EXIM Policy

EXIM Policy is the export import policy of the government that is announced every five
years. It is also known as the Foreign Trade Policy. This policy consists of general
provisions regarding exports and imports, promotional measures, duty exemption
schemes, export promotion schemes, special economic zone programs and other details
for different sectors. Every year the government announces a supplement to this policy.

The EXIM Policy of 2002-2007 (External website that opens in a new window)
emphasized the importance of agricultural exports and announced measures like the
setting up of agri export zones, removal of procedural restrictions and marketing cost
assistance. Agri Export Zones are considered the most important creation of this policy -

Agri Export Zones (External website that opens in a new

window)
Agri Export Zones were formed as a result of this policy. These zones are meant to
promote agricultural exports from the country and provide remunerative returns to the
farming community regularly. They are to be identified by the State Government, which
would evolve a comprehensive package of services to be provided by all State
Government agencies, State Agriculture Universities and all institutions and agencies of
the Union Government for intensive delivery in these zones. Corporate sector companies
with proven credentials would be encouraged to sponsor new agri export zones or take
over already notified agri export zones.

Services that would be managed and coordinated through this scheme include the
provision of pre/post harvest operations, plant protection, processing, packaging, storage
and related research and development. APEDA will supplement, within its schemes and
provisions, the efforts of State Governments for facilitating exports. Click here for a list
of the Agri Export Zones.

After, a change of government at the centre, a new EXIM Policy of 2004 - 2009
(External website that opens in a new window) was announced. This policy came up with
export promotional measures such as Towns of Export Excellence, Target Plus, Free
Trade and Warehousing Zones and the Vishesh Krishi Upaj Yojana.

Here are details on these schemes:

a. Towns of Export Excellence - Here, towns in specific areas that produce goods
of Rs. 250 crores and above in the handloom, agriculture, handicraft and fisheries
sector will be notified as Towns of Exports Excellence on the basis of their
potential for growth in exports. They will be granted this recognition to maximize
their potential, enable them to move higher in the value chain and tap new
markets.
 b. Target Plus - In this scheme, exporters who have attained a large increase in
growth of exports would be allowed duty free credit based on incremental exports
substantially higher than the general actual export target fixed. Rewards will be
granted according to a tiered approach. For incremental growth of over 20, 25 and
100 per cent, the duty free credits would be 5, 10 and 15 per cent of Free on
Board (FOB) value of incremental exports.
c. Vishesh Krishi Gram Udyog Yojana - It aims to promote exports of fruits,
vegetables, flowers, fruits, and other value-added products. This year it has been
expanded to include soybean and coconut oil as well as food preparations such as
soups. Plus, the benefit of the scheme has been extended to 100 per cent export-
oriented units.

The Annual Supplement of 2007 to the Foreign Trade Policy of 2004-2009 (221 KB)
(PDF file that opens in a new window) - The government has exempted service tax on
services rendered abroad and charged on exports from India. Similarly, service tax on
services rendered in India but utilised by exporters would be exempted or remitted. For
diversifying exports to tap unexplored markets, the focus market scheme has been
expanded to include 16 new countries.

New items such as barley, oats, soybean, cigar/cheroots, bovine fats and copra have been
included as focus products. To encourage agro-processing, status holders would be
rewarded with duty credit scripts equal to 10 per cent of the value of agricultural exports,
provided they use them for duty redemption on imports of cold storage and reefer vans.

Foreign Trade Policy

In India, the main legislation concerning foreign trade is the Foreign Trade (Development
and Regulation) Act, 1992. The Act provides for the development and regulation of
foreign trade by facilitating imports into, and augmenting exports from, India and for
matters connected therewith or incidental thereto. As per the provisions of the Act, the
Government :- (i) may make provisions for facilitating and controlling foreign trade; (ii)
may prohibit, restrict and regulate exports and imports, in all or specified cases as well as
subject them to exemptions; (iii) is authorised to formulate and announce an export and
import policy and also amend the same from time to time, by notification in the Official
Gazette; (iv) is also authorised to appoint a 'Director General of Foreign Trade' for the
purpose of the Act, including formulation and implementation of the export-import
policy.

