardized transactions

between organizations.

An electronic market is the use of information and communications technology to present

a range of offerings available in a market segment so that the purchaser can compare the

prices (and other attributes) of the offerings and make a purchase decision. The usual

example of an electronic market is an airline booking system. An Electronic Data

Interchange (EDI) on the other hand, provides a standardized system for coding trade

transactions so that they can be communicated directly from one computer system to

another without the need for printed orders and invoices and the delays and errors implicit

in paper handling. EDI is used by organizations that make a large number of regular

transactions. One sector where EDI is extensively used is the large supermarket chains, which

use EDI for transactions with their suppliers.

35

Seller Purchase order Customer

Payments

Shipping notices

Invoices

Basic transactions in EDI

Internet Commerce

Information and communications technologies can also be used to advertise and make

once-off sales of a wide range of goods and services. This type of e-Commerce is typified by

the commercial use of the Internet.

The three application types of E Commerce

The Internet can, for example, be used for the purchase of books that are then delivered by

post or the booking of tickets that can be picked up by the clients when they arrive at the

event. It is to be noted that the Internet is not the only technology used for this type of

service and this is not the only use of the Internet in e-Commerce.

Computer

Computer

36

Categories of E-commerce

Electronic commerce can be sub-divided into four distinct categories as shown in the

figure:

business-business

business-consumer

business-administration

consumer-administration

Categories of electronic commerce

The business-business category would be a company that uses a network for ordering

from its suppliers, receiving invoices and making payments. This category of electronic

commerce has been well established for several years, particularly using Electronic Data

Interchange (EDI) over private or value-added networks.

The business-consumer category largely equates to electronic retailing. This category

has expanded greatly with the advent of the World Wide Web. There are now shopping malls

all over the Internet offering all manner of consumer goods, from cakes and wine to

computers and motor cars.

The business-administration category covers all transactions between companies and

government organisations. For example, in any developed country details of forthcoming

government procurements are publicised over the Internet and companies can respond

37

electronically. However, in the wake of a growth of both the business-consumer and

business-administration categories, governments may extend electronic interaction to such

areas as welfare payments and self-assessed tax returns.

Advantages and disadvantages of E-commerce

There are a number of advantages for both the consumers or customers and

businesses of E-commerce.

Consumer Benefits Business Benefits

Easier cost due to comparative shopping Access to a larger market place

Change in traditional store hours Reduced overhead costs

Instant access to a greater number of

stores

Consumer disadvantages Business disadvantages

Increased risk of fraud Not all consumers are online

Increased costs due to shipping and

handling

Increased market barriers

Cannot see/touch the merchandise before

buying

Truly rely on “word of mouth” to get

business name/site out.

Hard to return unwanted merchandise

So, considering all the publicity with e-commerce why should any business participate?

The answer is simply the future. As technology and consumer wants and needs continue to

progress businesses will have to do business via the Internet if they want to remain in

business.

38

Checking your understanding of the text.

Work in small groups to do the following:

1. Write your own definition of E-commerce. Give examples to support your

definition.

2. What are the major categories of e-commerce? Give local examples of each.

3. Make a list of the acronyms (letter of the first word of the term) found in the

text. Write the word out in full and then write an example of each.

Write the acronym for the following terms. The first one is done for you.

1. Business-to-Consumer B2C

2. Business-to-Business _______

3. Consumer-to-Consumer _______

4. Consumer-to-Business _______

Scenario

With your classmates, discuss the following scenario and propose a solution. Hand in your

solution to your teacher at the end of the session.

One of your friends has the option to either set up an online business or rent space

and trade in the traditional way. What advice can you give? Explain some of the advantages

and disadvantages for businesses that want to go online. Present your work as a dialogue.

Brainstorm ideas (what information would you need)

Think about the vocabulary and grammar you would need to use.

Write out the draft of the dialogue.

39

Getting started

The people in the photos below have made a great contribution to ecommerce as we know it today.

Do you recognise any of them?

Do you know what their contribution has been?

Hint: One of them began the largest online shopping empire today.

Jeff Bezos

Tim Berners-Lee Marc Andreessen

Find out as we read....

...A short introduction to the history of e-commerce Not that long ago if you wanted to buy something then

you would have to go to the local shops. If they didn't have what

you wanted then you would either have to do without or buy a

substitute. With the development of the Internet a phenomenon

known as 'electronic commerce' or 'ecommerce' for short, has

been growing to such an extent that it is starting to become the

way to shop for many people. But how did this begin?

E-commerce, or electronic commerce, consists of the buying and selling of services or

products over electronic means like the internet. Originally, electronic commerce referred

to electronic commercial transactions such as Electronic Data Interchange (EDI) and

40

Electronic Funds Transfer (EFT). Electronic Data Interchange was first introduced in the

1960s and was a set of rules that helped large businesses transfer documents or business data

from one computer system to another without the intervention of humans. However,

businesses could use different EDI formats and so it was often difficult for one organization

to interact with another. This problem was solved in 1984 when the American National

Standards Institute (ANSI) created ASCX12, a standardized protocol for computer

transactions. Electronic Data Interchange also helped Electronic Funds Transfer (EFT) where

money is exchanged or transferred from one account to another through computer based

systems. This also led to other electronic money transactions such as the use of automatic

teller machines (ATM), credit cards and telephone banking.

E-commerce and the internet

But the story of e-commerce is intrinsically linked to that of the internet. By the late

1960s, the military had developed ARPAnet to ensure communications in the event of a

nuclear attack. This system was linked to four large U.S. research universities and relied on

large computers. In 1971, researchers developed the Terminal Interface Processor (TIP) for

connecting to the ARPAnet from an individual computer and in 1982 ARPAnet switched to

Transmission control Protocol and Internet Protocol (TCP/IP) which powers today’s modern

internet. In spite of this, internet use, the sending of emails and participating in listservs and

newsgroups, was still mainly in the hands of academics. This was soon to change when in

1990, Tim Berners-Lee proposed the first web browser program and the previous academic

telecommunication network was now at the disposal of the world through the World Wide

Web. Companies soon began providing networking services to the public. One such

company, CompuServe, was the first to provide internet connectivity through its e-mail,

message boards and chatrooms. In the mid 1980s, it had introduced a new service called the

Electronic Mall where users could purchase items from 110 online merchants. This, however,

had not been a success at the time.

In 1993, Marc Andreesen at the National Center for Supercomputing Applications

(NCSA) introduced the first widely distributed web browser, Mosaic which enabled users to

have a point-and-click access to the web. The following year, Mosaic was transformed into

the downloadable Netscape browser which included an important security protocol called

Secure Socket Layer (SSL). This encrypted messages on both the sending and the receiving

41

side of an online transaction thereby ensuring that personal information could be secure.

Within two years, third party services for processing online credit card sales had appeared,

with First Virtual and CyberCash being two of the most popular. In 1995, Verisign began

developing digital IDs which verified the identity of online businesses. The company later

switched its focus to certifying that the web site’s servers were properly encrypted and

secure. Finally, the development of a high-speed Aysmmetrical Digital Subscriber Line

(ADSL) in 1998 allowed users of the web to access internet speeds at higher bandwidths and

to be always connected.

The start of e-commerce as we know it

In 1991, the National Science Foundation lifted a ban previously placed on

commercial businesses operating over the Internet thereby opening the doors to electronic

commerce. Four years later, two important companies came onto the scene. In July, 1995

Jeff Bezos made his first sale on Amazon.com from his garage in Seattle, Washington. Within

30 days, books had been sold in all 50 U.S states and in 45 countries around the globe.

Amazon set the standard for customer oriented e-commerce as potential buyers could search

for, and browse books by keyword, author or subject and get personalized recommendations.

Amazon’s patented “one-click” checkout system ensured a quick and secure purchase.

Amazon products now include electronics, home and garden equipment, music, DVDs, video

games, digital downloads, clothing and jewelry on seven different international websites.

Around the same time, Pierre Omidyar, a software programmer, introduced a simple

website called AuctionWeb. Omidyar wanted to know if people would be willing to bid on

each other’s used items and so he posted a broken laser pointer for sale on line. Within a

day it had been sold for $14.83. Omidyar put online buying and selling in the hands of the

public and in 2008, eBay, its official name as of September, 1997, had expanded worldwide

and had more than 7.7 billion dollars in revenues.

E-commerce has changed the way in which people shop, putting at their disposal a

wide variety of goods and products at competitive prices and allowing retailers to know

about customer needs. None of this would have been possible without the technological

advancements begun in the last century.

42

Checking your understanding of the text

Do the following activities in pairs.

1. Choose two (2) of the following and explain their role in the development

of e-commerce:

a. Electronic Data Interchange

b. Netscape browser

c. Secure socket layer (SSL)

d. ADSL

2. Why do you think that the Electronic Mall from CompuServe was not successful when

it was first introduced in the 1980s? What changes do you think would have been

needed to make it successful?

