英语经贸知识问答题.doc

Questions and Answers Lesson 1 International Trade (I) 1. How would you define international trade? It can be defined as the exchange of goods and services produced in one country with those produced in another. 2. Why did international trade first begin? The distribution of natural resources is uneven. Some countries are abundant in resources, while elsewhere reserves are scarce or even nonexistent. And a country may be rich in some resources but poor in others. The country that is rich will export some of its resources to the country that is in need. The opposite is also true. That is the reason why international trade first began. 3. What is the new incentive for trade that arose with the development of manufacturing and technology? With the development of manufacturing and technology, international specialization occurs. One country produces more of commodity than it uses itself and sells the remainder to other countries. 4. Explain the theory of absolute advantage and its application in international trade. It holds that a commodity will be produced in the country where it costs least in terms of resources (capital, land, and labor). This theory is illustrated in the following table. To be more illustrative, let us assume there are only two countries producing two commodities under perfect competition. Output per man-year of labour Country A Country B Computers 50 10 Cars 20 40 From the above table, we can see that a man in Country A can produce 50 computers in a year but only 10 in Country B. On the other hand, one man in Country B can produce 40 cars in a year but only 20 in Country A. So Country A is more efficient in producing computers than Country B, and we say the former has an absolute advantage over the latter in producing computers. Similarly, Country B has an advantage over Country A in producing cars. As a result, Country A would specialize in producing computers and trade some of them for Country Bs cars, and Country B would specialize in producing cars and exchange some of them for Country As computers. Both countries will gain benefits through specialization and trade. 5. Who introduced the theory of comparative advantage? Which theory makes more sense, absolute advantage or comparative advantage? The English economist David Ricardo introduced the theory of comparative advantage. His theory of comparative advantage makes more sense. 6. Explain briefly why trade to exploit comparative advantage promote efficiency among countries. Where comparative advantage exists, two trading partners are both able to share the gains from the trade. The trade to exploit comparative advantage makes one country better off without making the other worse off. So trade to exploit comparative advantage promotes efficiency among countries. 7. Is comparative advantage something static? Is it purely decided by the endowments of nature? Give examples to show the development of comparative advantage by certain countries. Comparative advantage is not something static. It is not purely decided by the endowments of nature. A country can develop a particular comparative advantage through its own actions, independent of its endowment of nature. Switzerlands comparative advantage in making watches is a typical example. Similarly, the U.S. has developed comparative advantage in many lines that use the most up-to-date technology.Lesson 2 International Trade (II) 1. Are there other bases for trade when there are no differences among countries in production conditions? Mention some of the bases. Yes, there are some bases for trade. a. pattern of demand Trade will be based not on differences in the production capabilities of the two countries but on different consumption preferences, that is, patterns of demand. They may differ among nations. For example, most consumers in one country may consider dog meat a delicacy, while in another country the consumption of dog meat is abhorrent. In this case the second country may sell its dog meat to the first country. b. economy of scale Trade may occur out of economies of scale, that is, the cost advantages of large-scale production. For example, Country A and Country B may have the same capability in producing cars and computers, but the cost for the production of both commodities will decrease if the goods are produced on a larger scale. Both countries might find it advantageous if each were to specialize completely in the production of one commodity and import the other. c. innovation or style Trade takes place because of innovation or style. Even though Country A produces enough cars at reasonable costs to meet its own demand and even to export some, it may still import cars from other countries for innovation or variety of style. 2. What is economies of scale? What is the relation between economy of scale and trade? It means that an enterprise produces some goods on a large-scale in order to seek cost advantage. Trade may occur out of economies of scale. For example, Country A and Country B may have the same capacity in producing cars and computers, but the cost for producing both commodities will decrease if the goods are produced on a larger scale. Both countries might find it advantageous if they were to specialize in producing one commodity and import the other. 3. What does the theory of international specialization seek to answer? It seeks to answer the question which countries will produce what goods, with what trade patterns among them. Differences in production conditions, the element highlighted by the theory of comparative advantage, provide the most important part of the answer. But a complete answer must also take into account other factors such as patterns of demand, economies of scale and innovation or style. 