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INDEX

1. Trade Barriers

2. Economic Integration or Trade Blocs

3. Multilateral Trading Organisations

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International Business - I
ë   
`overnment of nations regulate international trade by changing ÷ 
 
0eriodically to achieve following objectives :
|   Œ
`ovt. 0olicies influence demand conditions by su00orting µinfant
industries¶ or levying taxes.
`ovt. controls its industries and business for requisite growth.
?   
  ¢
Vroductively em0loyed 0eo0le are its economic and social assets.
In US & E.U.nations level of unem0loyment is high. Veo0le feel that
India is ex0orting µunem0loyment¶ to them by snatching jobs. .
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më     
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ë    Œ These are artificial blockades 0ut in the 0ath of


foreign trade through taxes and duties.
Vattern of Tariff Barriers :
·   : Duties realized in im0ort and ex0ort 0er
unit, weight, volume etc.
· 
    uevied as a 0ercentage of value or
0rice e.g.10%, 50% or 100% of FOB 0rice
· r   ÷u Combination of s0ecific and ad-
valorem duties.
De0ending u0on the 0ur0ose for which tariff is levied, it is also
called 
 or 
 tariff.
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|    Monetary assistance given to make
0roducts com0etitive in ex0ort market e.g., USA, E U, Ja0an
0rovide subsidy on agricultural items to farmers.
?     Πhen some ex0enses are defrayed by `ovt.
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e.g., free electricity, seeds, fertilizers etc. to farmers.
° 
   ΠMonetary assistance given in ex0ort by `ovt.
when 0roducts are ex0orted below their 0roduction cost.

]    Œ ïonetary assistance 0rovided to fulfill


s0ecified conditions like ex0ort targets or use of domestic raw
material.
Õ   Œ Customs officials may decide higher 0rice
or customs duty in case they sus0ect the im0ort is µundervalued¶.
Common Worldwide customs nomenclature known as
  ë   ëhas reduced magnitude of
this 0roblem.

   Œ If im0orting nations¶ economy is hurt
by subsidy of ex0orting nation, it may levy extra duty on this
im0ort called µCountervailing Duty¶ 
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þ  
  ΠWhen a 0roduct is ex0orted at 0rice lower
than its home-country 0rice or cost of manufacture, it is called
£
 
Im0orting nation may charge extra duty on such 0roduct to
remove injury to domestic industry called 
  
!   " 
   ΠIm0orting nations set
minimum im0ort 0rice for items to 0rotect local 0roducers
      ΠSome countries insist on legalisation of
ex0orters documents by their consulate in ex0orters country.
| 
 ΠSome countries insist u0on de0osit of im0ort
duty before issuing im0ort licence.

   ë

|  
   Some nations insist u0on µIm0ort icence¶
for im0ort of µrestricted¶ items.
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?  
  Όuantum of s0ecified item to be
im0orted is declared in advance. Now discotinued by nations.

°"    "  Œ Since 1974 develo0ed


nations im0orted textiles and clothing from develo0ing and
underdevelo0ed nations u0to s0ecified quota called MFA.
It has been discontinued since 2005.

] 
  ΠMany nations levy quota on ex0orts to
conserve natural resources e.g., OVEC

Õ    Œ Nations block trade with s0ecified


nations called µTrade sanctions¶ or embargo under UN or other
authority e.g. Trade with Iraq under Saddam Hussain.

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     Πountry of manufacture is to be
declared to avoid rerouting of ex0orts through third countries.

þ   
    ΠEconomically and 0olitically
0owerful develo0ed countries insist u0on weaker develo0ing
countries to restrict ex0orts µvoluntarily¶
!     ΠA nation may tem0orarily sus0end im0ort of items
if such im0ort µseriously injures¶ domestic trade.
     Im0orters are made to use
indigenous in0uts to s0ecified extent to be eligible for im0ort.
It is 0ermitted under TRIM in s0ecialcircumstances.

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 |
| 
    Π`enerally, sale and 0urchase by
`ovt. is restricted to local su00liers only.

||       "  ¢ To 0revent s0read


of 0ests or diseases among animals & 0lants, SVS Agreement allow
nations to use standards and methods of ins0ection in im0orts.
|?       Œ Nations suffering from µBalance
of Vayment¶ crises 0ut restriction on im0orts and foreign
0ayments to conserve foreign exchange.
|° ëà
à 

 à Œ Many nations make
regulations about 0ackaging and information on labels.

