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.pdf4) submit |
d) fix |
5) constitute |
e) demand |
6) provide for |
f) reach |
7) conformity |
g) accept |
8) adopt |
h) specify |
9) in question |
i) meaning |
10) particulars |
j) under discussion |
11) to the effect |
k) items of information |
3. Replace the italicised words in the sentences below with the correct form of the words in 1
and 2.
1)The Arbitrator was not able to participate in the official trial of an action (lawsuit), so another one had to be chosen.
2)Since the Umpire has to investigate into another case, we shall need to put ours into the
care or protection of someone else.
3)The problem we are discussing now is of crucial importance for our future collaboration.
4)We had a wonderful harmony in our opinions and easily came to a mutually beneficial agreement.
5)The selection of the Arbitrator is put to the authority of the President of the Foreign Trade Arbitration Commission.
6)The claimant is to effect payment on account of the remuneration upon registering the Points of Claim.
7)The parties agreed upon the place of arbitration which is going to be Stockholm, Sweden.
8)The conflict between the parties will be settled in accordance with the Russian legislation.
9)The arbitration award is obligatory for both parties.
10)The company’s lawyer will carefully examine all the details stated in the Points of
Claim.
4.Study the words and word combinations in the box, and use them to fill in the gaps in the text below. Use a dictionary, if necessary.
judicial system |
resolve |
legal |
hear |
judicial body |
supervises |
deal |
administer justice |
legal equality |
legitimate interests |
lower arbitration courts |
liability |
invalidity |
legality |
protection |
|
|
|
Arbitration Courts in the Russian Federation
In accordance with the Federal Constitutional Law “On the Judicial System of the Russian Federation” a unified (1) ______ _____ has been created in our country. This judicial system includes arbitration courts that enjoy the status of federal courts.
The arbitration courts in Russia (2) ______ ______ by way of settling economic disputes and examining other cases referred to their competence by the Constitution of the Russian Federation, the Federal Constitutional Law “On the Arbitration Courts in the Russian Federation”, the Arbitration Procedural Code of the Russian Federation and by other federal laws adopted in compliance therewith.
In practice, arbitration courts are specialised courts which (3) _________ property and commercial disputes between economic agents. They also examine claims seeking (4) _________ of governmental acts allegedly violating rights and (5) ______ ____ of businessmen. Such claims include tax, land and other disputes arising out of administrative, financial and other (6) ________ relations. They also hear (7) ______ with participation of foreign persons. The system of arbitration courts is organisationally divided into four levels. The first level is made up of the federal arbitration courts of the subjects of the Russian Federation. The second level is represented by arbitration appellate courts. The third level is formed by 10 federal district arbitration courts, each of which functions as a court of cassation with regard to a group of arbitration courts making up one court circuit. The fourth level is
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represented by the Supreme Arbitration Court of the Russian Federation that is the superior (8) ______
______for deciding commercial disputes, and other cases handled by the arbitration courts; it (9)
______ their activity and issues explanations on matters of judicial practice.
The internal procedure of the activity of the arbitration courts and interrelations among such courts are regulated by the Arbitration Courts Rules of Procedure, adopted by the Supreme Arbitration Court of the Russian Federation, which are binding upon all (10)______ _______ ______. The structure of the arbitration courts at different levels is determined by their functions and the case-flow.
Presently, the arbitration courts in Russia examine more than one million cases a year. These cases (11) ______ in particular with disputes concerning sales contracts, property, taxes and evaluation of acts of taxation bodies, insolvency (bankruptcy), loan contracts, insurance, legal acts of state authorities and other bodies as well as many others.
The main tasks of the arbitration courts are (12) _____ of the violated or disputed rights and legitimate interests of enterprises, offices, organisations and private citizens in the sphere of entrepreneurial and other economic activity, as well as participation in the enhancement of legality and in prevention of conflicts in this area.
The activity of the arbitration courts in the Russian Federation is based on the principles of (13)
________ legality, independence of judges, the equality of organisations and individuals to law and court, adversary character and (14) ________ _______ of parties, the openness of hearings, etc.
