International trade

INTERNATIONAL TRADE
Today every country in the world buys from other countries and sells to them. In a way this trade between countries is like a barter of long ago. If one country has more bananas than it can use, but no trucks, it may exchange them with another country that has more trucks than it can use, but no bananas.
Trade among nations has been going on for a long time. The first international traders were Phoenician merchants who traveled in long caravans from one desert oasis to another. Suppose you could have watched the camels in the long caravans. They might have been carrying great rolls of silks or bags of spices, or they might have been carrying precious stones, gold and silver, and cakes of salt.
Later merchants traveled father and found more goods to trade. The routes these merchants traveled were named after the goods carried over them. Silk from China was carried through Middle Asia over the Silk Road. Salt were carried in great caravans over the Salt Road in Africa. And later in the New World donkeys carried fortunes of gold and silver from South America over the famous Gold Road.
The things a country sells to another country are called exports. The things a country buys from another country are called imports. Payments for imports and exports are make through a system called foreign exchange. Foreign exchange works like this. The value of the money of one country in relation to the money of another countries is agreed upon. For instance, an American dollar or a British pound sterling is worth certain amounts in the money of other countries. These rates of exchange vary from time to time. Sometimes a United States dollar is twelve pesos in Mexico. Another time it may be worth eight pesos.
Today international trade is big business. Hundreds of business houses and banks are engaged in work connected with international trade. Wholesale houses buy in large quantities from other countries. They sell in small quantities to shopkeepers and another merchants. In turn these merchants and shopkeepers sell in still small amount to individual buyers.
In interactions in international trade, actual money does not usually change hands. What happens may be something like this. Suppose that last year the Plantation Banana Company of Ecuador had wanted to buy fifty trucks from the Tractor and Truck Company of the United States. First the Plantation Banana Company would have instructed its bank in Ecuador to charge its account for the necessary money. Next the bank in Ecuador would have instructed its agent bank in the United States to establish a letter of credit in the same amount. This agent bank would then have paid the Tractor and Truck Company when its sent the trucks. In this same way, if a fruit dealer in the United States had wanted to buy a shipment of bananas from Ecuador, he would have instructed his bank in the U.S to open a letter of credit with its agent bank in Ecuador.
Transactions like this are happening all over the world as international trade is becoming more and more important.

Understanding ideas.
Find two sentences that are not true:
Trade between countries is like barter between people.
Countries must disagree on the value of their money.
International trade is a small business today.
In international trade a letter of credit may take the place of money.
Find in the lesson the names of things traded by two countries long ago: Phoenicia, Asian, South America, China.
Understanding words
Find words in the lesson that mean:
(a) things a country sells to another country, (b) things a country buy from another country, (c) trade between countries, (d) value of the money of one country in relation to the money of another country, (e) a substitute for actual money in international trade, (f) a business house that buys in large quantities from other countries.
Interpreting ideas
Why is international trade a “big business” today?
If you were coming to England or America to study, what would you want to know about the rates of exchange? Why?
How could you transfer the money you would need without carrying all of it?

Let’s talk and write about international trade
How is international trade like barter?
Who were the first international trader?
Where was the Silk Road? The Salt Road? The Gold Road?
What is the differences between imports and exports?
What is the letter of credit?