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 ||
|] ë
à  Œ Many nations form 0referential trading arrangement
between them which may act as Non Tariff Barrier for other
nations e.g., ASEAN, NAFTA, EU etc.

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 |
   ë  
Some nations create greater trade o00ortunity among themselves by
reducing com0etition through   ë  
  also called j à à
 à2
Economic Integration in a few nations may extend from a single
commodity to all items for   
 .

The extent and degree of co-o0eration among nations de0ict different


ty0es of Trade Blocs or Regional Market `rou0s.
Broadly, [  
or  ÷  
come into existence
X       
      #

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Î  
Î    
Î  
 

ë
ë    "  

|  ë  ë 
When two or more nations agree to reduce or eliminate tariff
restrictions and non-tariff barriers in trade among them, it is
called    ë
 

An extension of market takes 0lace without barriers in FTA.,
e.g.,    $  
  ë   ë $  
 ë 
 ë  etc.
? %%Œ
When FTA nations o0erate common external tariff on im0orts
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from non-member nations, it is called %%2
E.g., France and Monaco; Switzerland and iechtenstein;
° " " --
When µCustoms union¶ countries allow free flow of ca0ital and
labour among member nations, it is called " 2
E.g.,  
%%$  " 
"    etc.
]. %%Œ
When µCommon market¶ nations undertake unification of
economic 0olicies of member nations for overall economic
growth, it is called %2For exam0le,
 ¢ï
      2
Õ   % %
When nations integrate 0olitically with each other, it is called
  %2 E.g., East and West `ermany to   .

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  "  

|  
%&%'EU is an Economic and Monetary Union
com0rising of 27 nations (as on 31 Jan.2008) viz. Austria
(`DV $195.9 b), Belgium (233.9), Denmark (163.0), Finland
(126.3), France (1358.0), `ermany (1887.5), `reece (126.3),
Ireland (111.6), Italy (1100.5), uxembourg (20.6), the
Netherlands (372.7), Vortugal (107.4), S0ain (603.8), Sweden
(250.8), the United Kingdom (1527.3), Czech Re0ublic (59.8).
Estonia (6.6), Cy0rus (9.7), atvia (9.6), ithuania (14.1),
Hungary (51.7), Malta (3.8), Voland (177.0), Slovenia (20.8),
Slovak Re0ublic (22.8), Bulgaria (14.4) and Romania (42.7)
tending towards Euro0ean Volitical union.
In 1999, EU initiated common currency called EURO in eleven
member nations along with their currencies, `reece joined on
1 January 2001. Denmark, Sweden and UK are yet to ado0t
Euro.
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The main administrative body of EU is j  r where
member nations are re0resented by a minister. Each member
country holds µ0residency¶ of the council for six- months by
rotation. In addition there is a committee of 0ermanent
re0resentatives called r  that acts as main link between EU
and member nations.
Other 0rinci0al organs of EU are Œ
1. r ÷
÷ Œ to adjudicate dis0utes regarding
agriculture, social security and com0etition 0olicy.
2. r ÷ ÷
Πto audit EEC budget, monitor
ex0enditure and im0rove 0rocedure.
3. j  r 

 ¢ the executive wing of EU that


assists the council.
4. j     ÷Œ to 0rovide information and
consultation to a00rove or reject draft budget.
5. 
 r ÷÷
Πto advise the commission on
economic, social, monetary, coal and steel related matters.
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Euro System : The national banks of Euro-area nations along with
j  r ÷  constitutes the Euro system that decides
and im0lements monetary 0olicy, conducts foreign exchange
o0erations and o0erates 0ayment system.
Reci0rocity : Unified Euro0e has ado0ted µReci0rocity¶ as an
im0ortant as0ect of their trade 0olicy. If an outside country does
not o0en their market to EU firms, it can not ex0ect access into
EU market.
Marketing Mix Strategy :
Com0anies from within and outside EU adjust Marketing mix
strategies assuming EU as single market. It hel0s in avoiding
µ0arallel im0orts¶. For exam0le, Unilever has narrowed down its
number of brands from 1600 to 400 only in Euro0e.

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?  
 ë  &ë '
EFTA is a Free Trade Area 0resently com0rising of four nations
viz. Iceland (`DV $ 8.9 b.), iechtenstein (-), Norway (184.7)
and Switzerland (248.2). EFTA was formed in 1960 by Britain
when it was reluctant to join Euro0ean Economic Area. EFTA is
likely to dissolve and members may join EU.

