Unit 16 exporting

Section A. Your task: Read the text. Copy out words pertaining to the field Exporting to start forming your own glossary on the topic. Answer the questions below. Be prepared to produce a sight translation in class.

Give a summary translation of the text basing upon the questions.

Exports of Goods and Services

Exports are of two main kinds, goods and services, the former being known as visible items and the second as invisibles*. Over a period of time the total value of exports should balance with the total value of imports. To the extent that exports exceed imports we are said to have a favourable balance of payments*. To the extent that imports exceed exports the balance of payments is said to be unfavourable or adverse.

Napoleon once called the British 'a nation of shopkeepers'. That was intended as an insult, but had he called us a nation of traders it could not have been disputed. In Britain we buy and sell more per head of population than the people of any other country. Our island is too small to grow enough food for our people and so we need to earn enough from our exports to sustain our population.

One complication of the export trade is that each country has its own independent currency system; and another is that many countries impose customs duties or other restrictions on imports.

The would-be exporter is faced with a number of problems. First there is the need to find a customer for his goods. The actual operation of selling is made more difficult because of language barriers and cultural differences. There are also additional transport problems because of the greater distances involved and often unfamiliar territories. When the manufacturer turns from selling at home to selling overseas, his problems are magnified. This is particularly true in terms of finance.

The first financial problem facing the exporter is the time taken to deliver his goods. There could be a long delay while his merchandise is in transit between London and, say, Karachi. He has incurred the costs of production, but when is he going to be paid? The second problem is even more serious. How sure can he be that he is going to be paid at all? And even when he receives payment his troubles may not be over. If he is paid for his goods in a currency other than sterling, he has to convert that currency into sterling, and what if the other currency has fallen in value since the contract was made? These are the perennial problems for the exporter.

Fortunately for our exporters, and for our economy generally, help is available both from the government and the banks. From the government side, the Export Credits Guarantee Department* offers British exporters, in return for a fee, insurance against bad debts incurred as a result of sales to foreign buyers. The Export Intelligence Department also helps by providing them with useful advice and information. The most straightforward method of financing the operations is for the exporter to borrow the necessary funds from his bank. This way he can ship his goods abroad and draw on his bank for the funds needed to carry on production while he is awaiting the proceeds. But of course the borrowings from the bank will lower his profit margins.

Another method of financing international trade is by documentary credit*. A document known as a bill of exchange* (which is similar to a cheque but payable at a future date rather than immediately) is drawn by the importer in favour of the exporter and, although the bill of exchange is not yet due, the exporter can get it discounted (or encashed) immediately at his bank. While it is a very convenient method of payment for overseas trade, once again it serves to reduce the profit margin for the exporter.

Your task

Having read the above passage answer these questions in your own words.

1. Why are exports vital to Britain's wellbeing?

2. What is meant by an adverse balance of payments?

3. What are invisible exports?

4. What problems are posed to exporters by language barriers and cultural differences?

5. How does the government help British exporters?

6. How do the banks help British exporters?

7. Why are the exporters profit margins likely to be lower for overseas sales?

8. What do you think will happen to our balance of payments when the oil in the North Sea dries up?

Section B. Fill in the blanks

Your task: Fill in the blanks in this passage, using words from the list given below.

rate	element	transaction	contract
agreement	problem	rose	benefit
completion	fluctuate	result	currency

Each country has its own ………… and, since exchange rates are continuously changing, the exporter is constantly faced with an …………….. of uncertainty. The danger is that the rate of exchange will change between the date of the …………. and the date of payment. Consider, for example, the case of the London dress manufacturer who contracts to sell $150,000 worth of dresses to a New York store. The rate of exchange is $1.50 to the £ so the manufacturer hopes to receive £100,000 on ………….. of the transaction. As the dresses cost him £80,000 he hopes to make a profit of £20,000. However, before the dollars are paid over the exchange …………. changes. The dollar has fallen in value so that there are now $2.00 to the £. The …………….. is that the manufacturer will only receive £75,000 for his dresses and what should have been a profitable ………………… has turned into a loss. This was an extreme example, but rates of exchange can ……………… rapidly, particularly when there is no international ………………. to fix the rates for a particular currency. The banks can help the exporter to overcome this ……………. by providing forward exchange cover. In the case of the British dress manufacturer he would agree to sell the $US to the bank at the prevailing rate (less a discount) when the deal was made. It would then be the bank which suffered the loss if and when the dollars fell in value, but they would make a profit if the dollars ……………… in value, and of course they always ……………… to the extent of the discount they charge.

“And on what basis are you expecting a 10% increase in sales next year

Mr Snow?”

“Global warming Ms Fanshawe, global warming"

Section C. Verbs, adjectives and adverbs

Add an appropriate verb, adjective or adverb from the list below to each of the following sentences where indicated.

1. The UK has ………… had a surplus of trade in goods and a deficit in primary products.

2. The …………… period is ……………. much longer in the ………….. trade and exporters to do not have the same degree of control over the goods they sell once they are ………….. to their destination.

3. UK exporters face ………….. competition in an increasingly tough world market and can also …………… protectionism, …………… quotas, and …………. unrest in many countries.

4. Profitable trade overseas depends …………….. on the right market or markets to ………. .

5. Although rules of trading …………. from country to country, ……………… rules of conduct have been ……………….. for the countries of the European Community.

6. Export documents are …………… necessary for the movement of goods, for ………. the customer, for receiving payment for the goods ……………. and to ………….. various government regulations.

7. Much of the more tedious work …………… involved in filling out ……………. documents is now being done ………….. and more …………… by computers.

Verbs: formulated, invoicing, shipped, encounter, satisfy, enter, vary.

Adjectives: general, manufactured, delivered, fierce, political, import, export, vital.

Adverbs: inevitably, historically, normally, largely, vitally, systematically, increasingly.

Section D. Interpretation of data

Study the following information and then answer the questions below.

Items per 1000 inhabitants
	Television receivers	Telephones	Passenger Vehicles	Doctors
United Kingdom	339	535	322	0.6
West Germany	412	634	454	2.4
France	305	605	364	2.1
Italy	246	457	350	3.5
Japan	263	556	227	1.3
USA	668	763	495	2.3

Questions (answer on the evidence available)

1. Which country has most passenger vehicles per 1000 inhabitants?

2. Which country has least passenger vehicles per 1000 inhabitants?

3. In what rank order do the countries stand in terms of television receivers?

4. Which of these countries is the richest?

5. Which of these people appear to be looked after best? What other explanation could there be?

6. How would you describe the position of the Britons compared to the West Germans?

7. What do you think might be the difference between 'passenger vehicles' and 'motor cars'?

8. Why do you think such information as shown here might be misleading?

Section E. Case Study