The binding character of execution of the judicial decisions passed by the arbitration courts and having entered into force is of great importance for their realization. The failure to execute judicial decisions, resolutions and rulings handed down by arbitration courts is regarded as contempt of court and entails (15) _______ liability envisaged by the law.
5.Make up your own sentences using the words and word combinations in 4.
6.Speak about the system of Arbitration courts in Russia.
CONTRACTING
Read the Arbitration Clause from the Contract of Sale and do the comprehension task below.
Arbitration
All disputes or differences which may arise under the present Contract or in connection with it are to be settled as far as possible by means of negotiations between the parties. If they do not come to an agreement, the matter with the exception of recourse to the ordinary court of law shall be submitted for settlement to Arbitration, with its seat in Stockholm, Sweden.
The arbitration shall be established as follows. The party wishing to submit the dispute to Arbitration shall notify the other party by a registered letter stating the name and address of the Arbitrator chosen by it, who can be a citizen of any country, as well as the object of their dispute, date and number of the contract. Within 30 (thirty) days on receipt of the above mentioned letter the other party is to nominate the second arbitrator informing the first party of the name and address of the Arbitrator chosen by it. If the party summoned to Arbitration fails to appoint the second arbitrator within the given period, the latter will be appointed by the President of the Chamber of Commerce in Stockholm (Sweden) and such an appointment should follow within 30 (thirty) days upon receipt by the Chamber of an application from the party concerned. Both Arbitrators are to choose the third arbitrator within 30 days from the date of their appointment. If the arbitrators fail to agree upon the candidacy of the third arbitrator, the latter shall be appointed by the President of the Chamber of Commerce of Stockholm and this appointment should be made within 30 (thirty) days upon receipt of the corresponding application from the other party.
The award is to be issued by majority of votes on the basis of the terms and conditions of the present Contract as well as by provisions of the Substantive Law of Sweden. The Arbitration can also use generally accepted international trade customs. The arbitration award shall contain the reasons for the decision; it shall indicate the composition of the Arbitration body, the date and place of the decision, the indication of the opportunity given to the parties to speak on the matter, the allocation of the expenses of the arbitration between the parties. The decision of the Arbitration shall be made within 12 (twelve) months after the third arbitrator has been chosen or appointed. The award of the Arbitration is to be final and binding upon both parties. The arbitral proceedings shall be conducted in the English language.
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Comprehension
1.How can disputes between the parties to the sales contract be settled?
2.What should the notification of submitting the dispute to arbitration contain?
3.How can arbitration be established?
4.What should the arbitration award comprise?
5.Explain the essence of the Arbitration Clause in your own words to a non-expert.
RENDERING
Render the extracts about claims and arbitration in English.
1. Разрешение споров
Для разрешения споров не требуется математической точности оценки ущерба, если представлено самое убедительное доказательство (the best evidence), которое позволяет ситуация. Истец может компенсировать стоимость своего контракта, которая определена ожидаемой прибылью (expected profit).
Данные положения заимствованы из англо-американского права. При использовании континентального права возможен несколько иной подход к оценке убытков, другие категории убытков и их определения. Например, по праву Германии, если контракт был нарушен умышленно, то обязательно возмещение всех прямых убытков независимо от их возможного предвидения. По крайней мере, следует рекомендовать внимательно изучить выбранное применимое право для контракта или получить квалифицированную консультацию у специалиста.
2. Урегулирование споров мирным путём
Редкая сделка проходит без возникновения обстоятельств, в той или иной мере нарушающих предварительные договоренности и обязательства сторон. Мудрость и деловитость партнеров позволяет им своевременно путем переговоров достигать компромиссных соглашений и регулировать приключившиеся обстоятельства к взаимному удовлетворению, находить способ их достойной замены или компенсации. Деловая репутация фирмы, а также её стоимость (goodwill), в цивилизованном бизнесе достигается не количеством затеянных и даже шумно выигранных споров, а количеством достойных и выгодных сделок с разумной выгодой.