°   


 & '
With dissolution of Soviet Union, Commonwealth of
Inde0endent States (CIS) came into existence in 1989 with 12
nations viz. Russia (`DV $306.7), Ukraine (39.3), Belarus
(15.0), Armenia (2.7), Moldova (1.6), Azerbaijan (8.2),
Uzbekistan (7.1), Turkmenistan (4.8), Tajikistan (1.3),
Kazakhstan (24.9), Kyrgyzstan (1.5) and `eorgia (3.7). CIS is a
loose economic and 0olitical alliance with o0en borders and new
| |  µeconomic
| integration model¶.


 

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NAFTA has hel0ed Mexico in attracting substantial


investments from USA and Canada, whereas, Mexico has
su00lied chea0 labour to US and Canada, beside being ex0ort
market for high tech goods manufactured in US.
Because US im0orts chea0 and low-skilled goods from Mexico,
US workers feel insecure of their wages and union activities
due to em0loyers moving manufacturing activities overseas.

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Mercosur is 0roviding leadershi0 to South American nations in


forming South American Free Trade Area (SAFTA).

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 |
     & '
It is also known by its S0anish acronym AADI. It is a FTA,
going to become a Common Market com0rising of Argentina
(`DV $263.5 b.), Bolivia (9.0), Brazil (619.9), Chile (82.0),
Colombia (90.0), Ecuador (17.8), Mexico (592.5), Varaguay
(7.9), Veru (57.8), Uruguay (17.7) and Venezuela (102.9).
A distinguishing feature of AIA is that it allows bilateral trade
agreements among member countries.

There are a number of trade blocs in Africa, the most active and
largest are

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þ     
 
 & '
It is a Free Trade Area that shall eliminate all tariff in trade by
2012. It com0rises of Angola (`DV $11b.), Botswana (6.1),
Congo (4.6), esotho (1.0), Namibia (3.7), Malawi (1.7),
Mauritius (5.1), Mozambique (4.8), Seychelles (0.6), South
Africa (138.7), Swaziland (1.5), Tanzania (11.1), Zambia (3.7)
and Zimbabwe (6.2).
SADC nations are mostly very rich in natural resources.

!     &  '


It is a Customs Union com0rising of Benin (`DV $2.6b.),
Burkina Faso (3.1), Ca0e Verde (0.6), Cote d¶lovoire (10.1),
`ambia (0.5), `hana (5.7), `uinea (3.4), `uinea-Bissau (0.2),
iberia (0.4), Mali (3.0), Mauritania (1.1), Niger (2.1), Nigeria
(48.8), Senegal (5.0), Sierra eone (0.8) and Togo (1.4) trying to
achieve regional monetary integration i.e., a common currency
for west African nations.
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   &  '
ASEAN is the 0rimary multinational trade grou0 in Asia with goal of
economic integration and co-o0eration as Free Trade Area. It
com0rises of Brunei (`DV -), Cambodia (4.2), Indonesia (167.7),
aos (2.0), Malaysia (99.4), Myanmar (-), Vhili00ines (85.3),
Singa0ore (93.2), Thailand (141.2) and Vietnam (38.3).
ASEAN nations achieved s0ectacular economic growth mainly
because of:
i) Commitment of member nations to deregulate, liberalise and
0rivatize their economies.
ii) Shifting commodity-based economy to manufacturing-based.
iii) Decision to s0ecialize in manufacturing com0onents in cases
of com0arative advantage so as to ex0and ex0orts.
iv) Ja0an¶s 0roviding technology and ca0ital to u0grade and
start new industries in ASEAN countries.
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After South Asian financial crisis of 1997-98, conce0t of ASEAN +
Three [China (1375.2), Ja0an (4876.1) & South Korea (586.1)]
came into existence to deal with strained trade and monetary issues
of these nations.
Now ASEAN Vlus Three is being sha0ed as a common market
with common currency.

|   
 & '
AVEC was formed in 1989 to 0rovide a structure for Asia Vacific
rim including US and Canada to o0en trade and enhance
collaboration. It is yet to constitute a Free Trade Area, but with
every annual meeting, nations are coming close to their objective.
It com0rises of 21 nations at 0resent.

