1

ENGLISH FOR
INTERNATIONAL
TRADE 1

Material researched and adapted by:

Prof. Marina Meza
Prof. Carlos Mayora
Prof. Rubena St. Louis
This edition, April, 2013

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?

Lets 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 barteringtrading 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.

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 actorsindividuals and firmsemerged to play supportive roles in
commercial transactions. These "middlemen"wholesalers, providers of transportation
services, providers of market information, and othersfacilitate 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 characterthe exchange of goods and services for other
goods and services or for moneyremains unchanged.

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

Getting started
Lets 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.

International trade
Lets 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 nations
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
nations currency through selling the lower value of another nations 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.

http://www.wisegeek.com/what-is-international-trade.htm

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

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.

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
Term

is

a large company

verb

International trade
Term

general class

is
verb

the exchange
general class

that sets up production facilities in

several different countries.
special characteristics

of goods and services in the world

or on the global market.
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 rewrite them in the space provided using the examples above as a guide.
1.

___________________________________________________________________
___

2.

______________________________________________________________________

3.

______________________________________________________________________

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 nations 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

10

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.

11

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.

12

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 todays 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.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

13

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

Record of all international transactions for goods and services, income
Current Account 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.

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

14

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 governmentowned 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.

15

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 Venezuelas GDP because the productive activity occurred in the
country. However, the income generated by the Colombian company will be part of that
countrys 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.

16

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 todays 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

17

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

18

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.

19

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. Lets 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.

20

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.

21

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 nations 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 barteringtrading 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?

22

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

23

produce vast quantities of agricultural products, like cocoa in Cote dIvoire 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 importsforeign 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 toor choose toimport 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 sourcesfor example, coal, nuclear power, or hydro-electric powercould
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 Americas 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
1

Export trading company

Definition
______________________________________________
______________________________________________

Export management
company

Distributor

______________________________________________

______________________________________________
______________________________________________

Retailer

______________________________________________
______________________________________________

Import export agent

______________________________________________
______________________________________________

Sales representative

______________________________________________

28

Export traders
Trade

has

existed

ever

since Man recognized the

need to look for and obtain
resources
needs.

to

fulfill

his

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. manufacturers representative

31

32

Getting started
Lets 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 Ecommerce 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

Computer

Computer

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.

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
Increased risk of fraud
Increased

costs

due

Business disadvantages
Not all consumers are online

to

shipping

and Increased market barriers

handling
Cannot see/touch the merchandise before Truly rely on word of mouth to get
buying

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 todays 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 sites 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.
Amazons 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 others 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 Omidyars 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 clients 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 customers online
payments. This is done through a payment gateway, an online processor that connects the
credit card to the banks account verifying information, transferring requests and authorizing
the credit cards in real time.

Providers like Verisign provide this service.

advertisement is important in promoting the new business.

Finally,

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.

47

48

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.

49

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 WTOs
current work comes from the 198694 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.
Its a set of rules At its heart are the WTO agreements, negotiated and signed by
the worlds 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

50

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

Its 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

51

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 systems 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

52

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 WTOs 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 WTOs 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 GATTs 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 GATTs 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 198694, 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 worlds
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.

54

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 WTOs 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.

55

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 Councils 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 Secretariats 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.

56

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

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

57

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

58

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?

59

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.Lets take a look at some words that indicate chronology and are taken
from the text.

By the 1980s, the negotiations had expanded to

by (specific time / year or
decade)
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
WTOs 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 GATTs basic legal

principles remained much as they were in 1948.

on (day, date)

The WTOs creation on 1 January 1995 marked the

biggest reform of international trade

60

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.
Lets 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.

61

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 systempast, 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 WTOs 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

62

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...
GATT negotiations
expand to new areas

1947

Creation of the GATT

1980

1995

Creation of the WTO

2010

63

The expansion of negotiations to cover new areas had occurred before the 1980s
GATT provides rules for International Trading

1947

1995

Creation of the GATT

2010

Creation of the WTO

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

Past perfect
Action that took place before
another action

Simple past
Action completed in a specific
point in the past

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.

64

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
worlds 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:

65

1. Being very opaque and not allowing enough public participation, while being very
welcoming to large corporations. (That doesnt help the claims of free, open and
democratic!)
2. Some national laws and decisions for safety and protection of peoples 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 ones 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 nations 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 cant figure out a smarter process.... that impedes
growth, and development... Its 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?

66

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 oversimplified, ineffective, unrepresentative and non-inclusive; more active participants,
representing more diverse interests and objectives, have complicated WTO decisionmaking, 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

68

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.

69

Paragraph 1:
Definition,
principles,
purpose

Paragraph 5:

Paragraph 2:

Your own
opinion

History

WTO

Paragraph 4:

Paragraph 3:

Criticism

Structure

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.

70

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 Ive 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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72

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?

73

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.

74

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 isnt _________
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, email) 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.

76

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
Global warming

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.

77

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.

78

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

79

Getting started
To this point, you have learnt many things about globalisation. In
this next section, you will read about the disadvantages and
disadvantages.

Lets start by making our own list. Write three advantages and
three disadvantages of globalisation. Then compare your list with a
partners

Globalisation

Advantages

Disadvantages

80

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. Lets 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 others 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.

81

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. Its 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. Its 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 others 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
others 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 Valentines 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 receivers 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?

84

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

85

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-globalizationa291301

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.
Pros and Cons of
Is Globalization
Ideas
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.

Inevitable?: Criticism
of Globalization

87

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 sides reasons to prove that they are not good reasons).
5. The authors arguments
Now go back to the previous texts and find examples of these key elements

88

Key elements in argumentative texts

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

Authors argument

Pros and Cons of

Globalization

Is Globalization Inevitable?:
Criticism of Globalization

89

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 crossreferenced (verified in other sources). Opinions, on the other hand, are subjective in
nature and are usually expressions of the writers 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

90

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 worlds
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 writers opinion may seem to be based on facts but it is still the
individuals 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 writers 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.

91

Exercise
Are these statements facts (F) or opinions (O). Explain your answers.
1) For globalism to work, America cant 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 worlds 7 richest people combined.
(Global Issues.org) ______
4) The poorest 40 percent of the worlds 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.) ______

92

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
intensification of worldwide social relations...

globalisation

as

an

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.
b.
c.
d.

The term "globalisation" was first coined in the 1980s...

Globalisation can be seen as a positive, negative or even marginal process.
...the market forces are structured by policies and government.
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.

93

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).

94

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 My position (main Opposite
position Rebuttal
globalization
points, arguments)
(main
points,
arguments)

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.

95

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-inevitablecriticism-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 Simn Bolvar.
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., Berros G. and Cartaya, N. (2010). Focus on reading. Unpublished
instructional material. Universidad Simn Bolvar.
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 systempast, 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
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