В любом контракте должен быть установлен порядок претензионной работы и разрешения споров, которые могут возникнуть между сторонами или их уполномоченными представителями в связи с данным контрактом, его прекращением либо недействительностью.
Стороны всегда должны стремиться к мирному разрешению споров путем переговоров. В условиях контракта должен быть оговорен претензионный порядок, сроки ответа на претензии. Следует иметь в виду, что арбитраж не примет дело к разбирательству без проведения доарбитражного разбирательства путем переговоров и претензий сторон. Претензии и переговоры должны быть тщательно оформлены и документально подтверждены надлежащим образом протоколами, доказательствами.
3. Арбитражные оговорки в контракте
Всоответствии с типовыми правилами арбитражных оговорок споры разрешаются в постоянно действующих третейских судах или арбитражах. Место проведения арбитража – третья страна по усмотрению сторон контракта (Швеция – Стокгольм, Франция – Париж, Швейцария – Цюрих). Может быть принято согласие сторон рассматривать спор по месту расположения ответчика или прецедента. Можно, при согласии сторон, вызвать любой арбитражный суд, к примеру лондонский, на выездную сессию в любую точку мира, однако, прежде чем принять такое решение, следует внимательно оценить расходы по такому мероприятию, поскольку затраты на командирование высококвалифицированных юристов обойдутся весьма недешево.
Воговорке должен быть указан арбитраж, количество арбитров, порядок их избрания, язык и место разбирательствa, а также применимое для разрешения споров по данному контракту материальное право. Стороны оговоркой в контракте должны выразить обещание принять к исполнению решение арбитража.
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4. Арбитражная комиссия
Арбитражная комиссия обычно состоит из двух арбитров и одного суперарбитра. Чаще всего для арбитража избирается одна из постоянных арбитражных комиссий, создаваемых при товарных биржах, торговых палатах, союзах предпринимателей, или специализированная арбитражная ассоциация. Стороны могут предусмотреть в контракте рассмотрение возможных споров в арбитражном суде при Международной торговой палате (МТП). Согласно правилам МТП для решения спора между двумя контрагентами избираются два арбитра – граждане той же страны, что и спорящие контрагенты, и один суперарбитр – гражданин третьего государства.
5. Европейская конвенция о внешнеторговом арбитраже
Основным многосторонним международным документом, регулирующим вопросы арбитража, является Европейская конвенция о внешнеторговом арбитраже. В ней содержится норма о применимом праве: «Стороны могут по своему усмотрению устанавливать с общего согласия право, подлежащее применению арбитрами при разрешении споров по существу. Если не имеется указаний сторон о подлежащем применению праве, то арбитры будут применять закон, установленный в соответствии с коллизионной нормой (conflict rule), которую сочтут в данном случае применимой. В обоих случаях арбитры будут руководствоваться положениями контракта и торговыми обычаями». Из этого следует, что стороны контракта свободны в выборе компетентного правопорядка. Арбитры пользуются также такими коллизионными критериями как «закон страны продавца», «закон места исполнения обязательства», «закон места исполнения сделки» и другими.
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Appendix 1
SUPPLEMENTARY READING
INTERNATIONAL TRADE
Theoretical Background
While international trade has been present throughout much of history, its economic, social, and political importance has been on the rise in recent centuries. Industrialisation, advanced transportation, globalisation, multinational corporations, and outsourcing are all having a major impact. Increasing international trade is the primary meaning of ‘globalisation’. The early roots are to be found, perhaps, in ancient Greece in the works of Aristotel, Platon and Xenophon. In general, these philosophers opposed to the big commerce, supporting the idea of a closed domestic economy.
The British school of ‘classical economics’ began in no small measure as a reaction against the inconsistencies of mercantilist thought. Adam Smith was the 18th-century founder of this school; his famous work, “The Wealth of Nations”, is in part an anti-mercantilist tract. In “The Wealth of Nations”, Smith emphasised the importance of specialisation. Smith did not expand these ideas at much length; but David Ricardo, the second great classical economist, developed them into the ‘principle of comparative advantage’, the principle still to be found, much as Ricardo spelled it out, in every textbook on international trade. The principle of comparative advantage is based on what kind of product the country can produce best, in comparing not with other countries, but with the producing of other kinds of goods. In this case the country does not necessarily need an absolute advantage to specialise in producing and exporting it.
