(Nick and Ann are having lunch. Nick is an executive in the international computer company.)
Nick Do you like the idea of taking month's trip to Europe and the Far East?
Ann What? You are kidding.
Nick No. First of all I must say that it's a business trip. The company waits me to visit some of our operations. I should have meetings about the new computer I am developing. They think if we combine expertise we'll advance more quickly.
Ann Oh, Nick. It's great. Where are we going to? Nick To nine countries. We have nine development laboratories. In tact, only now I realize how large the company is, a real global company.
AnnBut the company started here in America. Nick Yes. In this sense, we're American. Each company has to be incorporated somewhere, here or in Japan or Canada or India. But our corporation is a real multinational one.
Ann What does it mean then? Nick Well, we are in 126 countries and we have there 125000 employees. We do our business in 28 languages and more than 32 currencies. Our plants are situated in 13 countries and we have eight development labs.
Ann Now I see. You are multinational. But such industries as shipbuilding, aircraft, automobiles can't survive without selling abroad.
Nick Right. By the way, do you know that for the last seven years more than half of the corporation's net income has come from overseas business. We are the part of the world community.
Ann It's exciting, isn't it?
Nick Yes, now we really can feel that nations are tied to each other through business operations. This internationalism is our hope for a better world.
Ann Well, it's time to pack.
AnnNick, can you explain me why do you sell a computer to a company in Canada when the company has a plant in Canada?
Nick Well, Ann. For example, it's not unusual for a automobile company from Britain to manufacture automobiles in France for sale in Britain with Canadian-made engine, Swiss transmission and German axles. It's international business.
Ann But it is so complicated to sell the goods to foreign company with different currencies and all that.
Nick I can tell you how we do.
Ann It's very interesting.
Nick When we deliver the machine to the shipping company, we receive a bill of lading. It’s a receipt from the shipping company and it's also the foreign company's claim to the computer when it gets to England.
Ann And what's then?
Nick Then we write draft or check which direct the British company to pay a sum in British pounds to a third party in, let's say, 90 days. We call it a "bill of exchange" which includes the rate of exchange at the time and, in addition, the interest. It must be paid in the 90 day extension of credit.
AnnThat is hard time getting the money, isn't it?
Nick No. We take the draft, the bill of lading and other necessary papers to our New York bank. The draft is sold at discount, it means without interest change, for the face value and get dollars. That's the way.
AnnWell, but you get your money from the bank. How does the British company pay? Who do they pay?
NickIt's quite simple, New York bank sends the documents and the draft to its branch in London or to a British Bank. The transaction is finished usually by accepting British pounds into a checking account deposit in a London bank, importing claim on British goods and services.
Ann Could you have dollars instead?
Nick Sure, but in this case we would have reduced the existing British claim on American goods and services.
Ann So what?
Nick If some nations pile up continuing capital surpluses and other continuing deficits the problem can arise in international economics.
Ann I see that I must study the subject thoroughly before we can continue.
Nick Yes, may be.