Accordingly, the Ministry of Commerce and Industry has been set up as the most
important organ concerned with the promotion and regulation of foreign trade in India. In
exercise of the powers conferred by the Act, the Ministry notifies a trade policy on a
regular basis with certain underlined objectives. The earlier trade policies were based on
the objectives of self-reliance and self-sufficiency. While, the later policies were driven
by factors like export led growth, improving efficiency and competitiveness of the Indian
industries, etc.

With economic reforms, globalisation of the Indian economy has been the guiding factor
in formulating the trade policies. The reform measures introduced in the subsequent
policies have focused on liberalization, openness and transparency. They have provided
an export friendly environment by simplifying the procedures for trade facilitation. The
announcement of a new Foreign Trade Policy for a five year period of 2004-09, replacing
the hitherto nomenclature of EXIM Policy by Foreign Trade Policy (FTP) is another step
in this direction. It takes an integrated view of the overall development of India’s foreign
trade and provides a roadmap for the development of this sector. A vigorous export-led
growth strategy of doubling India’s share in global merchandise trade (in the next five
years), with a focus on the sectors having prospects for export expansion and potential for
employment generation, constitute the main plank of the policy. All such measures are
expected to enhance India's international competitiveness and aid in further increasing the
acceptability of Indian exports. The policy sets out the core objectives, identifies key
strategies, spells out focus initiatives, outlines export incentives, and also addresses issues
concerning institutional support including simplification of procedures relating to export
activities.

The key strategies for achieving its objectives include:-

 Unshackling of controls and creating an atmosphere of trust and transparency;

 Simplifying procedures and bringing down transaction costs;

 Neutralizing incidence of all levies on inputs used in export products;

 Facilitating development of India as a global hub for manufacturing, trading and

services;

 Identifying and nurturing special focus areas to generate additional employment

opportunities, particularly in semi-urban and rural areas;

 Facilitating technological and infrastructural upgradation of the Indian economy,

especially through import of capital goods and equipment;

 Avoiding inverted duty structure and ensuring that domestic sectors are not
disadvantaged in trade agreements;

 Upgrading the infrastructure network related to the entire foreign trade chain to
international standards;

 Revitalizing the Board of Trade by redefining its role and inducting into it experts
on trade policy; and

 Activating Indian Embassies as key players in the export strategy.

The FTP has identified certain thrust sectors having prospects for export expansion and
potential for employment generation. These thrust sectors include: (i) Agriculture; (ii)
Handlooms & Handicrafts; (iii) Gems & Jewellery; and (iv) Leather & Footwear.
Accordingly, specific policy initiative for these sectors have been announced.

 For the agriculture sector :-

• A new scheme called "Vishesh Krishi Upaj Yojana (Special Agricultural

Produce Scheme)" to boost exports of fruits, vegetables, flowers, minor forest
produce and their value added products has been introduced. Under the scheme,
exports of these products qualify for duty free credit entitlement (5 per cent of
Free On Board (f.o.b) value of exports) for importing inputs and other goods;

• Duty free import of capital goods under Export Promotion Capital Goods
(EPCG) scheme, permitting the installation of capital goods imported under
EPCG for agriculture anywhere in the Agri- Export Zone (AEZ);

• Utilizing funds from the 'Assistance to States for Infrastructure

Development of Exports (ASIDE) scheme' for development of AEZs;

• Liberalization of import of seeds, bulbs, tubers and planting material, and

liberalization of the export of plant portions, derivatives and extracts to promote
export of medicinal plants and herbal products.

 For the handlooms and handicraft sector :-

• Enhancing to 5 per cent of Free On Board (f.o.b) value of exports duty

free import of trimmings and embellishments for handlooms and handicrafts;

• Exemption of samples from countervailing duty (CVD);

• Authorizing Handicraft Export Promotion Council to import trimmings,

embellishments and samples for small manufacturers; and

• Establishment of a new Handicraft Special Economic Zone.