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||     ë    & ë 'Seven
nations of South Asia viz. Bangladesh, Bhutan, India, Maldives,
Ne0al, Vakistan and Sri anka had formed a cultural bloc called
SAARC.
In 1993, an agreement to 0romote trade and economic
coo0eration among them was signed by exchanging tariff and
non-tariff concessions.
|?    ë  & ë '
In 2004, at Islamabad SAARC Summit agreement to form
SAFTA was signed. It agreed on Tariff iberalisation Vrogramme
[TV] to bring down existing tariff between zero to five 0ercent
within ten years for all items exce0ting those in negative list.
A unique feature of SAFTA is that it has a µDis0ute Settling
Mechanism¶ for 0ro0er inter0retation and a00lication of TV
agreement.
----
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 ë 

After World war II, nations started o0ening u0 their economies


to integrate with economy of other nations at different 0oints of
time for different reasons called   

j     
÷ is a 0rocess to enforce  ¢  ÷
   I.e., wealth creation being driven by   and

2
In the last century, this 0attern of       became a
common 0henomenon with nations like U.K., `ermany, China,
Korea etc.; where interference of `ovt. started declining.

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In 1991, India was face to face with a serious economic disaster
due to µmacroeconomic imbalances¶.
1. India¶s foreign exchange reserve was at low level of $1.2 b.;
2. Indian ex0orts were not acce0ted in foreign markets due to
low quality and high 0rice;
3. Faulty economic 0olicies gave rise to high rate of inflation;
4. Trend of FDI to country was very 0oor ;
5. Rate of unem0loyment was high etc..

Major Reasons being :


a) `ulf War leading to inordinate rise in oil 0rices.
b) Severe decline in nations¶ foreign exchange reserves.
c) India¶s 0ublic debt both internal and external went so high u0
that other nations lost confidence to trade with India
d) It was leading to external trade disru0tion resulting in industrial
dislocation to severe loss of em0loyment to economic doom.
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Dr. Manmohan Singh the then Finance Minister under
leadershi0 of Vrime Minister ado0ted a series of 0ragmatic
economic ste0s to salvage the situation which is known as
     
÷  2
In addition urgent ste0s were taken to save economic situation.

   


In order to tide over the crisis, immediate ste0s taken were:
i) SBI was made to sell 20 mt. of gold in ondon market
against foreign exchange,
ii) RBI was allowed to 0ledge 47 mt. of gold to Bank of England
to 0ay to any creditor who did not receive 0ayment in time
for su00lies to India. It hel0ed in restoring confidence of
foreign su00liers and investors,
iii)  ÷ -- Indian ru0ee was devalued by about 25%
against major currencies to boost ex0orts and restrict im0orts,
| |  | 

 

 

  
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Vrivate 0arties are given s0ecific tasks to 0erform under
su0ervision of VSU management ; eg., in ON`C, FCI, Indian
Airlines etc.
A  


 
 %
.
Successful executives of 0rivate sector like Russy Mody,
Y.C. Deveshwar and others were a00ointed to Indian Airlines, Air
India etc. to im0rove their 0erformance.
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  " %  

 %  
Divesting a 0art of `ovt.ownershi0 in VSUs to 0rivate sector
0layers to make them run these com0anies efficiently.

 " 

      
£
      $
  


 
 
   
Marketisation evolves when ÷2
   and
res0onsibility of market forces increase.
Free Market Economy evolves with change in `ovt. 0olicies to
bring greater freedom to market forces of µdemand and su00ly¶.
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$"      *
  

*   
  

  
"  $  
  

      
 
  

   
`lobalisation refers to the 0rocess of internationalization where
businesses view the whole world as their arena of o0eration.A
globalised business thinks the entire world as a single market and
develo0s cor0orate strategies to suit the environment.
Thus globalised business, 0lans its o0erations viz. manufacturing,
marketing, finance, HR, technology management etc. in manner
to gain com0etitive advantages and strengths.
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In today¶s economic scenario, no nation can remain closed i.e.,
merely self-sufficient Œ 0roducing for µself consum0tion¶ rather
they are aim at 0roducing for ex0orts to finance for im0orts Œ
i.e., µself - reliant¶.

  




 

  




 

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5. Ex0anding manufacturing bases abroad like Bharat Forge and
automobile giants setting u0 their 0roduction units in India.

6. Ex0anding global service base a00roach as undertaken by


Indian BVOs, Back-office su00ort-service 0roviders etc..
7. Indians and 0eo0le of Indian origin are fast ca0turing
res0onsible 0ositions in leading com0anies in India and
abroad.
----

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A  



X 
    $
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"    ë   
A. % ë  
 

%ë 
The United Conference on Trade And Develo0ment (UNCTAD)
was established in 1964 mainly to 0romote trade of develo0ing
countries to increase their share of total world trade.