3. In what way was Pierre Omidyar’s initiative important to e-commerce?

4. Make a list of the acronyms (letter of the first word of the term) found in the text.

Write the word out in full and then write an example of each, where possible.

43

Getting started

Shopping online for the first time? Discuss with your classmates what you, as a customer, would need to have to engage in online shopping.

An online shopper? Discuss with your classmates any problems you or anyone you know, have experienced when purchasing an item online.

Share your ideas with the class.

Before reading the text.

Review the different types of ecommerce by writing the acronym which corresponds to the

definition. Read each definition clearly and then determine the type of ecommerce it

describes. Then write the corresponding acronym next to it. One has been done for you.

Acronym Definition

_______ Business transactions that are carried out between

consumers.

B2C Business that sells its products or services directly to the

consumer.

_______ Consumers who present themselves as a buyer group.

_______ Business that sells its products or services directly to another

business.

Think of an example of each type of ecommerce. Write them in the space below.

1. ____________________________________________________________________

2. ____________________________________________________________________

3. ____________________________________________________________________

4. ____________________________________________________________________

44

Check your answers as you read the following text.

E-commerce: Consumer to Business – Business to Consumer.

Since the creation of the first World Wide Web server and browser by Tim Berners-Lee

in 1990, ecommerce has grown and expanded throughout the world. From the first online

Pizza hut in 1991 to Amazon, many people have, at one time or another, engaged in

ecommerce either as a customer or an entrepreneur. People can engage in many different

types of ecommerce. In Business to business, companies sell products to each other, as in

the case of a wholesaler selling to a retailer. In Business to consumer, on the other hand,

the public can purchase articles placing them in virtual shopping carts and without human

interaction. In Consumer to consumer, people can place their items online for sale to others

while in consumer to business, a client places his needs on the internet and companies vie to

obtain the contract for fulfilling them.

There are certain processes that both

customers and entrepreneurs go through when

engaging in ecommerce. In order to engage in

online commerce, customers must first have

access to the Internet either through a

computer or mobile device. They must then

select the site they wish to visit and the item

they wish to purchase. Once the decision has

been made, the item is placed in a shopping

cart, or basket, which keeps a record of all

the items the customer wishes to purchase.

The customer can continue shopping or

proceed to the Check out for payment. First

visitors to the site are required to create an

account, filling in a form with personal data

and then choose a user name and password.

Subsequent visits to the site will require this

information. Once the customer has arrived

at checkout and the order is confirmed

45

payment details are required. Once payment has been confirmed via email, the order is then

processed and shipped to the customer.

If, on the other hand, an online business is to be set up, there are several things

which must be taken into consideration. One of the most important is the setting up of the

website, the domain, through which the product will be known and the client can do

business with the seller. Part of this process includes the selection of a server, whether

Linux or Windows based, which will ensure that service is always available, and most

importantly, security. Creating an attractive website, professionally designed with an

authentic look is more likely to attract online clients is the next step. Information to be

displayed may include a detailed description of the product, type and quantity, prices,

discounts, legal information, customer service information and means of payment. For

purchasing to be done, specially designed software, is needed which will allow the

transaction to be carried out. When the customer reaches the checkout, the software will

calculate the total order including taxes, freight and offer the customer different payment

options.

Security and customer privacy are essential for online commerce and so special

software that records the orders the client has placed, the processing of the order and the

cash transaction mechanisms is used. Security protocols and digital signatures are

encryption techniques used to ensure that the client’s personal information is safe from

hackers and virus attacks. The Secure Socket Layer (SLL) allows websites to have a locked

padlock which tells customers that the site is secure.

However, before financial transactions can be undertaken on the web, a merchant

account must be obtained. This is a bank account which will accept the customer’s online

payments. This is done through a payment gateway, an online processor that connects the

credit card to the bank’s account verifying information, transferring requests and authorizing

the credit cards in real time. Providers like Verisign provide this service. Finally,

advertisement is important in promoting the new business. New websites should be

registered with search engine companies such as Google, Yahoo and Bing.

For those who wish to purchase or engage in ecommerce as an entrepreneur these are

a few of the basic procedures to be carried out. Security, whether it be financial

46

information or personal data is essential to ecommerce and care should be taken to ensure

that both those who buy and sell are able to do so confidently.

Checking your understanding of the text.

Go back through the text and highlight the information regarding:

Security protocol

Merchant account

Domain

Payment gateway

Now, explain these terms in your own words. Use this information to answer the following

question:

“What are the most important aspects to take into consideration when starting an online

business? Why are these important?

With your classmates discuss the following scenarios and suggest a solution. Choose one (1)

of the scenarios and hand in the activity at the end of this session.

Scenario: Your grandparents would like to make an online purchase but they have never

done so before. They have found three websites: Ebay, Amazon and Mercado Libre. Help

them to decide on the best site to use. Then explain, step by step, the process to complete

their purchase.

Scenario 2: One of your friends is interested in setting up an online business. He comes to

you for advice. Explain what steps are necessary.

Read and discuss the scenario

Decide on the information you need to have to complete the task. (Find the necessary

vocabulary and grammar).

Present your scenario as a dialogue either between you and your grandparents or you

and your friend.

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Getting started

In this unit, we will learn about the largest and most important organization of International Trade. The World Trade Organization. Before we start, briefly think about the following questions.

• What is the role of International Organizations in Foreign Trade? Are they necessary? Why?

• What are the advantages and disadvantages of having International Organizations in Foreign Trade?

Discuss the questions with the class. Write your ideas in the space below.

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Getting started

Now read this brief definition of what the World Trade Organization (WTO) is

The WTO is better understood as negotiating forum and a set of rules that regulate International Trade. It also helps to settle disputes between trading nations.

As you read the texts that follow, bear these ideas in mind.

The first text dealing with this topic provides an overview of the WTO. However, the

headings that identify each section have been deleted. Without reading the text in detail,

try to match these headings with the blanks in the text.

A little bit of History

Principles of the International Trading System

The Organization

What is the WTO?

As you quickly skim the text, write the headings in the space provided.

Now read the complete article. Was your matching correct? Make the necessary changes.

The World Trade Organization

1 _____________________________

The WTO is a negotiating forum … Born out of negotiations, where member governments try and sort out the trade problems they face with each other. The WTO’s current work comes from the 1986–94 negotiations called the Uruguay Round and earlier negotiations under the General Agreement on Tariffs and Trade (GATT). The WTO is the host to new negotiations, under the “Doha Development Agenda” launched in 2001.

It’s a set of rules … At its heart are the WTO agreements, negotiated and signed by the world’s trading nations. These documents provide the legal ground-rules for international commerce. They are essentially contracts, binding governments to keep their trade policies within agreed limits. The goal is to help producers of goods and services, exporters, and

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importers conduct their business, while allowing governments to meet social and environmental objectives.

The system’s purpose is to help trade flow as freely as possible. It also means ensuring that individuals, companies and governments know what the trade rules are around the world. In other words, the rules have to be “transparent” and predictable.

And it helps to settle disputes … Trade relations often involve conflicting interests. Agreements, including those negotiated in the WTO system, often need interpreting. The most harmonious way to settle these differences is through some neutral procedure based on an agreed legal foundation.

The World Trade Organization (WTO) deals with the rules of trade between nations at a global or near-global level. There are a number of ways to look at the WTO.

It’s an organization for liberalizing trade

a forum for governments to negotiate trade agreements.

a place to settle trade disputes and

a system of trade rules.

2 _____________________________

The WTO agreements are lengthy and complex because they are legal texts covering a wide range of activities. They deal with: agriculture, textiles and clothing, banking, telecommunications, government purchases, industrial standards and product safety, food sanitation regulations, intellectual property, and much more. These principles are the foundation of the multilateral trading system.

Trade without discrimination

Most-favoured-nation (MFN): treating other people equally

Under the WTO agreements, countries cannot normally discriminate between their trading partners. This principle is known as most-favoured-nation (MFN) treatment. It is so important that it is the first article of the General Agreement on Tariffs and Trade (GATT), which governs trade in goods.

National treatment: Treating foreigners and locals equally

Imported and locally produced goods should be treated equally — at least after the foreign goods have entered the market. The same should apply to foreign and domestic

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services, and to foreign and local trademarks, copyrights and patents. This principle of “national treatment” is also found in all the three main WTO agreements (GATT, GATS and TRIPS).

Freer trade: gradually, through negotiation

Lowering trade barriers is one of the most obvious means of encouraging trade. The barriers concerned include customs duties (or tariffs) and measures such as import bans or quotas that restrict quantities selectively. By the 1980s, the negotiations had expanded to cover non-tariff barriers on goods, and to the new areas such as services and intellectual property.

Predictability: through binding and transparency

Sometimes, promising not to raise a trade barrier can be as important as lowering one, because the promise gives businesses a clearer view of their future opportunities. The multilateral trading system is an attempt by governments to make the business environment stable and predictable. The system tries to improve predictability and stability in other ways as well. One-way is to discourage the use of quotas and other measures used to set limits on quantities of imports. Another is to make countries’ trade rules as clear and public (“transparent”) as possible.