Ricardo has been attacked on many grounds: his statement of the doctrine in terms of labor costs only; his assumption of the constant cost of production; and, of course, his artificial assumption of perfect factor mobility within a nation as against complete factor immobility internationally. Many feel that these demerits are minor and are overshadowed by the fact that his new approach opened up entirely new vistas for further research, for example, a restatement of the principle in terms of opportunity costs.
Ricardo’s contribution left unanswered the question of how the actual ratios at which goods exchange are determined. It was Jean Stuart Mill who explained the determination of the terms of trade and did so with great skill. He found that they are dependent on reciprocal demand and that the equilibrium exchange ratio is the ratio that equalises the values of exports and imports for each country in a two-country two-commodity situation. With the “Equation of International Demand” as a tool, he proceeded to envisage more complicated situations and explain what modifications in assumptions their analysis necessitated.
The Heckscher-Ohlin model was produced as an alternative to Ricardo’s model of basic comparative advantage. Despite its greater complexity, it did not prove much more accurate in its predictions. However from a theoretical point of view it did provide an elegant solution by incorporating the neoclassical price mechanism into international trade theory. The theory argues that the pattern of international trade is determined by differences in factor endowments. It predicts that countries will export those goods that make intensive use of locally abundant factors and will import goods that make intensive use of factors that are locally scarce. Empirical problems with the H-0 model, known as the Leontief paradox, were exposed in empirical tests by Leontief who found that the United States tended to export labour intensive goods despite having capital abundance.
The Gravity model of trade presents a more empirical analysis of trading patterns rather than the more theoretical models discussed above. The gravity model, in its basic form, predicts trade based on the distance between countries and the interaction of the countries’ economic sizes. The model mimics the Newtonian law of gravity which also considers distance and physical size between two objects. The model has been proven to be empirically strong through econometric analysis. Other factors such as income level, diplomatic relationships between countries, and trade policies are also included in expanded versions of the model.
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Resurgence of Protectionism
In the period of the comprehensive triumph of the doctrine of classical economic liberalism, in the first part of 19th century, there appears in Germany a diametrically contrary (at least apparently) doctrine of economic protectionism. The brightest representative of this new theory is, no doubt, Friedrich List (1789–1846), son of a German leatherworker.
The economic and political unity that characterised much of Europe in the first half of 19th century was totally absent from Germany. The peace treaty that ended Germany’s participation in Napoleonic wars left that country divided into 39 different states, most of which were individual monarchies economically and politically isolated from one another. Such isolation was primarily the result of a complex system of interstate tariffs that impaired the free and easy exchange of goods. At the same time, however, no import duties existed. Thus British surplus products (and those of other countries) found their way into German markets, where they were offered at extremely low prices. Under these circumstances the very existence of German manufacturing and mercantile interests was threatened, and by the 1830, there arose among the German states a general clamor for economic unity and uniform tariffs. It was this movement that consumed List’s interests and energy. In his analysis of national systems of political economy, List applied a method of inquiry originated by Saint-Simon: the idea that an economy must pass through successive stages before it reaches a ‘mature’ state. The historical stages of development detailed by List were: Barbaric, Pastoral, Agricultural, Agricultural-Manufacturing, and Agricultural-Manufacturing-Commercial.
It is important to note that List was not an outright protectionist; rather, he felt that protection was warranted only at critical stages in history. His writings are replete with examples borrowed from history and experience showing that economic protection is the only way for an emerging nation to establish itself. List felt that the American experience offered vindication of his views, and he of course found ready support among United States protectionists, particularly Alexander Hamilton and Henry Carey.