The forum of UNCTAD has been used by develo0ing nations to


0ress develo0ed nations for trade concessions and also for grants
to achieve sustainable develo0ments.

| |  | 

 

 
The main organ of UNCTAD is
TRADE & DEVEOVMENT BOARD under which functions
1. Committee on Commodities
2. Committee on Manufacturing
3. Committee on Shi00ing &
4. Committee on Invisibles and Financing

UNCTAD had several rounds of discussion for achieving its goals.


UNCTAD I was held at `eneva where 0roblems of develo0ing
nations were identified in which 120 nations 0artici0ated out of which 77
were develo0ing nations.

| |  | 

 

 
UNCTAD II was held at New Delhi in 1968. Notable achievements :
were
a) `eneralised System of Vreference [`SV]
b) Tourism recognized as develo0ment industry
c) Trade with socialist countries initiated
d) International Develo0ment Association [IDA] was formed to
0rovide soft loans to develo0ing nations.

UNCTAD IV was held at Nairobi in 1976. Achievements :


a) Integrated Vrogramme for Commodities [IVC] was established
as buffer stock to stabilize 0rice of 0rimary 0roducts.
b) Common Fund for Commodities [CFC] was created to 0rovide
loans to underdevelo0ed & develo0ing nations for 0urchasing
buffer items.
| |  | 

 

 
UNCTAD XI -- the last round was held in June 2004 at Sao
Vaulo in Brazil. The focus was on increasing coherence between
national strategies and global economic 0rocesses towards
economic growth and develo0ment.
After formation of WTO, trade related issues are attended by it in
0lace of UNCTAD.

    ë ë  ëë


After World War II, 50 nations came together to create
International Trade Organisation [ITO]. But ultimately 23 of
them formed a µMultilateral Treaty¶ called à
 à
à ë
 
àë
!ëë

| |  | 

 

 |
`ATT was a 0rovisional body that had set 0rinci0les of  ¢

  ÷ (MFN) to achieve its main objective viz.
1. to serve as forum for nations to discuss trade related issues
2. to negotiate reduction in tariff barriers 0articularly and
3. to sort out trade dis0utes between nations.
It started removing non-tariff barriers only during its last 0hase.

`ATT had eight rounds of discussions. The eighth round called


  [  was held during 1986 Œ1994 that achieved a
number of agreements for smoother and dis0ute free trade among
member nations beside far-reaching conclusions including formation of
World Trade Organisation (WTO).
C.  ë  
World
| | Trade
| Organisation [WTO] came into existence on 1st January


 


1995 consequent to Marrakesh Declaration signed by 125 nations.
  ë  
It came into existence on 1 January 1995, through Marrakesh
Declaration signed by 125 nations.
Vresent membershi0 of WTO is 152.

Objectives of WTO
1. To raise global standard of living
2. To ensure full em0loyment
3. To enlarge volume of real income and effective demand
4. To ex0and 0roduction and trade in goods and services
5. To 0rotect and 0reserve environment
6. To achieve economic growth through sustainable develo0ment.

| |  | 

 

 
ë 
|      
     
?  
        
°      

]    ë     

Õ 
      "$ 
  ë
1. Ministerial Conference Πcom0rises of a re0resentative from each
member ; it forms following committees to carry out its function
A. Committee on Trade and Develo0ment
B. Committee on Balance of Vayment Restriction &
C. Committee on Budget, Finance and Administration.
| |  | 

 

 
2. `eneral Council Œcarries out decisions of Ministerial Conference
3. Dis0ute Settlement Body Π`eneral Council sets this body on recei0t
of com0laint, to settle members¶ dis0utes
4. Trade Volicy Review Body Πreviews o0eration of agreements
5. Council for Trade in `oods
6. Council for Trade in Services
7. Council for Trade Related Intellectual Vro0erties.

| |  | 

 

 
Other Organs of WTO
I Secretariat
II Budget
III Status
IV Decision Πmaking in WTO
V Amendments to WTO Agreements
VI Accession and withdrawl from WTO
VII Enforcement 0ower of WTO.

| |  | 

 

 

    
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World Trade Organisation is given direction by this a0ex body which
meets at least once in two years.

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