Promoting fair competition

The WTO is sometimes described as a “free trade” institution, but that is not entirely accurate. The system does allow tariffs and, in limited circumstances, other forms of protection. More accurately, it is a system of rules dedicated to open, fair and undistorted competition. The rules on non-discrimination — MFN and national treatment — are designed to secure fair conditions of trade. So too are those on dumping (exporting at below cost to gain market share) and subsidies. Many of the other WTO agreements aim to support fair competition: in agriculture, intellectual property, services, for example.

Encouraging development and economic reform

The WTO system contributes to development. On the other hand, developing countries need flexibility in the time they take to implement the system’s agreements. They inherit the earlier provisions of GATT that allow for special assistance and trade concessions for developing countries.

More recently, developed countries have started to allow duty-free and quota-free imports for almost all products from least-developed countries. On all of this, the WTO and its members are still going through a learning process. The current Doha Development

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Agenda includes developing countries’ concerns about the difficulties they face in implementing the Uruguay Round agreements.

3 _____________________________

The WTO began life on 1 January 1995, but its trading system is half a century older. Since 1948, the General Agreement on Tariffs and Trade (GATT) had provided the rules for the system. The GATT gave birth to an unofficial, de facto international organization. Over the years GATT evolved through several rounds of negotiations. The last and largest GATT round, was the Uruguay Round which lasted from 1986 to 1994 and led to the WTO’s creation. Whereas GATT had mainly dealt with trade in goods, the WTO and its agreements now cover trade in services, and in traded inventions, creations and designs (intellectual property).

The GATT years: from Havana to Marrakesh

The WTO’s creation on 1 January 1995 marked the biggest reform of international trade since after the Second World War. It also brought to reality — in an updated form — the failed attempt in 1948 to create an International Trade Organization. Much of the history of those 47 years was written in Geneva. But it also traces a journey across continents, from that uncertain start in 1948 in Havana (Cuba), via Annecy (France), Torquay (UK), Tokyo (Japan), Punta del Este (Uruguay), Montreal (Canada), Brussels (Belgium) and finally to Marrakesh (Morocco) in 1994. GATT helped establish a strong and prosperous multilateral trading system that became more and more liberal through rounds of trade negotiations. By the 1980s the system needed a thorough overhaul. This led to the Uruguay Round, and ultimately to the WTO.

GATT: ‘provisional’ for almost half a century

From 1948 to 1994, the General Agreement on Tariffs and Trade (GATT) provided the rules for much of world trade and presided over periods that saw some of the highest growth rates in international commerce. It seemed well-established, but throughout those 47 years, it was a provisional agreement and organization. The original intention was to create a third institution to handle the trade side of international economic cooperation, joining the two “Bretton Woods” institutions, the World Bank and the International Monetary Fund.

Over 50 countries participated in negotiations to create an International Trade Organization (ITO) as a specialized agency of the United Nations. With the Second World War recently ended, they wanted to give an early boost to trade liberalization, and to begin to correct the legacy of protectionist measures which remained in place from the early 1930s

The combined package of trade rules and tariff concessions became known as the General Agreement on Tariffs and Trade. It entered into force in January 1948, while the

53

ITO Charter was still being negotiated. Even though it was provisional, the GATT remained the only multilateral instrument governing international trade from 1948 until the WTO was established in 1995.

For almost half a century, the GATT’s basic legal principles remained much as they were in 1948. There were additions in the form of a section on development added in the 1960s and “plurilateral” agreements in the 1970s, and efforts to reduce tariffs further continued. This was achieved through a series of multilateral negotiations known as “trade rounds” — the biggest leaps forward in international trade liberalization have come through these rounds which were held under GATT’s auspices.

In the early years, the GATT trade rounds concentrated on further reducing tariffs. Then, the Kennedy Round in the mid-sixties brought about a GATT Anti-Dumping Agreement and a section on development. The Tokyo Round during the seventies was the first major attempt to deal with trade barriers that do not take the form of tariffs, and to improve the system. The eighth, the Uruguay Round of 1986–94, was the last and most extensive of all. It led to the WTO and a new set of agreements.

The Uruguay Round

It took seven and a half years, almost twice the original schedule. By the end, 123 countries were taking part. It covered almost all trade, from toothbrushes to pleasure boats, from banking to telecommunications, from the genes of wild rice to AIDS treatments. It was quite simply the largest trade negotiation ever, and most probably the largest negotiation of any kind in history. The Uruguay Round brought about the biggest reform of the world’s trading system since GATT was created at the end of the Second World War despite its troubled progress, the Uruguay Round did see some early results. They called for regular reports on GATT members’ trade policies, a move considered important for making trade regimes transparent around the world.

The seeds of the Uruguay Round were sown in November 1982 at a ministerial meeting of GATT members in Geneva. In fact, the work programme that the ministers agreed formed the basis for what was to become the Uruguay Round negotiating agenda. However, it took four more years of exploring, clarifying issues and careful consensus-building, before ministers agreed to launch the new round. They did so in September 1986, in Punta del Este, Uruguay. It was the biggest negotiating mandate on trade ever agreed, and the ministers gave themselves four years to complete it. The Uruguay Round agreements contain timetables for new negotiations on a number of topics.

By 1996, some countries were openly calling for a new round early in the next century. The response was mixed; but the Marrakesh agreement did already include commitments to reopen negotiations on agriculture and services at the turn of the century.

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These began in early 2000 and were incorporated into the Doha Development Agenda in late 2001.

The Doha Development Agenda

At the Fourth Ministerial Conference in Doha, Qatar, in November 2001, WTO member governments agreed to launch new negotiations. They also agreed to work on other issues, in particular the implementation of the present agreements. The entire package is called the Doha Development Agenda (DDA).

The WTO replaced GATT as an international organization, but the General agreement still exists as the WTO’s umbrella treaty for trade in goods, updated as a result of the Uruguay Round negotiations.

4 _____________________________

The WTO is ‘member-driven’, with decisions taken by consensus among all member governments. The WTO is run by its member governments. All major decisions are made by the membership as a whole, either by ministers (who meet at least once every two years) or by their ambassadors or delegates (who meet regularly in Geneva). Decisions are normally taken by consensus.

Highest authority: the Ministerial Conference

The WTO belongs to its members. The countries make their decisions through various councils and committees, whose membership consists of all WTO members. Topmost is the ministerial conference which has to meet at least once every two years. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements.

Second level: General Council in three guises

Day-to-day work in between the ministerial conferences is handled by three bodies:

• The General Council • The Dispute Settlement Body • The Trade Policy Review Body

All three are in fact the same — the Agreement Establishing the WTO states they are all the General Council, although they meet under different terms of reference. Again, all three consist of all WTO members. They report to the Ministerial Conference.

The General Council acts on behalf of the Ministerial Conference on all WTO affairs. It meets as the Dispute Settlement Body and the Trade Policy Review Body to oversee procedures for settling disputes between members and to analyze members’ trade policies.

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Third level: councils for each broad area of trade, and more

Three more councils, each handling a different broad area of trade, report to the General Council:

• The Council for Trade in Goods (Goods Council) • The Council for Trade in Services (Services Council) • The Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS

Council)

As their names indicate, the three are responsible for the workings of the WTO agreements dealing with their respective areas of trade. Again they consist of all WTO members. The three also have subsidiary bodies (see below).

Fourth level: down to the fundamentals

Each of the higher level councils has subsidiary bodies. The Goods Council has 11 committees dealing with specific subjects (such as agriculture, market access, subsidies, anti-dumping measures and so on). Again, these consist of all member countries. Also reporting to the Goods Council is the Textiles Monitoring Body, which consists of a chairman and 10 members acting in their personal capacities, and groups dealing with notifications (governments informing the WTO about current and new policies or measures) and state trading enterprises. The Services Council’s subsidiary bodies deal with financial services, domestic regulations, GATS rules and specific commitments.

The Secretariat

The WTO Secretariat is located in Geneva and is headed by a director-general. Pascal Lamy is the fifth Director-General of the WTO. His appointment took effect on 1 September 2005. Divisions come directly under the director-general or one of his deputies. The Office of the director-general is the administrative support for (disputes) Appellate Body, Textiles Monitoring Body. The Secretariat’s responsibilities include:

Administrative and technical support for WTO delegate bodies (councils, committees, working parties, negotiating groups) for negotiations and the implementation of agreements.

Technical support for developing countries, and especially the least-developed.

Trade performance and trade policy analysis by WTO economists and statisticians.

Assistance from legal staff in the resolution of trade disputes involving the interpretation of WTO rules and precedents.

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Dealing with accession negotiations for new members and providing advice to governments considering membership.

The WTO’s main functions are to do with trade negotiations and the enforcement of negotiated multilateral trade rules, including dispute settlement.

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WTO structure

Key

Reporting to General Council (or a subsidiary)

Reporting to Dispute Settlement Body

Plurilateral committees inform the General Council or Goods Council of their activities, although these agreements are not signed by all WTO members

Trade Negotiations Committee reports to General Council

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Checking your understanding of the text.