 For the gems and jewellery sector :-

• Permission for duty free import of consumables for metals other than gold
and platinum up to 2 per cent of Free On Board (f.o.b) value of exports;
 • Duty free re-import entitlement for rejected jewellery allowed up to 2 per
cent of f.o.b value of exports;

• Increase in duty free import of commercial samples of jewellery to Rs.1

lakh; and

• Permission to import of gold of 18 carat and above under the

replenishment scheme.

 For the leather and footwear sector, the specific policy initiatives are mainly
in the form of reduction in the incidence of customs duties on the inputs and
plants and machinery. These include:-

• Increase in the limit for duty free entitlements of import trimmings,

embellishments and footwear components for leather industry to 3 per cent of
Free On Board (f.o.b) value of exports and that for duty free import of specified
items for leather sector to 5 per cent of f.o.b value of exports;

• Import of machinery and equipment for Effluent Treatment Plants for

leather industry exempted from customs duty; and

• Re-export of unsuitable imported materials (such as raw hides and skin

and wet blue leathers) has been permitted.

In order to review the progress and policy measures, each year, "Annual
Supplements" to the five year Foreign Trade Policy (FTP) have been
announced by the Ministry :-

• The Annual Supplement announced in April, 2005 incorporated additional

policy initiatives and further simplified the procedures. It provided for an
active involvement of the State Governments in creating an enabling
environment for boosting international trade, by setting up an Inter-State
Trade Council. Also, different categories of advance licences were merged
into a single category for procedural facilitation and easy monitoring. The
supplement provided renewed thrust to agricultural exports by extension
of 'Vishesh Krish Upaj Yojna' to poultry and dairy products and removal
of cess on exports of all agricultural and plantation commodities.

• The Annual Supplement put forward in April 2006, announced the twin
schemes of 'Focus Product' and 'Focus Market'. To further meet the
objective of employment generation in rural and semi urban areas, export
 of village and cottage industry products were included in the 'Vishesh
Krishi Upaj Yojana', which was renamed as "Vishesh Krishi and Gram
Udyog Yojana". Also, a number of measures were introduced in order to
achieve the objective of making India a gems and jewellery hub of the
world. These include:- (i) allowing import of precious metal scrap and
used jewellery for melting, refining and re-export; (ii) permission for
export of jewellery on consignment basis; (iii) permission to export
polished precious and semi precious stones for treatment abroad and re-
import in order to enhance the quality and afford higher value in the
international market.

• Likewise, the third Annual Supplement to the Foreign Trade Policy was
announced on 19 April,2007 (effective from 1 st April, 2007). Some of the
important measures introduced by it are:- (i) exemption from service tax
on services (related to exports) rendered abroad; (ii) service tax on
services rendered in India and utilized by exporters would be
exempted/remitted; (iii) categorization of exporters as 'One to Five Star
Export Houses' has been changed to 'Export Houses & Trading Houses',
with rationalization and change in export performance parameters; (iv)
expansion of ceiling, scope and coverage under the 'Focus Market Scheme
(FMS)' and 'Focus Product Scheme (FPS)'.

• The final annual supplement to the Foreign Trade Policy for 2004-2009
was announced in April 2008 in which several innovative steps were
proposed. They included the following:

• Import duty under the EPCG scheme is being reduced from 5% to

3%, in order to promote modernization of manufacturing and
services exports.

• Income tax benefit to 100% EOUs available under Section 10B of

Income Tax Act is being extended for one more year, beyond
2009.

• To promote export of sports and toys and also to compensate

disadvantages suffered by them, an additional duty credit of 5%
over and above the credit under 'Focus Product Scheme' is being
provided.

• Our export of fresh fruits and vegetables and floriculture suffers

from high incidence of freight cost. To neutralize this
disadvantage, an additional credit of 2.5% over and above the
credit available under Visesh Krishi and Gram Udyog Yojana
(VKGUY) is proposed.

• Interest relief already granted for sectors affected adversely by the

appreciation of the rupee is being extended for one more year.
 • DEPB scheme is being continued till May 2009.