4. Will complete specialization occur in reality? Why? Complete specialization may never occur. There are three reasons. a. For strategic or domestic reasons, a country may continue to produce goods for which it does not have an advantage. b. The benefits of specialization may also be affected by transport cost. Goods and raw materials have to be transported around the world and the cost of the transport reduces the benefit of trade. The case will be more serious with transporting bulky or perishable goods. c. Protectionist measures which are often taken by governments are also barriers to trade, and typical examples are tariffs and quotas. 5. What are tariff barriers? What is a customs area and what is a customs union? Tariff barriers are the most common forms of trade restriction. A tariff is a tax levied on a commodity when its crosses the boundary of a customs area. A customs area usually coincides with the area of a country. A customs area extending beyond national boundaries to include two or more independent nations is called a customs area. 6. What is most-favored-nation treatment? Is it a special treatment? Why? The term most-favored-nation (MFN) treatment refers to a tariff treatment under which a country is required to extend to all signatories any tariff concessions granted to any participating country. It is not a special treatment. Because it give a country the lowest tariffs only within the tariffs schedule, but it is still possible to have lower tariffs. 7. What is the most common form of non-tariff barriers? Explain it in a few words. Quotas or quantitative restrictions are the most common form of non-tariff barriers. A quota limits the imports or exports of a commodity during a given period of time. The limits may be in quantity or value terms, or quotas may be on a country basis or global, without reference to countries. They may be imposed unilaterally and can also be negotiated on a so-called voluntary basis. Obviously, exporting countries do not readily agree to limit their sales. Thus, the “voluntary” label generally means that the importing country has threatened to impose even worse restrictions if voluntary cooperation is not possible. 8. What are the differences between visible trade and invisible trade? Give a few examples of invisible trade. Visible trade can be defined as the import and export of goods between countries. Invisible trade refers to the exchange of services between countries. Transportation services across national boundaries, insurance, tourism, and immigrant remittance are typical example of invisible trade.Lesson 3 International Payment 1. Why is it difficult to effect payment in a straight-forward manner in international trade? It is difficult to effect payment in a straight-forward manner in international trade, say by remittance or by debiting the debtors account because things are far more complicated in international trade. Purchase and sale of goods and services are carried out beyond national boundaries, which makes it rather difficult for the parties concerned in the transaction to get adequate information about each others financial standing and creditworthiness. Therefore, mutual trust is hard to build. Both the exporter and the importer face risks, as there is always the possibility that the other party may not fulfill the contract. 2. Mention some of the risks the exporter and the importer face in trade. For the exporter there is the risk of buyer default. The importer might fail to pay in full for the goods for some reason or other. It is even possible that the buyer is not reliable and simply refuses to pay the agreed amount on various excuses. On the part of the importer, there is the risk that the shipment will be delayed, and such delays may lead to loss of business. There is also a risk that wrong goods might be sent as a result of negligence of the exporter or simple because of his lack of integrity. 3. Explain briefly the following methods of payment: cash in advance; open account; consignment transactions. a. cash in advance: In this case, the importer pays the exporter before the former gets the latters goods. It is in the exporters favour. b. open account: To trade on open account means that no documents are involved and that legally the importer can pay the exporter anytime. Obviously the exporter must have sufficient financial strength carry the cost of the goods until receiving payment. c. consignment transactions: It means the exporter has to send his goods abroad and will not get payment until the goods are sold. If not sold, the goods can be shipped back. This arrangement should only be made with full understanding of the risks involved. 4. What is draft? Does it have another name? What are the relevant parties in relation to a draft? A draft is an unconditional order to a bank or a customer to pay a sum of money to someone on demand or at a fixed time in the future. It has another name “bill of exchange”. The person who draws the draft, usually the exporter, is called the drawer, and the person to whom the draft is drawn is called the drawee. There is yet another party the payee, that is, the person receiving the payment, who and the drawer are generally but not necessarily the same person. 5. What is the difference between a sight draft and a usance draft and what is the difference between a clean draft and a documentary draft? A sight draft calls for immediate payment on the presentation to the drawee. A usance draft doesnt call for immediate payment on the presentation to the drawee. He may pay at a later date e.g.30, 45, 60, or 90 days after sight or date. A documentary draft is accompanied by the relevant documents such as the bill of lading, the invoice, the insurance policy etc. A clean draft is not accompanied by any document mentioned above. 