Answer these questions in your own words taking into account what you have read.

1.- What is the WTO?

2.- Explain the principles of the trading system

3.- What is the GATT? When did it start?

4.- Why is the Uruguay round important for international trade?

5.- How is the WTO organized?

6.- What are the main functions of the International Trade Centre?

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Rhetorical functions: Chronological Order

When a writer organizes information by time, he/she is using chronological order. This rhetorical function is common when the purpose of the text is to describe the development of an idea, the life of an individual or to provide a historical account about an event or organization. The writer usually states the events in the same order in which they occurred but sometimes, he may “flash back” (jump to a point in the past) to describe past events which affect the present or “flash forward” (jump to a point in the future) to show the results of present events.

For example, in the text you have just read, the section A little bit of History was organized by chronological order. Notice that the first sub-section provides a very broad summary of the history. Then, the following subsections are organized from the earlier years to the latest. In this way we now that the first form of Organization occurred under the GATT a few years after the end of World War II. The first GATT took place in Havana, later in other cities until the famous Uruguay Round which preceded the creation of the WTO in 1995. The most recent Ministerial Conference took place in Doha in 2001.Let’s take a look at some words that indicate chronology and are taken from the text.

by (specific time / year or decade)

By the 1980s, the negotiations had expanded to cover non-tariff barriers on goods, and to the new areas

such as services and intellectual property.

during (period of time)

The Tokyo Round during the seventies was the first

major attempt to deal with trade barriers that do not take the form of tariffs, and to improve the system.

from (specific point in time)

to (specific point in time)

The last and largest GATT round, was the Uruguay Round which lasted from 1986 to 1994 and led to the

WTO’s creation.

until (specific time/ event)

The first GATT took place in Havana, later in other

cities until the famous Uruguay Round which preceded the creation of the WTO in 1995.

in (year, month, season, decade)

For almost half a century, the GATT’s basic legal principles remained much as they were in 1948.

on (day, date)

The WTO’s creation on 1 January 1995 marked the biggest reform of international trade

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Since (specific time or period marking the beginning of a

state or action

Since 1948, the General Agreement on Tariffs and Trade (GATT) had provided the rules for the system.

Other common connectors include Before, after, ago, …later, afterwards. Can you find an example of any of these in the text about the WTO?

A good way to understand texts organized by chronological order is by creating a Timeline. A Timeline is a graphic representation of events in chronological order. It is usually represented as a horizontal line from which dates stem out sequentially. Under each date brief notes on the events occurred are written. Others models display a chart in which dates are organized vertically (from the earliest dates to the most recent ones) on the left column and brief notes on the event that happened in each date are displayed on the right column.

Let’s say you want to create a timeline of the WTO. You would use a model like this. From the text we know the WTO was created in 1995, yet we cannot start from 1995 because we would be leaving out all the events that preceded that year. The right date to start would be 1947, the year GATT was created.

1947 23 countries sign the General Agreement on Tariffs and Trade (GATT) in Geneva, Switzerland,

1948

1995 The WTO was created

2001

Read the section on the history of the WTO and complete the timeline.

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Getting started

Now you are given another text on the history of the WTO. Read the text and...

Find all the indicators of chronology, the words that show

you the passage of time. Underline them.

Make your own timeline of the events here described

The multilateral trading system—past, present and future

The World Trade Organization came into being in 1995. One of the youngest of the international organizations, the WTO is the successor to the General Agreement on Tariffs and Trade (GATT) established in the wake of the Second World War. So while the WTO is still young, the multilateral trading system that was originally set up under GATT is well over 50 years old.

50 years of exceptional trade growth The past 50 years have seen an exceptional growth in world trade. Merchandise exports grew on average by 6% annually. Total trade in 2000 was 22-times the level of 1950. GATT and the WTO have helped to create a strong and prosperous trading system contributing to unprecedented growth.

The system was developed through a series of trade negotiations, or rounds, held under GATT. The first rounds dealt mainly with tariff reductions but later negotiations included other areas such as anti-dumping and non-tariff measures. The last round — the 1986-94 Uruguay Round — led to the WTO’s creation.

The negotiations did not end there. Some continued after the end of the Uruguay Round. In February 1997 agreement was reached on telecommunications services, with 69 governments agreeing to wide-ranging liberalization measures that went beyond those agreed in the Uruguay Round. In the same year 40 governments successfully concluded negotiations for tariff-free trade in information technology products, and 70 members concluded a financial services deal covering more than 95% of trade in banking, insurance, securities and financial information.

In 2000, new talks started on agriculture and services. These have now been incorporated into a broader agenda launched at the fourth WTO Ministerial Conference in Doha, Qatar, in November 2001. The work programme, the Doha Development Agenda (DDA), adds negotiations and other work on non-agricultural tariffs, trade and environment, WTO rules such as anti-dumping and subsidies, investment, competition policy, trade facilitation, transparency in government procurement, intellectual property, and a range of issues raised by developing countries as difficulties they face in

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implementing the present WTO agreements.The deadline for the negotiations is 1 January 2005. Taken from: http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr01_e.htm

GRAMMAR

Take a look at these sentences from the text The World Trade Organization

a. By the 1980s, the negotiations had expanded to cover non-tariff barriers on goods, and to the new areas such as services and intellectual property.

b. Since 1948, the General Agreement on Tariffs and Trade (GATT) had provided the rules for the system.

c. Whereas GATT had mainly dealt with trade in goods, the WTO and its agreements now cover trade in services, and in traded inventions, creations and designs (intellectual property).

The highlighted expressions refer to...

...an action, state or event that started in the past and continues to the present. ...an action that happened at a specific point in the past. ...an action, state or event that happened before a specific time in the past.

The grammatical structure highlighted in these sentences is called past perfect, and it is made up of subject followed by ____________________ followed by ___________________________. When an adverb (never, mainly, mostly, insistently) is used it is usually placed __________________ the auxiliary and the main verb.

Take a look at these graphic representations...

1947 1980 1995 2010

GATT negotiations expand to new areas

Creation of the WTO Creation of the GATT

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The expansion of negotiations to cover new areas had occurred before the 1980’s

1947 1995 2010

GATT had provided the rules for International Trading before the WTO was created.

Notice that we often use the Past Perfect together with the Simple Past. The action which was completed before the other action began is put into Past Perfect.

GATT had established the rules of International Trade before the WTO was created

Complete the following sentences by selecting the correct alternative from the alternatives in brackets.

1. When the GATT came in force, World War II [had ended/ ended].

2. In November 1947, the 23 GATT delegates [had met/ met] with almost 30 Representatives from other countries in Havana, Cuba

3. Before the Uruguay round, there [had been/ were] other GATT rounds in different cities of the world including Habana, Annecy, Torquay and Tokyo.

4. In 2003, a 54-year-old Korean farming leader [had killed/ killed] himself in protest over WTO policies. Prior to this date, protests against the WTO policies [had never been/ never had been] so violent.

5. In 2004, members of the WTO agreed in Geneva to a framework to revive the Doha Round of trade talks which [had stalled/ stalled] since 2002.

Creation of the WTO Creation of the GATT

GATT provides rules for International Trading

Simple past

Action completed in a specific point in the past

Past perfect

Action that took place before another action

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Getting started

Against The World Trade Organization So far, you have learnt about the principles, structure and history of the WTO. However, you should know that many countries, organizations and individuals oppose the idea of the WTO. In this section, you will learn about these criticisms.

Before you read the texts for this section, go to the two previous texts on the WTO.

Discuss with the class what you have learnt so far about the definition and principles of the WTO.

Working with a classmates, try to predict some of the possible criticism you find in the texts. Write them in a piece of paper.

Now read the two following texts. Which of your predicted criticism can you find in them?

The WTO and Free Trade by Anup Shah, July 02, 2007

The World Trade Organization, (WTO), is the primary international body to help promote free trade, by drawing up the rules of international trade. However, it has been mired in controversy and seen to be hijacked by rich country interests, thus worsening the lot of the poor, and inviting protest and intense criticism.

Founded in 1995 after the 8-year “Uruguay Round” of talks, it succeeded the General Agreement on Tariffs and Trade (GATT), which was created in 1948 to lower trade barriers. The scope of the WTO is greater, however, including services, agriculture, and intellectual property, not just trade in goods. The main principles of the WTO boil down to the following:

Non discrimination

Reciprocity

Transparency

Special and differential treatment

As principles, many of these sound good. Certainly the vast majority of the world’s nations believe so for they have signed up to the WTO. However, in reality, these principles seem to be empty proclamation and power and politics seem to really rule the organization. Thus, the WTO has been criticized by various groups and third world countries for numerous reasons, including:

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1. Being very opaque and not allowing enough public participation, while being very welcoming to large corporations. (That doesn’t help the claims of free, open and democratic!)

