Reading the English newspaper

  1. l. Read the article and do the exercises.

War and Terrorism Put Globalization at Risk

Gail D. Fosler

New York.

The dual threats of terrorism and war may be able to achieve what anti-globalization forces have not — a significant decline in global trade and investment.

“The most serious economic consequence of the current global security threat is the vulnerability of the United States and other countries that depend on global trade to shocks from actual supply interruptions and to the sharply changed incentives that have promoted globalization,” says Gail D. Fosler in the current issue of StraightTalk, her monthly newsletter.

This new, higher risk to the global business environment has important implications for global market and supply chain strategies.

In the United States, several important industries have increasingly come to depend on their global supply chain both for supplying the US market and for export. Retailers and domestically branded apparel, appliance, and footwear manufacturers and distributors have tapped low-cost labor elsewhere, often Asia. Computers, electronics, and video, audio and communications equipment depend heavily on offshore supply. More than 40 % of all US requirements for both consumer and industrial use in footwear, apparel, and computers are made overseas.

Uncertain Supply Chain Connections

This increasing global dependence also exposes both companies and countries to the risks of supply interruption from real or perceived terrorist threats. The impact of supply shocks differs depending on the industry. Shocks to the auto industry have a big impact on the industrial sector, because they account for large up-stream purchases. Service sector shocks, in contrast, have relatively less impact on the rest of the economy.

Large differences in the economic impacts among industries help explain the devastation caused by the drop in technology demand and the impact of the West Coast dock strike on the one hand and the relatively smaller economic effects of 9/n on the other. Not only did the technology industry itself decline, but it also dragged with it close to twice as much demand throughout the economy. The dock strike had a similar impact.

The hotel and air transportation industries shutdown in the wake of 9/1 l did not ripple through the economy to the same extent, although the impact was enormous on the companies and industries involved. While these industries incurred huge economic hardship from which they have yet to recover, they do not have the broad economic reach in either scope or demand that some other industries do.

Global Growth Will Continue

Despite the threat of war and the darkening mood in financial markets, the global economy is intact. Overall, global growth is projected to be about 3.4 % this year, with better economic performance in almost all regions.

“Since stock markets are forward-looking animals, it is not surprising that they have continued to take valuations down in the face of the tremendous uncertainty surrounding events in the Middle East and increasing unease about the deteriorating situation in North Korea,” says Fos- ler. “Still, corporate profits in most major countries are showing substantial improvement even in the current lackluster growth environment. This profit improvement is not unencumbered by financial risks as weak stock markets, bad credits, and other impairments tug at the bottom line. But, in spite of this, a recovery is clearly underway.”

Even in Europe, where the financial mood is blackest, the strengthening US dynamic and the strong correlation between the European and US business cycles suggest that the European economy will improve later in 2003. Just as Europe was not immune from the US slowdown in 2000 and 2001, it will also be lifted by faster growth in the US this year.

US consumer fundamentals also appear to be improving. The continued rise in wages and salaries, which is a core component of consumers’ spending power even in the face of a sharp drop in consumer confidence, complements a huge gain in real disposable income driven by low inflation and the 2001 tax cuts. Consumer spending power is rising at a 5.8 % annual rate. Consumer spending growth, which is running at a 3 % annual rate, is low, not high, relative to spending power in the face of substantial discounts and financing incentives, reflecting an ongoing trend toward higher savings rates.

But as February numbers show, consumer confidence is still a problem, and probably constitutes the biggest risk associated with the imminent prospect of war. Until the economic momentum and corresponding job gains really take hold, consumer expectations remain volatile.

“The positive effects for an improving economy are in a foot race with the negative concerns of war,” Fosler says. “The outcome is a genuine unknown.”

FI.2. Answer the following questions.

  1. What new risks can threaten the process of globalization?
  2. What facts prove that nowadays national economies are very dependant on each other?
  3. How does the threat of war influence the global economy?
  4. What is the perspective of economic development in the global business environment?
  1. 3. Match up the words and definitions:
  1. spending power; a) weakening or making worse;
  2. disposable income; b) stopping of work or operation because of a labour

quarrel, holiday, repair, lack of demand, etc.;

  1. impairment;              c)              involving              an activity performed outside a particular

country, rather than inside it;

  1. appliance;              d)              to make action or movement difficult              for; weigh              down;
  2. devastate;              e)              income that is available for someone              to spend or save

after they have paid tax and paid for the things that they need such as accommodation and food;

  1. off-shore;              f)              buying power;
  2. shutdown;              g)              an apparatus; instrument, or tool for a              particular

purpose, esp. an electrical machine that is used in the house;

  1. encumber.              h)              to destroy completely so that nothing useful or valuable

Н.4. Read the article once more, find the sentences containing inversion and translate them into Russian.

  1. 5. Make up the outline of the article and then render it.
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Источник: Е. Н. Малюга. Английский язык для экономистов: Учебник для вузов / Е. Н. Малюга, Н.              В. Ваванова, Г. Н. Куприянова, И. В. Пушнова. — СПб.: Питер,2005. — 304 с.: ил.. 2005

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