6. What are documents against payment? What are D/P at sight and D/P after sight? Which is more favourable for the exporter? When does the importer get the shipping documents in the case of D/P after sight? In the case of documents against payment (D/P), documents will not be released to the importer until payment is effected. There are D/P at sight and D/P after sight. D/P at sight requires immediate payment by the importer to get hold of the documents. D/P after sight gives the importer a certain period after presentation of the documents, but the documents are not released to him until he actually pays for the goods. D/P at sight is more favourable for the exporter. The importer will not get the sipping documents until he actually pays for the goods in the case of D/P after sight. 7. What is the difference between D/A and D/P after sight? Which is safer for the exporter? In the case of documents against acceptance (D/A), documents are handed over to the importer upon his acceptance of the draft drawn by the exporter. Payment will not be made until a later date. D/A is always after sight. D/P after sight gives the importer a certain period after presentation of the documents, but the documents are not released to him until he actually pays for the goods. D/P after sight is safer for the exporter. 8. Is payment by collection very common in international trade? Mention some cases when payment by collection is used. Payment by collection is not very common in international trade. It should be accepted with discretion. It is usually used when the financial standing of the importer is sound, or when the exporter whishes to push the sale of his goods, or when the transaction involves only a small quantity. Lesson 4 The Letter of Credit (I) 1. What constitutes conflicting problems for international trade in respect of payment? Why? To match payment with physical delivery f the goods constitutes conflicting problems for international trade in respect of payment, since the exporter prefers to get paid before releasing the goods and the importer prefers to gain control over the goods and the importer prefers to gain control over the goods before paying the money. 2. What is the unique feature of the letter of credit? How does it offer security to the buyer and the seller? The bilateral security is the unique feature of the letter of credit. The seller has the security to get paid provided he presents impeccable documents while the buyer has the security to get the goods required through the documents he stipulates in the credit. 3. When was the modern letter of credit introduced and when did it have substantial development? What are the other names of the letter of credit? Modern credits were introduced in the second half of the 19th century and had substantial development after the First World War. “Letter of credit” is often shortened as L/C or L.C. and is sometimes referred to as “bankers commercial letter of credit”, “bankers credit”, “commercial credit” or simply “credit”. 4. Why does the exporter sometimes require a confirmed letter of credit? Who usually adds confirmation to the credit? The exporter sometimes require a confirmed letter of credit either because the credit amount is too large, or because he does not fully trust the opening bank. The bank that adds to its confirmation to the credit is called the confirming bank which is undertaken either by the advising bank or another prime bank. 5. What are the main contents of a letter of credit? Mention at least 10 items. Generally speaking, one letter of credit includes the following contents: 1.The number of the credit and the place and time of its establishment. 2.The type of the credit. 3.The contract on which it is based. 4.The major parties relevant to the credit. 5.The amount or value of the credit. 6.The place and date on which the credit expires. 7.The description of the goods. 8.Transportation clause including the port of shipment, the port of destination, the time of shipment, whether allowing partial shipment or transshipment. 9.Stipulations relating to the draft. 10.Stipulations concerning the shipping documents required. 11.Cetain special clauses if any, e.g. restrictions on the carrying vessel and the route. 12.Instructions to the negotiating bank. 13.The seal or signature of the opening bank. 14.Whether the credit follows “the uniform customs and practice for documentary credits.” 6. What are the banks concerned with in credit operations? Does a credit guarantee that the goods invoiced are those purchased? The banks are only concerned with the documents representing the goods instead of the underlying contracts. They have no legal obligation whether the goods comply with the contract. 7. In case of problems with the quality or quantity of the goods, who shall the buyer contact so long as the documents comply with the terms and conditions of the credit?In case of problems with the quality or quantity of the goods, the buyer shall contact or even take legal action against the exporter so long as the documents comply with the terms and conditions of the credit.Lesson 5 The Letter of Credit (II) 1. Explain the difference between clean credit and documentary credit. Where is the former generally used? Credits that only require lean draft are called clean credit. Credits that require shipping documents to be presented together with the draft are called documentary credit. Most of the credits used in international trade are documentary credits. Clean credits are generally used in non-trade settlement or in payment in advance by means of the L/C. 2. What is an irrevocable letter of credit? If a credit is not specified as revocable or irrevocable, what type should it be regarded? Irrevocable credits are those that cannot be amended or revoked without the consent of all the parties concerned. Irrevocable credits are extensively used in world trade and if there is no specific indication whether a credit is revocable or irrevocable, it should be regarded as irrevocable. 3. By whom is confirmation undertaken in the case of a confirmed letter of credit? The confirmation is undertaken either by the advising bank or by another leading bank. 4. Since a confirmed credit provides the greatest degree of security to the beneficiary, it should be used for all transactions. Is this statement right? Why? The statement is no