2. Some national laws and decisions for safety and protection of people’s health, environment and national economies have been deemed as barriers to free trade. Take the following examples: Countries cannot say no to genetically engineered food or products that contain genetically engineered growth hormones known to cause health problems

3. Instead of respecting the reasons why there has been special and differential treatment for developing countries, rich countries want to push poor countries to stick to equality, in what would actually be an unequal result (as it would maintain the unequal terms of trade.)

A number of countries have also spoken out against the WTO saying that there needs to be more co-operation between the North and South (a general term to refer to the Rich and Developing countries, respectively) with regards to international trade.

Another area that causes international tension is the TRIPS agreement that defines how products can be protected from piracy. While just reward for one’s efforts is reasonable, politics and power influences have affected how patent processes work and what can or cannot get patented. A major criticism then has been that in its current form, intellectual property rights regimes like TRIPS serve to stifle competition and protect rich nation´s investments and profits from piracy in that way. For poor nations it makes developing their own industries independently more costly, if at all possible.

As Noam Chomsky points out, “The World Trade Organization regime insists instead on product patents, so you can’t figure out a smarter process.... that impedes growth, and development... It’s intended to cut back innovation, growth, and development and to maintain extremely high profits” for the big corporations.

At the end of November 1999, Seattle saw major governments meet at a WTO ministerial meeting to discuss various trading rules. Seattle also saw free speech cracked down on for the sake of free trade. Enormous public protests ensued. There were many differences in the perspectives of developing and industrialized nation on the reality of free trade by then and how it affected them. It resulted in a WTO failure to agree on many issues. Developing countries were sidelined and one delegate even physically barred from a meeting. How about that for equality and democracy?

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The ones above is nothing but a brief list. But these simple examples show that the WTO has not lived up to the principles it promotes. Taken and adapted from http://www.globalissues.org/article/42/the-wto-and-free-trade

A. Summarize in your own words the main criticisms of the WTO the author of the text expressed.

Criticism of the World Trade Organization The stated aim of the World Trade Organization (WTO) is to promote free trade

and stimulate economic growth. The actions and methods of the World Trade Organization evokes strong antipathies. Among other things, the WTO is accused of widening the sociological gap between rich and poor it claims to be fixing.

Critics contend that smaller countries in the WTO wield little influence, and despite the WTO aim of helping the developing countries, the politicians representing the most influential nations in the WTO (and within those countries or between them, influential private business interests) focus on the commercial interests of profit-making companies rather than the interests of all. Martin Khor argues that the WTO does not manage the global economy impartially, but in its operation has a systematic bias toward rich countries and multinational corporations, harming smaller countries which have less negotiation power. Some examples of this bias are:

Rich countries are able to maintain high import duties and quotas in certain products, blocking imports from developing countries (e.g. clothing);

The maintenance of high protection of agriculture in developed countries while developing ones are pressed to open their markets;

Many developing countries do not have the capacity to follow the negotiations and participate actively; and

The TRIPs agreement which limits developing countries from utilizing some technology that originates from abroad in their local systems (including medicines and agricultural products).

Khor argues that developing countries have not benefited from the WTO Agreements of the Uruguay Round, and, therefore, the credibility of the WTO trade system could be eroded. According to Khor, "one of the major categories of 'problems of implementation of the Uruguay Round' is the way the Northern countries have not lived up to the spirit of their commitments in implementing (or not implementing) their obligations agreed to in the

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various Agreements." Khor also believes that the Doha Round negotiations "have veered from their proclaimed direction oriented to a development-friendly outcome, towards a 'market access' direction in which developing countries are pressurised to open up their agricultural, industrial and services sectors."

Other critics claim that the issues of labor and environment are steadfastly ignored. Steve Charnovitz, former Director of the Global Environment and Trade Study (GETS), believes that the WTO "should begin to address the link between trade and labor and environmental concerns." He also argues that "in the absence of proper environmental regulation and resource management, increased trade might cause so much adverse damage that the gains from trade would be less than the environmental costs." Furthermore, labor unions condemn the labor rights record of developing countries, arguing that the more the WTO succeeds at promoting globalization, the more environment and labor rights suffer.

Other critics have characterized the decision making in the WTO as over-simplified, ineffective, unrepresentative and non-inclusive; more active participants, representing more diverse interests and objectives, have complicated WTO decision-making, and the process of "consensus-building" has broken down. They argue that the GATT decision making worked in the past because there were fewer countries actively engaged and there was no compulsion for all countries to adhere to the results. They have thus proposed the establishment of a small, informal steering committee (a "consultative board") that can be delegated responsibility for developing consensus on trade issues among the member countries.The Third World Network has called the WTO "the most non-transparent of international organisations", because "the vast majority of developing countries have very little real say in the WTO system".

Many non-governmental organizations, such as the World Federalist Movement, are calling for the creation of a WTO parliamentary assembly to allow for more democratic participation in WTO decision making. Dr Caroline Lucas recommended that such an assembly "have a more prominent role to play in the form of parliamentary scrutiny, and also in the wider efforts to reform the WTO processes, and its rules

Taken and adapted from http://en.wikipedia.org/wiki/Criticism_of_the_World_Trade_Organization

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B. Complete this diagram with the main areas criticized about the WTO in each text. If some criticisms are common in both texts write them in the area where the two spheres overlap.

WRITING

In this last activity you will write your own text about the WTO integrating what you have learnt from the different readings in the unit.

Pre-writing

Below, you are given a possible outline for the text you are going to write. Start by completing the outline writing brief notes, facts, dates or relevant details around each circle.

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Writing.

Start writing your text. Remember to start each paragraph with a topic sentence, that is, a sentence that states what the paragraph is going to be about. Then your following sentences must be related to that topic sentence.

WTO

Paragraph 1:

Definition, principles, purpose

Paragraph 2:

History

Paragraph 3:

Structure

Paragraph 4:

Criticism

Paragraph 5:

Your own opinion

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Editing

Review your text considering the following questions:

My sentences are complete, i.e there is a subject, verb and complement.

Each sentence begins with a capital letter and ends with a full stop or period.

Each verb in my sentence agrees with its subject.

All of the verb forms are correct and consistent.

Each pronoun I use refers back to the correct noun it replaces.

The adjectives and adverbs I use are in the correct position in the sentence.

The words I use in my sentences are appropriate and effective.

I use the new words I have learnt in my text.

I check the correct meaning of the words I want to use in the dictionary.

I check the spelling of the words I’ve learnt.

I use capital letters for proper nouns, i.e the names of people and places.

After that, post your documents in our online space devoted to the purpose. Remember that version will not be definite. Your classmates and/or teacher will give you other feedback and you will probably have to make a second and maybe even a third version.

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Getting started

In this unit, we will learn about the Globalisation , a phenomenon

that has had a great impact on International Trade in the last year.

Here are some things to think about.

What ideas, key words or situations can you associate

with globalisation ?

Discuss with your classmates the following:

1. What is globalisation?

2. How does globalisation affect your life?

3. What is the effect of globalisation in International Trade?

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Globalisation

Globalisation is a relatively new word used to describe a very old process. It is a historical and economic process that began with our human ancestors moving out of Africa to spread all over the globe.

The term "globalisation" was first coined in the 1980s, but the concept goes back decades, even centuries, if you count the trading empires built by Spain, Portugal, Britain, and Holland. Some would say the world was as globalised 100 years ago as it is today, with international trade and migration. (E-cyclopedia)

The problem with globalisation begins when we try to define it. An accepted definition neither exists in science, nor in the broader public debate. Economist and internationalist Malcolm Waters defines globalisation as

...a social process in which the constraints of geography on social and cultural arrangements recede and in which people become increasingly aware that they are receding...

British sociologist Anthony Giddens, defines globalisation as

“...an intensification of worldwide social relations, via which faraway places are linked together in such a way that events in one place are affected by processes taking place many miles away, and vice-versa...”

This phenomenon could be a great deal of different things, or perhaps multiple manifestations of a prevailing trend. It has become a buzzword that some will use to describe everything that is happening in the world today.

Globalisation came to be seen as more than simply a way of doing business, or running financial markets - it became a process. From then on the word took on a life of its own. Centuries earlier, in a similar manner, the techniques of industrial manufacturing led to the changes associated with the process of industrialisation, as former country residents migrated to the overcrowded but booming industrial cities to tend the new machines.

Globalisation can be seen as a positive, negative or even marginal process. And regardless of whether it works for good or evil, globalisation's exact meaning will continue to be the subject of debate among those who oppose, support or simply observe it.

Checking your understanding of the text.

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Read the following statements; are they true or false according to the text? Write T or F next to each statement. Be ready to explain your answers for false statements.

1. There is universal consensus on what globalisation is _________

2. Some people think the word is new but the process it refers to isn’t _________

3. International trade and worldwide migration are considered key elements in globalisation. _________

4. Everybody has welcomed happily the process of globalisation. _________

5. The word globalisation started to be used 100 years ago. _________

THE DIMENSIONS OF GLOBALISATION

The dimensions of globalisation are very closely related to each other. When trying to draw differences between each of them, it is essential to see that these are very difficult to isolate. They are all interconnected since they are derived from the process of globalisation. The global networking of players and subject areas counts as a particular feature of globalisation.