Trade Facilitation Measures (Supplement To Foreign Trade Policy 2004-

09) Announced On 26th February 2009,

• DUTY CREDIT SCRIPS under DEPB scheme to be issued without

waiting for realization of export proceeds;

• Special package of Rs.325 crore for leather and textiles sector;

• STCL, DIAMOND INDIA, MSTC, GEM & JEWELLERY EPC and

STAR TRADING HOUSES added as nominated agencies for import of
precious metals;

• Gem and Jewellery export: import restrictions on worked corals removed;

• Bhilwara and Surat recognized as towns of export excellence for textiles

and diamonds;

• Threshold limit for recognition as premier trading houses reduced to Rs.

7500 crore;

• Under EPCG scheme, export obligation extended till 2009-10 for exports
during 2008-09;

• DEPB/DUTY CREDIT SCRIP utilization extended for payment of duty

for import of restricted items also;

• Procedure for claiming duty drawback refund & refund of terminal excise
duty further simplified;

• Re-credit of 4% SAD for VKGUY, FPS and FMS allowed;

• A new office of DGFT to be opened at Srinagar;

• Value cap under DEPB revised for two products;

• Electronic message transfer facility for advance authorization and EPCG

to be established;

• Gem & Jewellery units in EOU to be allowed – personal carriage of gold

up to 10 kg;
• Advance licenses issued prior to 1.4.2002 requiring MODVAT/CENVAT
certificate dispensed with;

• Export obligation period against advance authorizations extended up to 36

months;
 • Reimbursement of additional duty of excise levied on fuel to be
admissible for EOUS;

• Early refund of service tax claims & further simplification of refund

procedures on the anvil;

In accordance with the provisions of the Act, a "Directorate General of Foreign

Trade (DGFT)" has been set up as an attached office of the Ministry of
Commerce and Industry. It is headed by the 'Director General of Foreign Trade'
and is responsible for formulating and executing the Foreign Trade Policy/Exim
Policy with the main objective of promoting Indian exports. The DGFT also
issues licences to exporters and monitors their corresponding obligations through
a net work of 32 regional offices located at the following places:- Ahmedabad;
Amritsar; Bangalore; Baroda (Vadodara); Bhopal; Kolkata; Chandigarh; Chennai;
Coimbatore; Cuttack; Ernakulam; Guwahati; Hyderabad; Jaipur; Kanpur;
Ludhiana; Madurai; Moradabad; Mumbai; New Delhi; Panaji; Panipat; Patna;
Pondicherry; Pune; Rajkot; Shillong; Srinagar(Functioning at Jammu); Surat;
Thiruvananthapuram; Varanasi; and Vishakhapatnam.

Trade is an indispensable means for sustaining the economic growth and development of
a nation. In India, the main legislation governing foreign trade is the Foreign Trade
(Development and Regulation) Act, 1992. As per the provisions of the Act, the
Government of India formulates and announces a foreign trade policy and amends it from
time to time. The new Foreign Trade Policy (FTP) announced in August, 2004, covering
a five year period of 2004-2009 is a comprehensive policy for the overall development of
India's foreign trade sector. It is built around two major objectives :- (i) to double India's
percentage share of global merchandise trade within the next five years; and (ii) trade to
act as an effective instrument of economic growth by giving a thrust to employment
generation.

The Ministry of Commerce and Industry is the most important organ concerned with the
promotion and regulation of foreign trade in India. The Ministry has an elaborate
organizational set up to look after the various aspects of trade. Its two important offices
concerned with trade are the 'Directorate General of Foreign Trade (DGFT)' and the
'Directorate General of Commercial Intelligence and Statistics (DGCI&S)'. DGFT is
responsible for implementing the Foreign Trade Policy/Exim Policy with the main
objective of promoting Indian exports. It also issues licences to exporters and monitors
their corresponding obligations through a network of regional offices. DGCI&S is
entrusted with the work of collecting, compiling and publishing/ disseminating trade
statistics and various types of commercial information required by the policy makers,
researchers, importers, exporters, traders as well as overseas buyers.