The regulation of international trade is done through the WTO at the global level, and through several other regional arrangements such as MERCOSUR in South America, NAFTA between the United States, Canada and Mexico, the European Union and others. Structural changes and new forms of delivery in international trade require new and also different data. OECD is responding to these new challenges by further developing and expanding its trade databases. A great variety of internal and external users rely on complete and up-to-date trade statistics. OECD governments, International Organisations, Central Banks and private institutions, economic research institutes, universities and private businesses are amongst the many users of OECD trade data.
Six databases can be distinguished:
1.The International Trade by Commodities Statistics (ITCS) database is OECD’s largest database covering world trade for OECD countries by commodity and partner country.
2.The database Monthly Statistics on International Trade (MSIT) provides monthly and quarterly aggregated trade data, also by detailed partner countries.
3.and 4. One of the two databases for Trade in Services (TIS) covers detailed data by category of services, while the second one provides data by partner country.
5.The database Balance of Payments (BOP) provides a systematic summary of economic transactions of an economy with the rest of the world.
Balance of Payments = Current Account + Capital Account + Change in Official Reserve Account
6.The database of Trade Indicators (TI) contains ready-to-use statistical indicators for the analysis of international economic integration (trade aspects). The database combines data from different sources thus providing cross-disciplinary information. The indicators are available both on macro and micro (chapter/section) levels.
MODIFICATIONS TO THE TRADITIONAL THEORY BY D. RICARDO
International Trade and Globalisaton
Rich countries have democratic governments, so continued support for globalisation will depend on how prosperous the average worker feels. Yet workers’ share of the cake in rich countries is now the smallest it has been for at least three decades. In many countries average real wages are flat or even falling. Meanwhile, capitalists have rarely had it so good. In America, Japan and the euro area,
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profits as a share of GDP are at or near all-time highs. Corporate America has increased its share of national income from 7 % in mid-2001 to 13 % in 2007.
Like so many other current economic puzzles, the redistribution of income from labour to capital can be largely explained by the entry of China, India and other emerging economies into world markets. Globalisation has lifted profits relative to wages in several ways. First, offshoring to low-wage countries has reduced firms’ costs. Second, employers’ ability to shift production, whether or not they take advantage of it, has curbed the bargaining power of workers in rich countries. In Germany, for example, several big firms have negotiated pay cuts with their workers to avoid moving production to central Europe. And third, increased immigration has depressed wages in sectors such as catering, farming and construction.
Most of the fears about emerging economies focus on jobs being lost to low-cost foreign competitors. But the real threat is to wages, not jobs. In the long run, trade and offshoring should have little effect on total employment in rich countries; rather, they will change its composition. So long as labour markets are flexible, job losses in manufacturing should eventually be offset by new jobs elsewhere. But trade with emerging economies can have a big impact on both average and relative wages.
Over long periods of time, real wages tend to track average productivity growth. But so far this decade, workers’ real pay in many developed economies has increased more slowly than labour productivity. The real weekly wage of a typical American worker in the middle of the income distribution has fallen by 4 % since the start of the recovery in 2001. Over the same period labour productivity has risen by 15 %. Even after allowing for health and pension benefits, total compensation has risen by only 1.5 % in real terms. Real wages in Germany and Japan have also been flat or falling. Thus the usual argument in favour of globalisaton – that it will make most workers better off, with only a few low-skilled ones losing out – has not so far been borne out by the facts. Most workers are being squeezed.
If GDP per person is growing fairly briskly, why are most workers missing out on real pay rises? Partly because a bigger share is going to profits, and partly because high earners have pocketed a huge slice of the gains in income, causing inequality to widen. America’s top 1 % of earners now receive 16 % of all income, up from 8 % in 1980. Wage inequality in Europe and Japan has also increased, but not by as much.
A decade ago, the consensus among economists was that increasing wage inequality was caused mainly not by trade but by information technology, which has raised the demand for skilled workers relative to unskilled ones. Today, a growing number of economists agree that trade is playing a bigger role. It is hard to separate the impact of globalisation and it on relative wages because they both reduce the demand for low-skilled workers. But now that the majority of workers are losing out, the finger of blame points at globalisation.