The various dimensions involved form interfaces with 'globalisation, since it is important to envisage all factors that are a part this phenomenon, and the fact that these factors are in no way exhausted in economic processes, even if economic

globalisation makes up the cause and is an important driving force.

Economic Dimensions

Examples of each dimension can be found in the daily press, whereby the economic dimension is normally placed in the centre of the discussion, samples rank

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from enormous growth in trade or direct investments, globalisation of the financial markets, transnational integrated production, location competition of states and regions, end of national economies.

Environment as a Dimension

Global problems such as the warming of the earth's atmosphere, the ozone hole, and the deforestation of the tropical rain forests best illustrate globalisation, since global problems are clearly being dealt with which need to be approached on a global level.

The Social Dimension

The world is turning into a 'global village', new communication societies (chat, e-mail) communicating across great distances is being added to traditional societies such as the family or neighbourhood. The Cultural Dimension

Movies can be seen worldwide which allows us to know the culture, values and expectations of a particular country no matter how distant. However, local and regional cultures do not become extinct because of this. On the contrary, the reflection on such cultures counts as one of the accompanying characteristics of globalisation, which is why the term 'glocalisation' has been introduced to the debate.

The political dimension

Politics has to battle enormous problems. Globalisation and location competition limit the amount of flexibility retained by national politics. Many problems can only be dealt within a measured way at an international or global level. New forms of politics and arenas need to be found. European integration is seen as a promising response to the challenges of globalisation.

But globalisation is not actually guilty of everything that it is made out to be. Frequently, it serves politicians as a scapegoat and all-purpose weapon for argumentation. This aspect becomes clear as soon as examples from politics are taken, which do not count as interfaces to globalisation.

Checking your understanding of the text.

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Complete the diagram by adding areas or examples from the text that fall into each of the dimensions. Add one example of your own to each dimension.

movies

CAUSES OF GLOBALISATION

Complex phenomena can only be explained multicausally. There is no controversy about this in the globalisation debate, however all else remains disputed. Depending on the understanding taken as the basis for globalisation, other causes and forces are projected into the field of vision. Without being complete, the image below illustrates some of the elements most frequently cited as causes of globalisation.

Technological innovations, particularly in the field of information and communication, have played and still do play a central role. The Internet represents a symbol for globalisation in many respects. The globalisation of the financial markets, the lightening-quick transfer of unimaginable sums of money around the globe would be impossible without this technology, just as the organisation of transnational production would be and much more.

Global warming

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The enormous increase in trade as a further central element of commercial globalisation results not least from the fact that transport costs have sunk rapidly, and goods can be transported more quickly. This applies to the service sector in particular. Products such as software or databases can be sent from one corner of the world to the other over data lines in seconds.

The end of the Cold War is also frequently named as a cause. Whereas the world was divided up into two camps during the East-West conflict, this separating influence crumbled in the years following 1989/90 following the fall of the Iron Curtain. The former “Eastern Bloc countries” have opened their borders to the world market.

Global problems have played a very central role, above all at a conscious level. The presence of one world stores’ in the highly developed industrial nations is not the only evidence of this. Globalisation problems require an internationalisation of politics, and the promotion of an international consciousness.

Organisations like Greenpeace or Amnesty International, who have dedicated themselves to global topics such as the environment or human rights, are global players in this field. The beginnings of a global society can be seen quite clearly. But without the liberalisation of world trade within the framework of GATT or the WTO, the developments made possible by globalisation would, in fact, have been improbable.

Globalisation describes the way that world trade, culture and technologies have become rapidly integrated over the last 20 years, as geographic distance and cultural difference no longer pose an obstacle to trade. New technologies have increased the ease of global communication, allowing money to change hands in the blink of an eye. International bodies such as the World Trade Organisation and the European Union have been created to help reduce barriers to trade and investment.

To sum up, Globalisation involves...

The opening up of trade which allows goods and services to travel across the world more freely.

An increase in foreign investment - companies investing overseas by building plants, contracting subsidiaries or buying stock in foreign countries.

The opening up of capital markets which increases the flow of money across the world.

Improved access to communication - from the development of new technology like the internet to cheaper plane tickets.

Checking your understanding of the text.

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Now that you have read about globalisation, its definition, dimensions and causes, go back to the questions in the getting started section and discuss them again with the class.

Complete the following diagram summarizing the information from the texts you have read so far.

Globalisation

Definition Dimensions Causes

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Getting started

To this point, you have learnt many things about globalisation. In this next section, you will read about the disadvantages and disadvantages. Let’s start by making our own list. Write three advantages and three disadvantages of globalisation. Then compare your list with a partner’s

Globalisation

Advantages Disadvantages

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A. Now you are going to read a text that discusses both advantages (pros) and disadvantages (cons) of globalisation. As you read the text, focus on finding the answers to these questions.

What are the pros of globalisation? What are the cons of globalisation? Are the advantages and disadvantages you listed before reading the text similar

to the ones listed in the text? The author explains both positive and negative sides of globalisation. However,

does he favour one of the two sides? If so, which one? What words, phrases or other elements make you think so?

Pros and Cons of Globalization By Poushali Ganguly

Globalization has made world a smaller place. Let’s know how, it's pros and cons and it's general impact.

Globalization refers to the absence of the walls of matchboxes that every country had, between themselves based on suspicion, mutual distrust and ambition. We were different countries, in fact divided into worlds, and therefore could never manage to deal with natural holocausts and deadly epidemics, which time and again challenged us. Globalization has strengthened the nexus and has helped us to know each other’s need in a better way. It has helped to demolish those walls that separated us and curbed our natural identity of being fellow human beings. Globalization has primarily become a fiscal term but its impact is not limited to the economy of the countries only, the term globalization actually refers to every aspect of life like cultural, social, psychological and of course, political.

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It is true that the impact of globalization is visible and affects largely the politics and the economy of the country but its effect on the mindset and the culture is noticeable gradually in the way people think and react. It’s like the Iceberg theory wherein what we do and say are at the tip and what we think and believe is at the base. The base is not visible but manifestations at the top are conspicuous. It applies here as well where people do not change abruptly but may be after a decade the change starts showing and seems radical.

Pro-globalization Globalization is not a new phenomena, the base was laid long back when the

Dutch East India Company and the British East India Company started trading with India. In history there were trade relations between different countries like Arabia and Egypt and now in modern times that has translated into Globalization or Free Trade. It’s true that ultimately all the free trade resulted in the white man taking the burden proactively but then globalization leads to more employment and higher standard of living, especially among the developing countries. Theories suggest that globalization leads to efficient use of resources and benefits all those who are involved.

According to liberalists, globalization will help the whole world to deal with crises like unemployment and poverty. It will help us to raise the global economy only when the involved power blocks have mutual trust and respect for each other’s opinion. Globalization and democracy should go hand in hand. It should be pure business with no colonialist designs. The way we have developed in the last 10 years, globalization seems to have given us good returns. Globalization has made the life of the third world citizen a completely different story. There are so many foreign companies that have made way to Orient and have made India a brand name all over the world.

Pros and Cons of Globalization The pros of Globalization are many these are some of them:

Now there is a worldwide market for the companies and for the people there is more access to products of different countries.

There is a steady cash flow into the developing countries, which will gradually decrease the dollar difference to other currencies.

Due to the presence of a worldwide market, there is an increase in the production sector and there are lots of options for both companies and consumers.

Gradually there is a world power that is being created instead of compartmentalized power sectors. Politics is merging and decisions that are being taken, are actually beneficial for people all over the world.

There is more influx of information between countries, even if they do not have many things in common.

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There is cultural intermingling and each nation/country is trying to learn about the other’s cultural preferences and in so doing, we are actually coming across things that we like and adopt as our own.

Since we share financial interests, corporations and governments are trying to sort out ecological problems for each other.

Socially, we have become more open and tolerant towards each other and they who live in the other part of the world are not aliens as we had always thought. There are examples like now Indian girls work in call centers and work nights, which was a taboo even two years back. We are celebrating Valentine’s Day, scraping on Orkut, watching the Idol series, Fear factor, the Indian version Big Brother.

There is a lot of technological development that we have undergone over the years. There are fewer brain drains since Asians are working in their own country though for a foreign company but are earning foreign exchange for their country.

There are cons as many as pros, which are as follows:

It is true that Europeans are losing jobs and that is posing a problem for them since the companies are outsourcing work to the Asian countries since the cost of labour is low and that profits companies considerably.

There is immense pressure on the employed Europeans who are always under the threat of the business being outsourced.

Corporations are building up units in other countries equally well equipped as they have done at their own country, thus transferring the quality to other countries.

There are some experts who think that globalization is also leading to the incursion of negatives like communicable diseases and social degeneration.

There is also a fear of corporations ruling the world because there is a lot of power, which is invested in them and by them.