India is also engaged in trade negotiations and agreements at multilateral, regional and
bilateral levels. It is interacting with international agencies such as the World Trade
Organisation (WTO), the United National Conference on Trade & Development
(UNCTAD), the Economic and Social Commission for Asia and Pacific (ESCAP), etc as
well as with individual countries or group of countries on a wide range of issues
including tariff and non-tariff barriers, international commodity agreements,
preferential/free trade arrangements, investment matters, etc. Some of the major regional
trading arrangements that India has entered into include:- Agreement on South Asian
Free Trade Area (SAFTA); Asia-Pacific Trade Agreement (APTA); Framework
Agreement on Comprehensive Economic Cooperation between ASEAN and India; etc.

Import Procedure
Imports to India are governed by the Foreign Trade (Development and Regulation) Act
1992 (External website that opens in a new window). Under this Act, imports of all goods
are free except for the items regulated by the policy or any other law in force. The
present, foreign trade arrangements for different commodities are stated in the EXIM
Policy of 2004-2009 (External website that opens in a new window). This policy is
announced once every five years with annual supplements coming out every year. It is
also known as the Foreign Trade Policy or Export Import Policy.

Items on the 'Prohibited' list like tallow, fat or oils of any animal origin, animal rennet
and wild animals including their parts and products and ivory cannot be imported. For
import of items that appear in the 'Restricted' list you need secure an import licence.
Import of items that are enumerated in the canalised list of items are permitted to be
imported through canalising Agencies. All other products can be freely imported.

Registration with a regional licensing authority is a precondition for the import of goods.
Customs officials will not permit clearance of goods unless the importer gets an Import
Export Code (IEC) number from the regional licensing authority.
Import Procedure for Livestock Products
Livestock products include meat and meat products of different types that comprise fresh,
chilled and frozen meat as well as tissue or organs of poultry, pig, sheep and goat. It also
consists of egg and egg powder; milk and milk goods; pet foods of animal origin and
embryos, ova or semen of cows, sheep and goats. No livestock product may be imported
into India without a valid sanitary import permit. All livestock products with valid
sanitary import permits may be brought into India only through seaports or airports where
Animal Quarantine and Certification Services Stations (External website that opens in a
new window) are situated. These stations are located in the cities of Delhi, Mumbai,
Kolkata and Chennai. When livestock products arrive at the checkpoint, they will be
checked by the Officer-in-charge of the Animal Quarantine and Certification Services
Station or any other veterinary officer duly approved by the Department Of Animal
Husbandry and Dairying (External website that opens in a new window).

Import Procedure for the Fisheries Sector

License under EXIM policy is not required for the import of 125 species/groups of fish,
crustaceans, molluscs and other aquatic invertebrates covered under FREE policy under
the EXIM policy. Import of five groups of live fish is permitted under Restricted Policy.
Import of Whale Shark (Rhincodon types) and parts and products of the species is
restricted.

Import Procedure for Horticulture (-1 MB) (PDF file that opens in a new window) -
According to the Foreign Trade Policy, there is no quantitative restriction on import of
spices into the country except for items such as 'seed quality' spices and garlic. The tariffs
for import have also been steadily brought down. Under a bilateral agreement with Sri
Lanka, duty free import of spices is permitted. This is useful for value addition and re-
exportation.

India to have 2 MT surplus aluminium for export by 2013 Business Standard: February
12, 2010

Mumbai: Capacity expansion by planned projects to treble production to 4.4 mt.

The aluminium industry in India may be moving towards overcapacity, since supply is
likely to grow in excess of demand going forward. Considering that all aluminium
projects would begin commercial production with expanded capacity as planned, there
could be at least two million tonnes of additional capacity for exports by 2013.
“India’s aluminium production will more than treble to 4.4 million tonnes by mid-2012
with new capacities coming on stream, along with requisite captive power generation
capacities,” stated a Fitch Ratings report recently.

Vedanta, Hindalco and Nalco together produced 1.5 million tonnes of the metal for the
year ended 31 March 2009, a growth of 9 per cent year on year. Though higher cost
capacities were shut down (in Vedanta’s subsidiaries Balco, Malco and Vedanta
Aluminium) to the extent of 0.14 million tonnes, additional capacities from Vedanta
Aluminium Ltd in Orissa, along with incremental capacity expansions at Nalco and
Hindalco compensated for the loss. For eight months between April and November 2009,
total aluminium produced was 0.98 million tonnes, a rise of 16.6 per cent over the
corresponding period in the previous year.

“Although demand outlook for aluminium is likely to grow in line with the economy,
supply is estimated to grow far in excess of demand, resulting in overcapacity in the
domestic market over 2011-2013,” the report added. Large power and housing projects,
which use aluminium extensively, depend largely on growth in economy and, thus, spur
consumption of the metal.

According to an Icra report, “With sharp increase in capacity over 2010-13, India will
start massive export of aluminium. The country could by 2013 be an annual exporter of 2
million tonnes of the metal, assuming the planned capacity expansions become
operational as currently envisaged.” It added that the current demand-supply situation for
aluminium was largely balanced with consumption in line with existing production, and a
relatively small volume of exports.

India’s per capita consumption of aluminium is 1 kg as against 30 kg in the developed

world, it stated in the report. “The industry is exploring new application areas and
untapped demand potential, which may result in greater preference for aluminium in the
future,” Icra added.

The expansion projects are subject to execution risk given their scale, greenfield nature,
and regulatory risks with regard to mining approvals. These could delay some of the
projects, or postpone indefinitely. However, the risks are partly offset by the fact that the
new capacity would have low, globally competitive costs once operational. The surplus
production would be exported.

Exports up 11.5% in Jan to $14 bn Business Standard: February 12, 2010

New Delhi: The country’s merchandise exports have reached $14.34 billion (about Rs
66,680 crore) in January, up 11.5 per cent from $12.86 per cent (nearly Rs 59,800 crore)
in the same month a year ago, even as Commerce and Industry Minister Anand Sharma
has recommended a “cautious” exit from export sops.
“Exports have again registered growth in January as some of the sectors did exceedingly
well … However, a cautious withdrawal would help and reassure the industry. Any
abrupt changes would undermine the confidence and robust recovery,” Sharma told
reporters here today.

The official foreign trade data, including the import figures, would be released on March
2. Preliminary data had earlier put the export growth for January at 8 per cent.

Among the sectors that posted growth were agricultural products, tea, coffee, basmati
rice, marine products, gems and jewellery, drugs, petroleum products and plastics, while
textiles, jute, handicrafts, engineering goods and leather remained sluggish, Sharma
added.

“I am having a series of meeting with the finance minister regarding continuation of the
stimulus measures. A proper analysis is underway and I am sure our proposals will be
taken care of,” the minister said.

Earlier, Commerce Secretary Rahul Khullar had also said exporters should not expect
more and more assistance from the government and focus on expanding their markets
with a wide range of products.

Exports started dropping since October 2008 as the global economic downturn worsened.
It fell as low as around 40 per cent during April-May last year. “As the world economy
emerges from the current recession, the government will have to take a decision to exit
from the economic stimulus measures, including those that were aimed at boosting
exports. The paramount reason for this is not so much the vulnerability of subsidised
exports to countervailing action as the need to reduce fiscal deficit,” said Anwarul Hoda
of the Indian Council for Research on International Economic Relations.

Exports grew by 18.2 per cent at $11.16 billion and 9.3 per cent at 13.36 billion in
November and December, respectively. Total exports for 2009-10 is expected to be $165-
170 billion.

FDI inflows touch US$ 1.54 billion in December 2009 IBEF: February 11, 2010

New Delhi: Foreign direct investment (FDI) grew to US$ 1.54 billion in December 2009,
an increase of 13.2 per cent over the December 2008 level of US$ 1.36 billion, according
to the latest bulletin issued by the Reserve Bank of India (RBI). This makes it the third
consecutive month of year-on-year increases in FDI inflows.

The February bulletin of the RBI showed that FDI equity inflows for the period between
April and December of the current fiscal, stood at US$ 21.5 billion, higher than the US$
21.15 billion posted in the same period in the preceding fiscal.
The services sector followed by the telecommunications, real estate and housing sector
are seen as preferred destinations for foreign investors. The government has issued a
compendium of 177 Press Notes relating to FDI and has stated that from the next fiscal,
FDI rules would be reviewed twice a year.

Trade
From Wikipedia, the free encyclopedia
Jump to: navigation, search
This article is about the economic mechanism. For other uses, see Trade
(disambiguation).

Trade is the voluntary exchange of goods, services, or both. Trade is also called
commerce or transaction. A mechanism that allows trade is called a market. The original
form of trade was barter, the direct exchange of goods and services. Later one side of the
barter were the metals, precious metals (poles, coins), bill, paper money. Modern traders
instead generally negotiate through a medium of exchange, such as money. As a result,
buying can be separated from selling, or earning. The invention of money (and later
credit, paper money and non-physical money) greatly simplified and promoted trade.
Trade between two traders is called bilateral trade, while trade between more than two
traders is called multilateral trade.

Trade exists for man due to specialization and division of labor, most people concentrate
on a small aspect of production, trading for other products. Trade exists between regions
because different regions have a comparative advantage in the production of some
tradable commodity, or because different regions' size allows for the benefits of mass
production. As such, trade at market prices between locations benefits both locations.

Trading can also refer to the action performed by traders and other market agents in the
financial markets.

Contents
[hide]

• 1 History of trade
o 1.1 Development of money
o 1.2 Current trends
 1.2.1 Doha rounds
 1.2.2 China
 • 2 International trade

• 3 References

[edit] History of trade

Part of a series on Trade routes
Amber Road · Hærvejen . Incense Route
Kamboja-Dvaravati Route . King's
Highway
Roman-India routes . Royal Road
Silk Road · Spice Route . Tea route
Varangians to the Greeks · Via Maris
Triangular trade .Volga trade route
Trans-Saharan trade . Salt Route
Hanseatic League . Grand Trunk Road

Trade originated with the start of communication in prehistoric times. Trading was the
main facility of prehistoric people, who bartered goods and services from each other
before the innovation of the modern day currency. Peter Watson dates the history of long-
distance commerce from circa 150,000 years ago.[1]

Trade is believed to have taken place throughout much of recorded human history. There
is evidence of the exchange of obsidian and flint during the stone age. Materials used for
creating jewelry were traded with Egypt since 3000 BC. Long-range trade routes first
appeared in the 3rd millennium BC, when Sumerians in Mesopotamia traded with the
Harappan civilization of the Indus Valley. The Phoenicians were noted sea traders,
traveling across the Mediterranean Sea, and as far north as Britain for sources of tin to
manufacture bronze. For this purpose they established trade colonies the Greeks called
emporia. From the beginning of Greek civilization until the fall of the Roman empire in
the 5th century, a financially lucrative trade brought valuable spice to Europe from the far
east, including China. Roman commerce allowed its empire to flourish and endure. The
Roman empire produced a stable and secure transportation network that enabled the
shipment of trade goods without fear of significant piracy.

The fall of the Roman empire, and the succeeding Dark Ages brought instability to
Western Europe and a near collapse of the trade network. Nevertheless some trade did
occur. For instance, Radhanites were a medieval guild or group (the precise meaning of
the word is lost to history) of Jewish merchants who traded between the Christians in
Europe and the Muslims of the Near East.

The Sogdians dominated the East-West trade route known as the Silk Road after the 4th
century AD up to the 8th century AD, with Suyab and Talas ranking among their main
centeres in the north. They were the main caravan merchants of Central Asia.

From the 8th to the 11th century, the Vikings and Varangians traded as they sailed from
and to Scandinavia. Vikings sailed to Western Europe, while Varangians to Russia. The
Hanseatic League was an alliance of trading cities that maintained a trade monopoly over
most of Northern Europe and the Baltic, between the 13th and 17th centuries.

