MBA商务英语课堂讲义
Most companies begin as private limited companies. Their owners have to put up the capital themselves, or borrow from friends or a bank, perhaps a bank specializing in venture capital. The founders have to write a Memorandum of Association (GB) or a Certificate of Incorporation (US), which states the company‘s name, its purpose, its registered office or premises, and the amount of authorized share capital. They also write Articles of Association (GB) or Bylaws (US), which set out the duties of directors and the rights of share holders (GB) or stockholders (US). They send these documents to the registrar of companies.
A successful, growing company can apply to a stock exchange to become a public limited company (GB) or a listed company (US). Newer and smaller companies usually join ?over-the-counter‘ markets, such as the Alternative Investment Market in London or Nasdaq in New York. Very successful businesses can apply to be quoted or listed (i.e. to have their shares traded) on major stock exchanges. Publicly quoted companies have to fulfil a large number of requirements, including sending their shareholders an independently-audited report every year, containing the year‘s trading results and a statement of their financial position.
The act of issuing shares (GB) or stocks (US) for the first time is known as floating a company (making a flotation) (release for sale). Companies generally use an investment bank to underwrite the issue, i.e. to guarantee to purchase all the securities at an agreed price on a certain day, if they cannot be sold to the public.
Companies wishing to raise more money for expansion can sometimes issue new shares, which are normally offered first to existing shareholders at less than their market price. This is known as a rights issue. Companies sometimes also choose to capitalize part of their profit, i.e. turn it into capital, by issuing new shares to shareholders instead of paying dividends. This is known as a bonus issue.
Buying a share gives its holder part of the ownership of a company. Shares generally entitle their owners to vote at a company‘s Annual General Meeting (GB) or Annual Meeting of Stockholders (US), and to receive a proportion of distributed profits in the form of dividend – or to receive part of the company‘s residual value if it goes into liquidation. Shareholders can sell their shares on the secondary market at any time, but the market price of a share – the price quoted at any given time on the stock exchange, which reflects (more or less) how well or badly the company is doing – may differ radically from its nominal value.
Unit 11 International Trade
Vocabulary
Match up these words and expressions with the definition below.
Autarky balance of payments balance of trade barter or counter-trade Deficit dumping invisible imports and exports
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MBA商务英语课堂讲义
protectionism Quotas surplus tariffs
visible trade (GB) or merchandise trade (US)
1. trade in goods
2. trade in services (banking, insurance, tourism, and so on) 3. direct exchanges of goods, without the use of money
4. the difference between what a country receives and pays for its exports and imports of goods
5. the difference between a country’s total earnings form exports and its total expenditure on imports 6. the (impossible) situation in which a country is completely self-sufficient and has no foreign trade 7. a positive balance of trade or payments 8. a negative balance of trade or payments. 9. selling goods abroad at (or below) cost price
10. imposing trade barriers in order to restrict imports 11. taxes charged on imports
12. quantitative limits on the import of particular products or commodities
PROTECTIONISM AND FREE TRADE
The majority of economists believe in the comparative cost principle, which proposes that all nations will raise their living standards and real income if they specialize in the production of those goods and services in which they have the highest relative productivity. Nations may have an absolute or a comparative advantage in producing goods or services because of factors of production (notably raw material), climate, division of labour, economies of scale, and so forth.
This theory explains why there is international trade between North and South, e.g. semiconductors going form the USA to Brazil, and coffee going in the opposite direction. But it does not explain the fact that over 70% of the exports of the advanced industrial countries go to other similar advanced nations, with similar resources, wage rates, and levels of technology, education, and capital. It is more a historical accident than a result of natural resources that the US leads in building aircraft, semiconductors, computers and software, while Germany makes luxury automobiles, machine tools and cameras.
However, the economists who recommend free trade do not face elections every four or five years. Democratice governments do, which often encourages them to impose tariffs and quotas in order to protect what they see as strategic industries – notably agriculture – without which the country would be in danger if there was a war, as well as other jobs. Abandoning all sectors in which a country does not have a comparative advantage is likely to lead to structural unemployment in the short (and sometimes medium and long) term.
Other reasons for imposing tariffs include the following:
To make imports more expensive than home-produced substitutes, and thereby reduce a balance of payments deficit;
As a protection against dumping (the selling of goods abroad at below cost price in order to destroy or weaken competitors or to earn foreign currency to pay for necessary imports); To retaliate against restrictions imposed by other countries;
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MBA商务英语课堂讲义
To protect ?infant industries‘ until they are large enough to achieve economies of scale and strong enough to compete internationally.
With tariffs, it is impossible to know the quantity that will be imported, because prices might be elastic. With quotas, governments can set a limit to imports. Yet unlike tariffs, quotas provide no revenue for the government. Other non-tariff barriers that some countries use include so-called safety norms, and the deliberate creation of customs difficulties delays:
The General Agreement on Tariffs and Trade (GATT), an international organization set up in 1947, had the objective of encouraging international trade, of making tariffs the only form of protectionism, and of reducing these as much as possible. The most favoured nation clause of the Gatt agreement specified that countries could not have favoured trading partners, but had to grant equally favourable conditions to all trading partners. The final Gatt agreement – including services, copyright, and investment, as well as trade in goods – was signed in Marrakech in 1994, and the organization was superseded by the World Trade Organization.
It took nearly 50 years to arrive at the final Gatt agreement because until the 1980s, most developing countries opposed free trade. They wanted to industrialize in order to counteract what they rightly saw as an inevitable fall in commodity prices. They practiced import substitution (producing and protecting goods that cost more than those made abroad), and imposed high tariff barriers to protect their infant industries.
Nowadays, however, many developing countries have huge debts with Western commercial banks on which they are unable to pay the interest, let alone repay the principal. Thus they need to rollover (or renew) the loans, to reschedule (or postpone) repayments, or to borrow further money from the International Monetary Fund, often just to pay the interest on existing loans. Under these circumstances, the IMF imposes severe conditions, usually including the obligation to export as much as possible.
Quite apart from IMF pressure, Third World governments are aware of the export successes of the East Asian ?Tiger‘ economies (Hong Kong, Singapore, South Korea and Taiwan), and of the collapse of the Soviet economical model. They were afraid of being excluded from the world trading system by the development of trading blocks such as the European Union, finalized by the Maastricht Treaty, and the North American Free Trade Agreement (NAFTA), both signed in the early 1990s. So they tended to liberalize their economies, lowering trade barriers and opening up to international trade.
There is a logical connection among three of the four words in each of the following groups. Which is the odd one out, and why?
1 Absolute advantage – barriers – comparative advantage – free trade 2. Autarky – counter-trade – invisible trade – visible trade 3. Balance – deficit – dumping – surplus
4. Banking – insurance – merchandise – tourism
5. Comparative advantage – protectionism – quotas – tariffs 6. Non-tariff barriers – norms – quotas – taxes
7. Barter – import substitution – infant industries – tariff barriers 8. Debt – reschedule – rollover – trade
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MBA商务英语课堂讲义
9. Liberalize – protect – subsidize – substitute
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