For nations that are at the receiver’s end are also giving up the reins in the ends of a foreign company which might again lead to a sophisticated form of colonization.

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Impact of Globalization

Globalization has made way for free trade and business and has boomed communication among various parts of the globe. It has potential to make this world a better place to live in. It is changing the political scenario thus deep-seated problems like unemployment; poverty and shift in power are coming to the picture. The marginal are getting a chance to exhibit in the world market. The term "brand" is catching up in the Asian countries.

It, however, is not only modernizing but also westernizing and to an extent also sinicizing the native cultures. The power play is leading to the linguicide or linguistic, cultural and traditional genocide. That is probably

where we need to keep a check and not let enthusiasm go wild. There has been significant de-localization that needs individuals to be more tolerant since face-to-face interaction is no more the order of the day. One American is trying to sort out his billing issue of his mobile phone with an Indian who is not a direct employee of the service provider. Now that sounds complicated and is complicated and has to be dealt with carefully.

Taken and adapted from: http://www.buzzle.com/articles/pros-and-cons-of-globalization.html

Checking your understanding of the text

Did you find the answers to the questions presented before you read the article? Work with a classmate and compare your answers. Be ready to discuss with the whole class.

The next article, as its title shows, will discuss criticism to globalisation. As you read find answers to these questions.

Does the author mention any advantages of globalisation? If so which? Without reading the article, predict three criticism you think you will find based

on the title, subtitles and illustrations. Is the author objective or biased (showing a clear preference for one position)?

What words, phrases or other elements make you think so?

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Is Globalization Inevitable?: Criticism of Globalization By Eyrun Bernhardsdottir

Many claim the inevitability of globalization, while ignoring the private interests which are the drive behind globalization.

Since the Cold War ended, the idea of globalization and the interconnected global economy seemed to offer hope to many nations struggling, post-Cold War, to find political and economical stability. Free markets, they were told, would lead to a re-distribution of power, which, in turn, would lead to economical and political opportunities.

Today, many claim globalization is, and has been, inevitable; where the main function of the government is to uphold policies which correspond with the ideas and economic outlooks of the free market and global economical institutions.

The fact, however, that the present form of globalization offers as much suffering as it does prosperity, as well as the failure of the 'one-size-fits-all' economic model posed by the International Monetary Fund (IMF), shows that globalization is not an inevitable occurrence. Instead, it is a phenomenon led by the West, for the benefit of the West.

Globalization, Inevitable Ideology, and the Western Economy

It is necessary to keep in mind the market forces are structured by policies and government. When, as has been the case, governments are forced to shape their policies according to a Western ideology regarding the free market system, it is perhaps not surprising that some claim this is a sign of the inevitability of globalization. The truth is, however, that these governments are without a choice regarding their economic choices and policies.

Furthermore, it has often been ignored that the interests of the transnational corporation; the non-governmental organization, or the Western politician drive the

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forces of globalization. Without these active proponents, it can be argued that we indeed would see less of globalization – after all, without some of the most economically powerful people of this world promoting globalization, it would hardly have become such a tool of Western economic ideology.

Globalization and Truly Global Problems

Thus, in fact, the idea of globalization has replaced international relations as a description of what the world is, as well as what our place is within it. Content is put into a global context over national, which, perhaps, would work if it were not for the fact that when it comes to global problems such as climate change, opportunities for the young, and preventing human suffering, globalization and the Western free-market system have failed.

These problems are quite severe. After all, the focus has been on the state thus far; whether it is stronger or weaker; its economical problems, and how it can be an active player in today's globalized

economy. Instead, social and environmental problems which are even, perhaps, directly linked to globalization, and which truly affect populations across borders in a much more real way tend to be ignored. Such problems often include gender, race, or religion, lack of resources and poverty. Considering the apparent inability of globalization to solve the problems which appear to be truly global, one can question the power it actually holds today.

Conclusion

Therefore, those that claim that globalization is an inevitable phenomenon; built up since the Industrial Revolution, fail to comprehend the power of those, well, in power. Globalization is not a truly global, and equal force; it is a force of individual interests built around the ideology of the Western Way.

Although a very real force, it is far from inevitable, and, as famine, poverty, misogyny, and religious persecutions continue across borders, one must question whether globalization exists in a sense outside the economical sphere. Even within economics, transnational corporations, non-governmental organizations; and the Western economy in general are, perhaps, little stronger than they were prior to the First World War.

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It is impossible to claim that economical remedies, such as those promoted by the IMF in a 'one-size-fits-all' box, work globally, when the global community has proved itself unable to tackle global problems such as climate change and female persecution and mutilation. These are very real problems of today, which affect millions around the world. Perhaps, rather than forcing an economic policy down the throats of those affected in return for help, true assistance regarding these matters would be more appropriate.

Taken from: http://www.suite101.com/content/is-globalization-inevitable-criticism-of-globalization-a291301

Checking your understanding of the text.

A. Did you find the answers to the questions presented before you read the article? Work with a classmate and compare your answers. Be ready to discuss with the whole class.

B. In which of the texts above are the following ideas presented? Complete the following chart by checking the appropriate column. In some cases, you may check both columns.

Ideas Pros and Cons of Globalization

Is Globalization Inevitable?: Criticism of Globalization

In many cases, globalization has caused more harm than good.

Globalization is nothing but a tool to help the rich get richer.

A truly global world will be a better place to live in.

Developing countries have been benefited by the economic changes promoted by globalization and free trade.

Globalization has brought about the westernization of many local communities.

Globalization has resulted in more power for transnational corporations.

Globalization has been unable to tackle real global problems in the social and environmental spheres.

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Rhetorical functions: Argumentation

An argument is the act of reasoning to establish or reject a position. The purpose of an argument is generally to present a particular point of view. The authors of an argumentative text may want to persuade their readers of the importance, necessity or correctness of their point of view, defend their position and perhaps even attack a different point of view. The two texts in the previous section, Pros and Cons of Globalization and Is Globalization Inevitable?: Criticism of Globalization are examples of argumentative texts. The former wants to highlight the positive impact of globalization while the latter is trying to provide a negative image of globalization.

Authors of argumentative texts try to accomplish their goal by presenting facts, evidence and reasons to support a conclusion. However, to shape a convincing argument, the authors need more than just a collection of facts. They need to analyze the topic, establish relationships among disparate elements, and weigh evidence. A good argument reasons and draws sound inferences from facts, and in order to do this, it also incorporates values. The authors forge a position on an issue based on the evidence they gather and analyze, and the beliefs and values they hold.

The opinions and values of the authors are predominant in argumentative texts. So you, as a reader, have to be able to evaluate the validity of the arguments put forward by the writers. How do you do it? First of all, a good argument is based on solid evidence and sound reasoning.

Keep in mind that an argumentative text usually contains these five key elements:

1. An explanation of the issue

2. A clear statement of the author point of view.

3. A summary of opposing arguments

4. Rebuttal to the opposing arguments (rebut means to point out problems with the other side’s reasons to prove that they are not good reasons).

5. The author’s arguments

Now go back to the previous texts and find examples of these key elements

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Key elements in argumentative texts Pros and Cons of Globalization

Is Globalization Inevitable?: Criticism of Globalization

Explanation of the issue (in this case globalization)

Statement of the author point of view (either globalization is “good” or “bad”

Summary of opposing arguments

Rebuttal

Author’s argument

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As you may have noticed, the key elements do not necessarily come in the same rigid order in the text. You may also have noticed that the amount of information given is not necessarily proportional (while a few lines are devoted to opposing arguments, full-length paragraphs are devoted to rebuttal).

When you read an argumentative text take into account the following questions:

1. Do the ideas presented in the text make you think seriously about your personal position or belief on the subject?

2. Does the author base his/her analysis on sound evidence or on personal opinion or preference?

3. Is the author trying to convince you to accept one point of view?

4. Is the author simply presenting different arguments and lets the reader decide for herself/himself?

Re-read the texts Pros and Cons of Globalization and Is Globalization Inevitable?: Criticism of Globalization and then apply the questions above to each of them. Discuss your answers in class.

Separating facts from opinion

A fact is something that is based on direct evidence or observation and can be tested, and therefore verified, by more than one person on different occasions. Facts can be found in textbooks, reference material and official documents. They are expressed in precise numbers and quantities and through neutral language. For example

According to UNICEF, 22,000 children die each day due to poverty. And they “die quietly in some of the poorest villages on earth...

Source: http://www.globalissues.org/article/26/poverty-facts-and-stats

This is a fact, because the information comes from an international source (UNICEF), you have a number that can be checked out and the information can be cross-referenced (verified in other sources). Opinions, on the other hand, are subjective in nature and are usually expressions of the writer’s feelings or beliefs on a topic. They express attitudes, make judgement, express approval or disapproval. Opinions most often involve abstract concepts that are difficult to define and on which, as a result, each person has his own personal view. Concepts of right and wrong, fair play, loyalty, the right to live and the right to die. Opinions cannot be verified like facts. Take this as an example

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The interests of powerful nations and corporations are shaping the terms of world trade.