It is all comparative
Traditional trade theory, based on the ideas of David Ricardo, a 19th-century economist, argues that economies gain from trade by specialising in products where they have a comparative advantage. Developed economies have lots of skilled workers, whereas emerging economies have lots of low-skilled ones, so according to the theory advanced countries will specialise in capital-intensive products requiring skilled labour and emerging economies in low-tech products. Competition from cheaper imports will reduce the wages of unskilled workers in developed economies, but workers as a whole will be better off.
Yet, according to the evidence above, the average worker does not seem to be enjoying his fair share of the fruits of economic prosperity. Richard Freeman, an economist at Harvard University, points to several reasons why the traditional theory may need modifying. The first is that the sheer size of the emerging giants’ labour forces has shifted the global capital-labour ratio (which determines the relative rewards of capital and workers) massively against workers as a group. The entry of China, India and the former Soviet Union into market capitalism has, in effect, doubled the world supply of workers, from 1.5 billion to 3 billion. These new entrants brought little capital with them, so the global capital-labour ratio dropped sharply. According to economic theory, this should reduce the relative price of labour and raise the global return to capital – which is exactly what has happened.
Over time, competition should reduce profit margins and distribute benefits back to consumers and workers in the form of lower prices. But downward pressure on wages in rich countries could
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continue for a long time. China still has perhaps 200m underemployed rural workers who could move to factories over the next two decades, so wages for low-skilled workers are rising more slowly than productivity, reducing China's unit labour costs.
A second reason why the traditional trade model needs modifying has to do with a rise in emerging countries’ skill levels. It used to be thought that only rich countries had educated workforces able to produce skill-intensive goods, but poor countries have invested heavily in education in recent years, allowing them to start competing in more sophisticated markets. Every year, 1.2m engineers and scientists graduate from Chinese and Indian universities, as many as in America, the European Union and Japan combined and three times the number ten years ago. In 1970 America accounted for 30 % of all university enrolments world-wide; now its share is down to around 12 %.
The McKinsey Global Institute estimates that only one-tenth of engineering graduates in China and one-quarter in India would meet the standards expected by big American firms. But this will improve overtime. A report by the World Bank also points out that a large share of engineering graduates in China and India become civil and electrical engineers, needed for the boom in domestic construction. There are not enough engineers and scientists to produce high-tech goods across the board. But it remains true that there has been a big increase in the global supply of educated as well as unskilled workers.
A third flaw in the traditional trade model, says Mr. Freeman, is its assumption that rich countries would make high-tech products and developing economies low-tech ones. In fact, rich countries no longer have a monopoly on high-tech capital and know-how. The OECD says that in 2004 China overtook America as the world’s leading exporter of information-technology goods. This exaggerates China's move up the ladder: laptop computers, mobile phones and DVD-players are no longer cutting-edge technology, and they are typically only assembled in China by foreign firms, with most of their high-value components being imported. Even so, the faster spread of technology to poor countries is weakening the rich world’s comparative advantage in high-tech sectors. As emerging economies start to export high-tech goods and services, this reduces the prices of such products in world markets, and hence the wages of skilled workers in the developed world.
White-collar blues
It is no longer just dirty blue-collar jobs in manufacturing that are being sucked off-shore but also white-collar service jobs, which used to be considered safe from foreign competition. Telecoms charges have tumbled, allowing workers in far-flung locations to be connected cheaply to customers in the developed world. This has made it possible to offshore services that were once non-tradable. Morgan Stanley’s Mr. Roach has been drawing attention to the fact that the ‘global labour arbitrage’ is moving rapidly to the better kinds of jobs. It is no longer just basic data processing and call centres that are being outsourced to low-wage countries, but also software programming, medical diagnostics, engineering design, law, accounting, finance and business consulting. These can now be delivered electronically from anywhere in the world, exposing skilled white-collar workers to greater competition.
