International Trade

top

Position at Global Level

Nowadays, the concept of global economy is a real phenomenon. Nations with strong international trade have become prosperous and have the power to control the world economy. But, few decades ago, more particularly during the period between the two world wars, International Trade, regulated mainly through the bilateral treaties; was badly affected and various countries imposed import restrictions solely to safeguard their national economies, resulting in the need for a regulatory body to govern the global trade and lessen the increasing imbalance between the developing and the developed nation. Many deliberations took place at global level for extending international Trade & Employment.

 

Thereafter, an Agreement known as 'GATT' (General Agreement on Tariffs & Trade) was entered into in Geneva by 23 countries in relation to Tariffs imposed on Trade in 1947. India was amongst its founder members. GATT laid down the principles for imposition of anti-dumping duties, countervailing duties, Uniform Customs Practice and safeguard measures. It also introduced the “Most Favored Nations (MFN) clause”, whereby, every member country was considered an MFN country and concession given to any nation was automatically acceded to all member countries.

 

Other important aspects regulated by GATT were national treatment clause, prohibition on quantitative restrictions, article XVIII B; code on subsidies, international sales of goods, lex mercatoria; international claims, international adjudication (arbitration and judicial settlement) etc. Until 1994, when GATT was replaced by the World Trade Organization (WTO), it had 118 countries as member.

 

WTO is a private international / multilateral organization designed to supervise, liberalize and regulate international trade between the participating countries. The organization officially commenced on 1 January 1995, under the Marrakesh Agreement. It provides a framework for negotiating and formalising trade agreements, enforcing participants' adherence thereto and a peaceful dispute resolution mechinism. Most of the issues that the WTO focuses on derive from previous trade negotiations, specially from the Uruguay Round (1986-1994) of GATT.

 

There are number of other international organization which have been established keeping in mind specific purposes, such as -

 

  • Customs Cooperation Council - Established in 1950 with headquarter in Brussels (Belgium) and 150 member countries, it serves as a technical body to study and resolve customs problems of various countries by harmonizing customs operations and promoting (international) trade.
  • International Chamber of Commerce – Comprises of national councils from more than 60 countries, to promote free trade and private enterprise, and to represent business interests at both national as well as international level.
  • International Monetary Fund (IMF) - A financial institution created to promote international monetary harmony, monitor exchange rate and monetary policies of the member states. It also provides credit for member states experiencing temporary balance of payments deficits.
  • International Safe Transit Association (ISTA) – It is a non-profit organization, which develops effective packaging, methods, and logistics systems in order to prevent or to reduce the transit and handling damage to a shipment.
  • International Standards Organization (ISO) - Worldwide non-governmental federation of national standards groups for (quality) standardization in every field, excluding electrical and electronic engineering.

Position at Regional Level

At regional level, most significant trade treaties / agreements are as follows -

 

