Trade policy

Trade policy is a collection of rules and regulations which pertain to trade. Every nation has some form of trade policy in place, with public officials formulating the policy which they think would be most appropriate for their country. The purpose of trade policy is to help a nation's international trade run more smoothly, by setting clear standards and goals which can be understood by potential trading partners. In many regions, groups of nations work together to create mutually beneficial trade policies. Things like import and export taxes, tariffs, inspection regulations, and quotas can all be part of a nation's trade policy. Some nations attempt to protect their local industries with trade policies which place a heavy burden on importers, allowing domestic producers of goods and services to get ahead in the market with lower prices or more availability. Others eschew trade barriers, promoting free trade, in which domestic producers are given no special treatment, and international producers are free to bring in their products. Safety is sometimes an issue in trade policy. Different nations have different regulations about product safety, and when goods are imported into a country with stiff standards, representatives of that nation may demand the right to inspect the goods, to confirm that they conform with the product safety standards which have been laid out. Security is also an issue, with nations wanting to protect themselves from potential threats while maintaining good foreign relations with foreign nations trade with each other regularly, they often establish trade agreements. Trade agreements smooth the way for trading, spelling out the desires of both sides to create a stronger, more effective trading relationship. Many trade agreements are designed to accommodate a desire for free trade, with signatories to such agreements making certain concessions to each other to establish a good trading relationship. Regular meetings may also be held to discuss changes in the financial climate, and to make adjustments to trade policy accordingly. For lay people, understanding trade policy can get quite complex. The relevant rules, regulations, agreements, and treaties are often scattered across numerous government documents and departments, from State Departments which handle foreign policy to economic departments which deal with the nuts and bolts of things like converting currency. Often, the best resource for information is documents pertaining to specific trade agreements, such as the North American Free Trade Agreement. These documents spell out the trade policy of the nations involved in one convenient location, although the language used can become very complex.

Commercial policy
A commercial policy (also referred to as a trade policy or international trade policy) is a governmental policy governing trade with third countries. This covers tariffs, trade subsidies, import quotas, Voluntary Export Restraints, restrictions on the establishment of foreign-owned businesses, regulation of trade in services and other barriers to international trade. These are sometimes restricted within a customs union. In the case of the European Union, commercial policy has been dealt with in common since it was created in 1957. A common commercial policy is also an aim of Mercosur.

Policy Overview
The policy changes initiated in July 1991, are designed to attract significant capital inflows into India on a sustained basis and to encourage technology collaboration agreements between Indian and foreign firms. It marked a watershed change in the policy environment, which had formerly restricted foreign investment to projects connected with foreign technology transfer. Today, India welcomes direct foreign investment in virtually every sector of the economy except those of strategic concern such as defence, railway transport and atomic energy. Salient features of the new policies towards foreign investment are:

Foreign equity upto 100% is allowed, subject to certain conditions. Automatic approval for foreign equity participation upto 51% is granted in several key areas. These automatic approvals are normally granted within two weeks by the Reserve Bank of India (RBI). The Foreign Investment Promotion Board (FIPB), a specially empowered Board has been set up in the office of the Prime Minister to speed up the approval process. Clearance of proposals by the FIPB takes around six weeks on an average. Foreign investors need not have a local partner. Free repatriation of profits and capital investment is permitted, except for a short specified list of consumer goods industries where it is subject to dividend balancing against export earnings. Use of foreign brand names/trade marks for sale of goods in India is permitted. Indian capital markets are now open to foreign institutional investors. Indian companies have been permitted to raise funds from international capital markets. India has become a member of MIGA and is also willing to sign Bilateral Investment Protection Agreements with investing countries. Corporate taxes have been reduced by 5-10%. Further progressive reductions are planned. Special investment and tax incentives are given for exports and certain sectors such as Power, Electronics and Food Processing.

The new trade policy is spelt out in the Export Import (EXIM) policy, which is valid for the period 1992 to 1997, amendments to this policy were announced on 31st March 1995.