The standard retort to such arguments is that outsourcing abroad is too small to matter much. So far fewer than in American service-sector jobs have been lost to offshoring. Forrester Research forecasts that by 2015 a total of 3.4m jobs in services will have moved abroad, but that is tiny compared with the 30m jobs destroyed and created in America every year. The trouble is that such studies allow only for the sorts of jobs that are already being off-shored, when in reality the proportion of jobs that can be moved will rise as it advances and education improves in emerging economies.
Alan Blinder, an economist at Princeton University, believes that most economists are underestimating the disruptive effects of offshoring, and that in future two to three times as many service jobs will be susceptible to offshoring as in manufacturing. This would imply that at least 30 % of all jobs might be at risk. In practice the number of jobs offshored to China or India is likely to remain fairly modest. Even so, the mere threat that they could be shifted will depress wages.
Moreover, says Mr. Blinder, education offers no protection. Highly skilled accountants, radiologists or computer programmers now have to compete with electronically delivered competition from abroad, whereas humble taxi drivers, janitors and crane operators remain safe from offshoring. This may help to explain why the real median wage of American graduates has fallen by 6 % since 2000, a bigger decline than in average wages.
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In the 1980s and early 1990s, the pay gap between low-paid, low-skilled workers and high-paid, high-skilled workers widened significantly. But since then, according to a study by David Autor, Lawrence Katz and Melissa Kearney, in America, Britain and Germany workers at the bottom as well as at the top have done better than those in the middle-income group. Office cleaning cannot be done by workers in India. It is the easily standardised skilled jobs in the middle, such as accounting, that are now being squeezed hardest. A study by Bradford Jensen and Lori Kletzer, at the Institute for International Economics in Washington, DC, confirms that workers in tradable services that are exposed to foreign competition tend to be more skilled than workers in non-tradable services and tradable manufacturing industries.
Ride on, Ricardo
None of this makes a case for protectionism. Offshoring, like trade, is beneficial to developed economies as a whole. The increased mobility of capital and technology does not invalidate the theory of comparative advantage, as some commentators like to argue. China and India cannot have a comparative advantage in everything; they will export some things and import others. Emerging economies’ comparative advantage will largely remain in labour-intensive industries. A country’s trading pattern is determined by its relative capital intensity compared with other economies. Emerging economies still have relatively little capital, so they are unlikely to become significant capital-intensive exporters until their capital-to-labour ratio catches up. That will take time. Developed economies will retain their comparative advantage in knowledge-intensive activities because they have relatively more skilled labour, but that advantage will be eroded more quickly in future.
The developed economies as a whole will still benefit hugely from trade with emerging economies. Increased competition and greater economies of scale will boost the growth in productivity and output. Consumers will enjoy lower prices and a greater variety of products, and shareholders will enjoy higher returns on capital. Although workers will continue to see their pay squeezed, they can still gain as consumers or as shareholders, either directly or through their pensions. The snag is that richer people own more shares, so the increased return on capital tends to reinforce income inequality.
In recent years the stagnation of real wages in America has been masked by surging house prices, which make families feel better off. If the housing market stumbles and the growth in pay remains feeble, there will be increased calls for the introduction of import barriers, restrictions on overseas investment and higher taxes on profits. But in a globalised economy, such measures would be worse than useless. Firms would simply move their head offices to friendlier countries.
The fact that many workers seem to be excluded from the spoils of globalisation is a big challenge to orthodox economics. Many of its practitioners refuse to come clean about the costs to workers of trade with emerging economies for fear of handing ammunition to protectionists. At the same time, protectionists exaggerate those costs and ignore the benefits. It is time for a more honest debate about trade.
JOINT VENTURES TODAY
Joint ventures are common in the oil and gas industry, and are often cooperations between a local and foreign company (about 3/4 are international). A joint venture is often seen as a very viable business alternative in this sector, as the companies can complement their skill sets while it offers the foreign company a geographic presence. Studies show a failure rate of 30–61 %, and that 60 % failed to start or faded away within five years. It is also known that joint ventures in low-developed countries show a greater instability, and that JVs involving government partners have higher incidence of failure (private firms seem to be better equipped to supply key skills, marketing networks, etc.). Furthermore, JVs have shown to fail miserably under highly volatile demand and rapid changes in product technology.