Source: http://www.globalissues.org/issue/38/free-trade-and-globalization

How can we make sure this is true? What evidence or data is given to show this is true? Intuitively, the statement above sounds very reasonable and you may even feel is right, but it is an opinion from an author. Although opinions cannot be checked or verified for accuracy, you as a reader can determine the validity of the opinion. Does the writer support his opinion with evidence, facts or reason? Does he cite respected authorities in the field who agree with his point of view? Is the writer an expert or authority in his field? Does he have the knowledge and experience to make his statements? Compare the example above with this one:

...this is in an age of immense wealth in increasingly fewer hands. The inequality of consumption [...] is terribly skewed: “20% of the world’s people in the highest-income countries account for 86% of total private consumption expenditures — the poorest 20% a minuscule 1.3%” according to the 1998 United Nations Human Development Report.

Source:http://www.globalissues.org/article/408/sustainable-development-introduction#LittleProgressSoFar

The author of this text describes the distribution of wealth as “skewed” (which means “placed or turned to one side; asymmetrical”). In his opinion, this is not fair, but he shows his opinion to be right by providing facts taken from a credible source.

Sometimes the writer’s opinion may seem to be based on facts but it is still the individual’s point of view and not a fact in itself. Take a look at this example from Is Globalization Inevitable?: Criticism of Globalization

It is impossible to claim that economical remedies, such as those promoted by the IMF in a 'one-size-fits-all' box, work globally,

Sometimes writer’s express their opinions by using certain qualifiers such as believe, think, in my opinion, feel and suggest. However, there are occasions in which the writer does not use any of these indicators and it is up to the reader to determine if the statement is a fact or an opinion. In the example above the phrase “it is impossible to claim that…” make the statement sound as an absolute truth, a fact, but it is actually his point of view; pro-globalization authors would claim the opposite and might even show statistics to support their claims.

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Exercise

Are these statements facts (F) or opinions (O). Explain your answers.

1) For globalism to work, America can’t be afraid to act like the almighty

superpower that it is.…The hidden hand of the market will never work without a

hidden fist. (Thomas Friedman, 1999) ______

2) The world is becoming more globalized, there is no doubt about that. (Global

Issues.org) ______

3) The GDP (Gross Domestic Product) of the 41 Heavily Indebted Poor Countries (567

million people) is less than the wealth of the world’s 7 richest people combined.

(Global Issues.org) ______

4) The poorest 40 percent of the world’s population accounts for 5 percent of global

income. The richest 20 percent accounts for three-quarters of world income.

(Global Issues.org) ______

5) Based on enrollment data from UNICEF, about 72 million children of primary

school age in the developing world were not in school in 2005; 57 per cent of

them were girls. And these are regarded as optimistic numbers. (Global

Issues.org) ______

6) Inequality is soaring through the globalization period (Noam Chomsky, 2001)

______

7) Fortunately, the scary portrait [provided by the 1999 United Nations Human

Development Report] is highly misleading. (Virginia Postrel, 2002) ______

8) Globalisation represents the largest economic and social shift since the Industrial

Revolution. (Dirk Messner/Franz Nuscheler, n.d.) ______

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GRAMMAR

In some sentences, the first noun or noun phrase is usually the agent, that is, the doer of the action. As in the following example:

British sociologist Anthony Giddens, defines globalisation as an intensification of worldwide social relations...

Who defines what? Anthony Giddens (agent) defines globalisation (object). This is called the active voice, in which the subject and agent are the same. However, in other sentences the subject is not the agent. For example:

Globalisation is defined by British sociologist Anthony Giddens, as an intensification of worldwide social relations...

Notice that iuf we ask “who defines what?” the answer would be the same: Anthony Giddens (agent) defines globalisation (object), but the grammatical arrangement is different. This arrangement is called the passive voice. Take a look at these sentences from the texts in this lesson.

a. The term "globalisation" was first coined in the 1980s... b. Globalisation can be seen as a positive, negative or even marginal process. c. ...the market forces are structured by policies and government. d. Content is put into a global context over national,

In all these sentences the subject is not the agent, the subject is the product or the receiver of the main action, in other words, the object. Notice also that in some cases the agent is not mentioned at all, can you identify those examples? In which example is the agent mentioned?

From the examples above, we can conclude that in the passive voice (select 2)...

a. It is more important to mention the agent than the product or receiver. b. It is more important to mention the product or receiver than the agent. c. The agent is not important, too obvious or unknown. d. It is essential to mention the agent at the end.

What is the structure of a sentence in the passive voice?

Subject + _________________ + ______________________________ + complement.

And/or

Subject + ______________ + ____________________ + ________ + agent + complement.

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What happens when a modal auxiliary is used (can, will or should)?

____________________________________________________________________________

__________________________________________________________________________

What happens when an adverb is added (initially, first, often, rarely)? Where is the adverb placed in the passive voice sentence?

____________________________________________________________________________

__________________________________________________________________________

Exercise

A. Read the following sentences. Are they active(A) or passive(P)? Write A or P next to each.

1) Examples of each dimension can be found in the daily press. ______

2) Global problems need to be approached on a global level. ______

3) Globalisation describes the way that world trade. ______

4) Culture and technologies have rapidly integrated over the last 20 years. ______

5) Local and regional cultures do not become extinct because of the cultural

exchange globalisation promotes. ______

6) Movies can be seen worldwide allowing people to learn the culture, values and

expectations of a particular country no matter how distant. ______

7) New technologies have increased the ease of global communication. ______

8) Politics has to battle enormous problems. ______

9) The developments made possible by globalisation would be improbable in the

world of 30 years ago. ______

10) The different dimensions of globalisation are derived from the process itself.

______

11) The world is turning into a 'global village'. ______

B. Go back to the sentences that are PASSIVE. Underline the agent in each of them (if present). For those in which the agent is omitted, write (i) who the agent could be; and (ii) why was it omitted (too obvious, unimportant or unknown).

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WRITING

In this last activity you will write your own argumentative text about Globalisation integrating what you have learnt from the different readings in the unit.

Pre-writing

Choose one of the prompts given below.

Globalisation has potential to make this world a better place.

Globalization is not a truly global, and equal force; it is a force of individual interests built around the ideology of the Western Way.

Then,

a. Decide whether you agree or disagree with the prompt you chose. b. Complete this chart with information from the texts in this lesson, other

resources and your own ideas.

Facts about globalization

My position (main points, arguments)

Opposite position (main points, arguments)

Rebuttal

c. Make an outline of your text in which you organize the ideas from the chart in a graphic organizer. Plan ahead what you would include in the introduction, body and conclusion. Refer back to the key elements in argumentative texts listed on page X.

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Writing

Start writing your text. Remember to devote at least one paragraph to each point (probably two or more). Use language that lets the reader know when you are giving an opinion or stating a fact. Cite sources if necessary with expressions such as According to... Some author believe that... and the like. If you want to, write a first draft by hand.

Editing

Review your text considering distribution of ideas, grammar, spelling and mechanics. Then type it and use a spell checker. After that, post your documents in our online space devoted to the purpose. Remember that version will not be definite. Your classmates and/or teacher will give you other feedback and you will probably have to make a third version.

REFERENCES

Bernhardsdottir, E. (2010). Is Globalization Inevitable?: Criticism of Globalization. [Online]. Retrieved from http://www.suite101.com/content/is-globalization-inevitable-criticism-of-globalization-a291301

Export911 (n.d.). Gateways to global markets. [Online]. Retrieved from http://www.export911.com/e911/gateway/change.htm

Ganguly, P. (n.d.) Pros and Cons of Globalization. [Online]. Retrieved from http://www.buzzle.com/articles/pros-and-cons-of-globalization.html

Meza, M. (2008). English for International Trade V. Unpublished instructional material. Universidad Simón Bolívar.

Shah, A. (2007.) The WTO and Free Trade. [Online]. Retrieved from: http://www.globalissues.org/article/42/the-wto-and-free-trade

St.Louis, R., Pereira, S., Berríos G. and Cartaya, N. (2010). Focus on reading. Unpublished instructional material. Universidad Simón Bolívar.

The Levine Institute (2010). Trade and Globalization. [Online]. Retrieved from: http://www.globalization101.org/uploads/File/Trade/tradeall2010.pdf

Wikipedia (2008). Criticism of the World Trade Organization. [Online]. Retrieved from http://en.wikipedia.org/wiki/Criticism_of_the_World_Trade_Organization

World Trade Organization (n.d.). The multilateral trading system—past, present and future [Online]. Retrieved from http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr01_e.htm

World Trade Organization (n.d.). What is the WTO? [Online]. Retrieved from http://www.wto.org

REFERENCES FOR E-COMMERCE ARTICLES

http://www.adamssite.com/what-is-e-commerce.shtml

http://www.netxs.com.pk/ecommerce/whatisecommerce.html

http://www.netpresence.biz

http://www.websitecenter.com/ecommerce/glossary.html