Two basic concepts describe the process of international trade – the concept of specialization and the concept of economic interdependence.
V. Russian Economy
Task 1. Read and translate the text
| The Soviet Union had a centralized state control almost over all means of production, exchange, distribution and investment. The Soviet Union also had a planned economy. Economic policy was made according to directives from the Communist Party, which controlled all aspects of economic activity. Today Russia tries to change its planned economy into market economy. But we can see that this process of transition is full of challenges. It is evident that Russian economy has great potential for growth: Russia has huge supplies of the most valued natural resources, especially those required to support a modern industrialized economy. It also has a well-educated labour force especially in technical area. At the same time, Soviet-era management practices and old infrastructure hinder efficient utilization of those resources. |
Russian economy has grown considerably since the financial crisis of 1998. High oil prices and a relatively cheap ruble were important factors of these economic successes, but since 2000 investment and consumer demand have played a very important role. Russia has also improved its international financial standing.
Strong oil export incomes have allowed Russia to increase its currency reserve. These achievements, along with structural reforms of the government, have increased business and investor confidence in Russia's economic prospects.
But still there are some problems which include a weak banking system, a poor business climate that discourages domestic and foreign investors, corruption, and a lack of trust in institutions.
| Vocabulary: means – средство, средства to hinder – препятствовать transition – переход challenge – вызов evident – очевидный (очевидно) considerable – значительный huge supply – огромный запас to require – требовать to support – поддерживать | to increase – увеличивать to improve – улучшать achievement – достижение to advance – продвигать to discourage – обескураживать, отпугивать a lack of… - недостаток, отсутствие rather than – скорее, чем |
Task 5. Read the article by H. McRae “The architect of Russia’s success” and answer the questions.
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Russia seems so to have so many social problems that sometimes we forget that it is also becoming an economic success story. Even if this performance depends heavily on exports of energy and raw materials, the fact is that this is real wealth creation. Yet the transition to the market economy was indeed a mess. During privatization giant companies were not sold to the public in an organized manner. Instead they were almost given away to friends. This failure has led to the argument that China made the right choice in making economic reforms before political ones, whereas Russia made all the other way round. But this is only one problem. A top Chinese banker argued that China had taken the advice of Britain and German economists on how it should move from a controlled economy to a market one. They had the experience of doing just that after the Second World War in both Britain and Germany. They had argued that that price should be lifted gradually and that the transition from state enterprises to market ones should take a number of years. By contrast, the Russians has gone to US economists from Harvard who had no experience of the real world and though everything would be all right if you just ended all the controls in one big bang. Finally the living standard decreased in Russia in the early 1990s. China, from its reforms starting in 1978, has seen considerable and continuous growth.
The conclusion is not that it is better to have economic reform before political reform than vice-versa. Rather it should be that gradual – “steady-state” economic reform, which will be more successful than the “big bang”.
Anyway today Russia has one of the most powerful and successful economies. My point is simply that getting the economic relationship right with Russia is hugely important to Europe and Britain. It will be a rough partnership. But that is fine, for at least we know where we stand.
VI. International Trade
Task 1. Read and translate the text.
International trade is exchange of capital, goods, and services across international borders or territories. Industrialization, transportation, and globalization influence the international trade system. Depending on what a country produces and needs, it can export (sell goods to another country) and import (buy goods from another country).
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The main difference between international trade and domestic trade is that governments control international trade by means of tariffs (or duties) and quotas. A tariff is a tax on imported goods, and a quota is the number of goods, that must be produced or imported into a country during a certain period of time. These measures increase the price of imported goods to “protect” national economy. International organizations such as the WTO (World Trade Organization) and EFTA (European Free Trade Organization) regulate tariffs and reduce trade restrictions between member countries.
Two basic concepts describe the process of international trade – the concept of specialization and the concept of economic interdependence.
The concept of specialization focuses on comparative advantage, when countries specialize in producing what they produce best. A nation’s comparative advantage is measured in relation to all of the goods and services the nation produces. By specializing in production, each nation can make the best use of its available resources.
Economic interdependence is another force which stimulates international trade. It means that the distribution of resources often gives a nation an absolute advantage in the production of a particular product. Absolute advantage means that using the same resources one nation can produce a product at a lower cost than a second nation.
Brazil, for example, enjoys an absolute advantage over the United States in coffee production. Brazil's resources – especially its land, climate and labor force let this country produce large quantities of coffee at a relatively low price compared to the costs for coffee production in the United States. Thus, it is to Brazil's advantage to export coffee to the United States.
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The United States, on the other hand, enjoys an absolute advantage over Brazil in many other areas, particularly in the production of manufactured goods. The United States has natural resources, a highly skilled labor force and well-developed means of production for consumer and capital goods. Thus, it is to the advantage of the United States to export manufactured goods to Brazil.
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VII . Market Structure
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