Some countries, such as the People’s Republic of China and to some extent India, require foreign companies to form joint ventures with domestic firms in order to enter a market. This requirement often forces technology transfers and managerial control to the domestic partner.
A majority of joint ventures fail in Asia due to cultural differences, as was the case with the alliance between Renault, a French car company, and Nissan. Joint ventures fail due to various reasons, including the lack of communication and the distribution of power between management.
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Another form joint ventures may take are the Joint Ventures (JVs) in the US, Canada, and Mexico dedicated to the conservation of priority bird species and their associated habitats. Each of these JVs is different in how they go about their respective missions, but all try to follow the principles of Strategic Habitat Conservation (SHC). SHC combines biological planning, conservation design, conservation delivery, and evaluation and monitoring.
ROLE OF COUNTERTRADE IN THE WORLD MARKET
Noted US economist Paul Samuelson was sсeptical about the viability of countertrade as a marketing tool, claiming that “Unless a hungry tailor happens to find an undraped farmer, who has both food and a desire for a pair of pants, neither can make a trade”. (This is called ‘double coincidence of wants’.) But this is a too simplistic interpretation of how markets operate in the real world. In any real economy, bartering occurs all the time.
The truth is that the volume of countertrade is growing. In 1972, it was estimated that countertrade was used by business and governments in 15 countries; in 1979, 27 countries; by the start of 1990s, around 100 countries.
More than 80 countries nowadays regularly use or require countertrade exchanges. Officials of the GATT organisation, claimed that countertrade accounts for around 5 % of the world trade. The British Department of Trade and Industry has suggested 15 %, while numerous scholars believe it to be closer to 30 %, with east-west trade having been as high as 50 % in some trading sectors of Eastern European and Third World Countries. A consensus of expert opinions has put the percentage of the value of world trade volumes linked to countertrade transactions at between 20 % to 25 %.
According to an official US statement, “The U.S. Government generally views countertrade, including barter as contrary to an open, free trading system and, in the long run, not in the interest of the U.S. business community. However, as a matter of policy the U.S. Government will not oppose U.S. companies’ participation in countertrade arrangements unless such action could have a negative impact on national security.” A large part of countertrade has involved military sales.
But countertrade also occurs when countries lack sufficient hard currency, or when other types of market trade are impossible. In 2000, India and Iraq agreed on an ‘oil for wheat and rice’ barter deal, subject to UN approval under Article 50 of the UN Gulf War sanctions, that would facilitate 300,000 barrels of oil delivered daily to India at a price of $6.85 a barrel while Iraq oil sales into Asia were valued at about $22 a barrel. In 2001, India agreed to swap 1.5 million tonnes of Iraqi crude under the oil-for-food program.
The Security Council noted: “... although locally produced food items have become increasingly available throughout the country, most Iraqis do not have the necessary purchasing power to buy them. Unfortunately, the monthly food rations represent the largest proportion of their household income. They are obliged to either barter or sell items from the food basket in order to meet their other essential needs. This is one of the factors which partly explains why the nutritional situation has not improved in line with the enhanced food basket. Moreover, the absence of normal economic activity has given rise to the spread of deep-seated poverty.”
TERMS OF DELIVERY: TERMINOLOGY
While drafting Incoterms 2000, considerable efforts have been made to achieve as much consistency as possible and desirable with respect to the various expressions used throughout the thirteen terms. Thus, the use of different expressions intended to convey the same meaning has been avoided. Also, whenever possible, the same expressions as appear in the 1980 UN Convention on Contracts for the International Sale of Goods (CISG) have been used.
“shipper”
In some cases it has been necessary to use the same term to express two different meanings simply because there has been no suitable alternative. Traders will be familiar with this difficulty both in the context of contracts of sale and also of contracts of carriage Thus, for example, the term “shipper” signifies both the person handing over the goods for carnage and the person who makes the contract with the carrier: however, these two “shippers” may be different persons, for example under a FOB contract where the seller would hand over the goods for carnage and the buyer would make the contract with the carrier.
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