  • AFTA (ASEAN Free Trade Area) signed in 1992 between ASEAN members to introduce common effective preferential tariff and lower non-tariff barriers for the intra-group trade;
  • Asia Pacific Economic Cooperation (APEC) - An informal grouping of Asia Pacific countries established in November 1989.
  • Association of Southeast Asian Nations (ASEAN) - It was established in 1967 to promote economic, political, and social cooperation among the member countries.
  • Arab Cooperation Council (ACC) established in 1989 and partly intended as a counterpart to Gulf Cooperation Council, to promote economic cooperation and integration amongst Egypt, Iraq, Jordan, and North Yemen.
  • Belgium-Luxembourg Economic Union (BLEU) - It is the union of Belgium and Luxembourg into a single customs unit having common tariff and excise tax schedules, freedom from internal tariff barriers, joint foreign trade system, mutual acceptance of local currencies, division of customs and excise receipts on the basis of population, single balance of payments, common exchange controls, and a combined foreign trade statistics.
  • Benelux Economic Union - A cooperative economic and trade effort among Belgium, the Netherlands, and Luxembourg.
  • CARICOM (Caribbean Community and Common Market) - Earlier known as “Caribbean Free Trade Association”, it is an organization of Caribbean countries to promote the regional development coordination. It has succeeded to Caribbean Free Trade Association.
  • Central African Customs and Economic Union (UDEAC - Union Douaniere et Economique de l'Afrique Centrale) - An organization of African countries to foster closer cooperation, economic integration among the member countries, and the eventual formation of a common market and monetary union.
  • Central American Common Market (CACM) - It is an organization established to liberalize intra-regional trade and to set a free-trade area and a customs union.
  • Central European Free Trade Association (CEFTA) – Established in 1992 to eliminate duties on items traded among the members and create a free trade area.
  • Council of the Entente (Conseil de l'Entente) - It is an organization of the states in the former French West Africa for the purpose of coordinating members' economic and commercial policies.
  • Council of Economic Arab Unity (CEAU) - It fosters economic integration among the Arab nations.
  • Economic Community of Central African States (Communaute Economique des Etats de l'Afrique Centrale, CEEAC) - It is a regional organization established by the Central African Customs and Economic Union to promote economic cooperation, eliminate barriers to intra-community trade, set up a common external tariff, and move towards a common market.
  • Economic Community of the Great Lake Countries - It is an organization aimed to foster economic cooperation and integration between Burundi, Rwanda, and Zaire.
  • Economic Community of West African States (ECOWAS) - To promote trade, cooperation and self-reliance in West Africa. It provides the free movement of people, services, and capital through harmonization of agricultural and common monetary policies, and joint development of the economic and industrial policies.
  • Economic and Social Commission for Asia and the Pacific (ESCAP) - Commission designed by the United Nations to provide the only intergovernmental forum for Asia-Pacific region and also to execute development programs through technical assistance, advisory services to governments, research, training, and information.
  • European Free Trade Association (EFTA) - It is a regional trade organization, which aims to bring free trade in industrial goods and to expand the trade in agricultural goods between the member countries and to contribute to the liberalization and expansion of world trade.
  • Gulf Cooperation Council (GCC) - It is an organization, which provides the means for coordination, integration, and cooperation in economic, social, and cultural affairs among the members. It is also known as the 'Cooperation Council for the Arab States of the Gulf.'
  • Japan External Trade Organization (JETRO) - It administers the export programs of the Japanese Government independently under the aegis of the Ministry of International Trade and Industry. Apart from assisting the Japanese firm’s export, it also helps American companies on export to Japan and promotes Japanese direct investment in the US and vice versa.
  • Korea Foreign Trade Association (KFTA) - It is a non-profit private business organization of Korean companies headquartered in Seoul to provide information and services concerning trade for members and also for the foreign businesses.
  • Korea Trade Promotion Corporation (KOTRA) - It is a non-profit organization established in 1962 to promote foreign trade, serve as an import promotion center and facilitate free services in trade, investment, and international cooperation.
  • Latin American Association of Development Financing Institutions - This association, established in January 1968 in Lima (Peru), promotes the cooperation among members, supports integration of Latin American economies. It includes 24 Latin American countries and other European and North American countries.
  • Latin American Integration Association (LAIA) - Formerly known as 'Latin American Free Trade Association', it concentrates on economic & regional tariff preferences.
  • Multilateral Investment Guarantee Agency (MIGA) - Established in April 1988, it is a part of the World Bank Group to encourage equity investment and other direct investment flows to developing countries through mitigation of non-commercial investment barriers. It also offers the investors guarantees against non-commercial risks, advises the developing member governments on design and implementation of policies, programs and procedures related to the foreign investments etc.
  • Pacific Basin Economic Council (PBEC) - It is a private sector group established in 1967 to promote regional trade and investment. At present it includes about 1,000 corporations and 14 national membership committees.
  • Pacific Economic Cooperation Council (PECC) - Founded in 1980, it is a non-governmental organization to promote cooperation in the Asia-Pacific region. The members are Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, the Pacific Islands, Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, and the US.
  • Private Export Funding Corporation (PEFCO) – It is a corporation, which lends to foreign buyers in order to finance exports from the US.
  • Southern African Customs Union (SACU) - It is an agreement among Botswana, Lesotho, Namibia, South Africa, and Swaziland to maintain a common external tariff, to share customs revenues, and allow free trade of goods within the area.
  • Southern African Development Community (SADCA) - It is a regional group to harmonize economic policy among the members. It mobilizes resources, shares technology, and eventually creates a common market.
  • West African Economic Community (CEAO) - It operates as a free trade area for agro products and raw materials and for approved industrial products, as a preferential trading area. Import duties are replaced by a regional cooperation tax (TCR). It also encourages trade among members, envisions eventual creation of a customs union and coordination of fiscal policies.

Position at National Level

Generally speaking, International / Foreign trade laws are designed to benefit the wholesome global community by encouraging the developing nations to meet the standards of the developed nations while breaking country particular's monopoly in a specific business / trade. However, all countries are equally free to make their international trade laws. According the Indian law(s) are amended from time to time to bring them in line with the provisions of the respective GATT agreements / WTO requirements. India enjoys different types of trade agreements with many countries which are as given below -

 

  • Regional Agreement South Asia Free Trade Agreement (SAFTA) with Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives; 

    South Asian Association for Regional Cooperation (SAARC) to promote economic, technical, scientific, and social cooperation among member countries, and; BIMSTEC (Bangladesh, India, Myanmar, Sri Lanka, Thailand Economic Co-operation).
  • Free Trade Agreement (FTA) with Sri Lanka and Thailand. Countries choose FTA, if their economical structures are complementary, not competitive and agree to eliminate tariffs, quotas and preferences on most of the goods (if not all) between them.

    Bilateral Trade Agreements with Bangladesh, Bhutan, Ceylon, Maldives, China, Japan, Korea and Mongolia.
  • Trade Treaty with Nepal.
  • Comprehensive Economic Cooperation Agreement (CECA) with Singapore.
  • Framework Agreement with GCC states i.e. Member States of the Cooperation Council for the Arab States of Gulf; ASEAN and Chile.
  • Preferential Trade Agreement (PTA) to give preferential access to only certain products by reducing related tariffs. Established through trade pact, it is the weakest form of economic integration. India enjoys PTA with the Afghanistan, Chile and Mercosur (a trading bloc formed in 1991 in Latin America comprising Brazil, Argentina, Uruguay and Paraguay and Chile & Bolivia as associate members).

 

Follow us on: