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INERNATIONAL TRADE

Basic terms to know ?


Business ? International Business ? Trade ? International Trade ? Difference between Globalization and international trade ? Exports and imports ?

What Is International Trade?


International trade is exchange of capital, goods, and services across international borders or territories. In most countries, it represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history (see Silk Road, Amber Road), its economic, social, and political importance has been on the rise in recent centuries.

Importance of International Trade


Without international trade, nations would be limited to the goods and services produced within their own borders. International trade is the backbone of our modern, commercial world, as producers in various nations try to profit from an expanded market, rather than be limited to selling within their own borders. There are many reasons that trade across national borders occurs, including lower production costs in one region versus another, specialized industries, lack or surplus of natural resources and consumer tastes.

Risks in international trade


Buyer insolvency (purchaser cannot pay); Non-acceptance (buyer rejects goods as different from the agreed upon specifications); Credit risk (allowing the buyer to take possession of goods prior to payment); Regulatory risk (e.g., a change in rules that prevents the transaction); Intervention (governmental action to prevent a transaction being completed); Political risk (change in leadership interfering with transactions or prices); and War and other uncontrollable events. In addition, international trade also faces the risk of unfavorable exchange rate movements

Trade In India
Trade and commerce have been the backbone of the Indian economy right from ancient times. Textiles and spices were the first products to be exported by India. The Indian trade scenario evolved gradually after the countrys independence in 1947. From the 1950s to the late 1980s, the country followed socialist policies, resulting in protectionism and heavy regulations on foreign companies conducting trade with India.

India Trade: Imports


Indias major imports comprise of crude oil machinery,
military products, fertilizers, chemicals, gems, antiques and artworks. Imported goods are divided into the following categories: Freely importable items: For these items, no import license is required. They can be freely imported by an individual or a firm. Canalized items: These items can only be imported by public sector firms. For example petroleum products fall under this category. Prohibited items: Items such as unprocessed ivory, animal rennet and tallow fat cannot be exported to India.

India Trade: Exports


Indian exports comprise mainly of engineering and textile products, precious stones, petroleum products, jewelry, sugar, steel chemicals, zinc and leather products. Most of the exported goods are exempt from export duties. India also exports services to several countries, primarily to the US. In fact, India is among the worlds largest exporters of services related to information and communication technology (ICT). It is also the key destination for business process outsourcing (BPO).

Where Does India Stand Globally ? International Trade of Select Countries in 2010
Country Exports
(US$ bn.)

Imports
(US$ bn.)

GDP
(US$ bn.)

GDP Growth in % 6.1 10.5 5.5 4.9 4.6 9.2 7.5 8.5

Korea 197.6 175.5 China 274.6 251.4 Mexico 298.5 301.5 Russia 376.7 237.3 South Africa 67.9 70.2 Argentina 68.5 56.4 Brazil 201.9 181.6 India 225.6 357.7 Source: Economist Intelligence Unit

605.0 423.0 626.1 433.5 357.4 370.3 492.1 1632.0

Indias share in global merchandise exports: 1.4% (2010)

FOREIGN RELATIONS OF INDIA

BASIC TERMS TO KNOW ?


Types of trade Bilateral trade Multilateral trade FDI FII

FII VS FDI
FII is Foreign Institutional Investment: It is investment made by foreign Mutual Funds in the Indian Market. FDI is Foreign Direct Investment: It is the investment made by Foreign Multinational companies in India

Some of the countries with which India has strong economic relations are
United States of America United Kingdom Japan China Germany Canada Switzerland Italy

India's Economic Relations with US


India ranks 24th among the trade partners of the US in terms of exports and 18th in terms of imports. The Indo-US Economic Dialogue of 2003 was a major step in strengthening economic relations between India and the United States

The major export items from India to the United States include
Fish Seafood Precious stones Textile products Apparels Metals Machinery Organic Chemicals Iron and steel products

The major import items to India from the United States include
Medical and surgical equipments Computers and computer parts Gas turbines Telecom Electrical Machinery Plastic Cotton Wooden pulp

India's Economic Relations with UK


UK ranks fifth among India's trade partners. However before 2002, UK was the second leading trading partner of India . India is one of the leading export markets of the United Kingdom among the developing nations Major FDI inflows to India from UK have taken place in the following sectors power, telecom , oil and gas and service industries

India's Economic Relations with Japan


The economic relations between the two nations have been traditionally very strong Japan is the second largest export destination of India The major export items from India to Japan include Marine products Cotton yarn Gems Iron ore

India's Economic Relations with China


India and China are two very populous countries with ancient civilizations, friendship between the two countries has a time-honoured history, which can be dated back 2,000 years The major export item from India to China is Iron ore which constitutes 53% of India's exports to China Machinery is the most important import item to India from China accounting for 36% of aggregate imports.

India and European union


India is one of the growing economies that will reshape the global economy in the twenty-first century
Trade in goods EU goods exports to India 2010: 34.7 billion EU goods imports from India 2010: 33.2 billion Trade in services EU services exports to India 2010: 9.8 billion EU services imports from India 2010: 8.1 billion Foreign Direct Investment EU outward investment to India 2010: 3.0 billion Indian inward investment to EU 2010: 0.6 billion

South Asian Free Trade Area


signed in 6 January 2004 eliminate most tariffs and other trade barriers on products and services Bangladesh, Bhutan, India, Maldives, Nepal, Pa kistan and Sri Lanka The SAFTA agreement came into force on 1 January 2006

SAFTA requires the developing countries in South Asia (India, Pakistan and Sri Lanka) to bring their duties down to 20 percent in the first phase of the two year period ending in 2007 In the final five year phase ending 2012, the 20 percent duty will be reduced to zero in a series of annual cuts.

The least developed nations in South Asia (Nepal, Bhutan, Bangladesh and Maldives) have an additional three years to reduce tariffs to zero India and Pakistan ratified the treaty in 2009, whereas Afghanistan as the 8th memberstate of the SAARC ratified the SAFTA protocol on the 4th of May 2011

SAFTAs main provisions called for the gradual reduction of tariffs, customs duties, and other trade barriers between the seven members, with some tariffs being removed immediately and others over periods of several years

SAFTA ensured eventual duty-free access for a vast range of manufactured goods and commodities traded between the signatories