Vasco da Gama restarted the European Spice trade in 1498. Prior to his sailing around
Africa, the flow of spice into Europe was controlled by Islamic powers, especially Egypt.
The spice trade was of major economic importance and helped spur the Age of
Exploration. Spices brought to Europe from distant lands were some of the most valuable
commodities for their weight, sometimes rivaling gold.

In the 16th century, Holland was the centre of free trade, imposing no exchange controls,
and advocating the free movement of goods. Trade in the East Indies was dominated by
Portugal in the 16th century, the Netherlands in the 17th century, and the British in the
18th century. The Spanish Empire developed regular trade links across both the Atlantic
and the Pacific Oceans.

In 1776, Adam Smith published the paper An Inquiry into the Nature and Causes of the
Wealth of Nations. It criticised Mercantilism, and argued that economic specialisation
could benefit nations just as much as firms. Since the division of labour was restricted by
the size of the market, he said that countries having access to larger markets would be
able to divide labour more efficiently and thereby become more productive. Smith said
that he considered all rationalisations of import and export controls "dupery", which hurt
the trading nation at the expense of specific industries.

In 1799, the Dutch East India Company, formerly the world's largest company, became
bankrupt, partly due to the rise of competitive free trade.

In 1817, David Ricardo, James Mill and Robert Torrens showed that free trade would
benefit the industrially weak as well as the strong, in the famous theory of comparative
advantage. In Principles of Political Economy and Taxation Ricardo advanced the
doctrine still considered the most counterintuitive in economics:

When an inefficient producer sends the merchandise it produces best to a country

able to produce it more efficiently, both countries benefit.

The ascendancy of free trade was primarily based on national advantage in the mid 19th
century. That is, the calculation made was whether it was in any particular country's self-
interest to open its .

John Stuart Mill proved that a country with monopoly pricing power on the international
market could manipulate the terms of trade through maintaining tariffs, and that the
response to this might be reciprocity in trade policy. Ricardo and others had suggested
this earlier. This was taken as evidence against the universal doctrine of free trade, as it
was believed that more of the economic surplus of trade would accrue to a country
following reciprocal, rather than completely free, trade policies. This was followed
within a few years by the infant industry scenario developed by Mill promoting the
theory that government had the "duty" to protect young industries, although only for a
time necessary for them to develop full capacity. This became the policy in many
countries attempting to industrialise and out-compete English exporters. Milton Friedman
later continued this vein of thought, showing that in a few circumstances tariffs might be
beneficial to the host country; but never for the world at large.[2]

The Great Depression was a major economic recession that ran from 1929 to the late
1930s. During this period, there was a great drop in trade and other economic indicators.

The lack of free trade was considered by many as a principal cause of the depression.
Only during the World War II the recession ended in the United States. Also during the
war, in 1944, 44 countries signed the Bretton Woods Agreement, intended to prevent
national trade barriers, to avoid depressions. It set up rules and institutions to regulate the
international political economy: the International Monetary Fund and the International
Bank for Reconstruction and Development (later divided into the World Bank and Bank
for International Settlements). These organisations became operational in 1946 after
enough countries ratified the agreement. In 1947, 23 countries agreed to the General
Agreement on Tariffs and Trade to promote free trade.

Free trade advanced further in the late 20th century and early 2000s:

• 1992 European Union lifted barriers to internal trade in goods and labour.
• January 1, 1994 the North American Free Trade Agreement (NAFTA) took effect
• 1994 The GATT Marrakech Agreement specified formation of the WTO.
• January 1, 1995 World Trade Organization was created to facilitate free trade, by
mandating mutual most favoured nation trading status between all signatories.
• EC was transformed into the European Union, which accomplished the Economic
and Monnetary Union (EMU) in 2002, through introducing the Euro , and
creating this way a real single market between 13 member states as of January 1,
2007.
• 2005, the Central American Free Trade Agreement was signed; It includes the
United States and the Dominican Republic.

[edit] Development of money

Main article: History of money

The first instances of money were objects with intrinsic value. This is called commodity
money and includes any commonly-available commodity that has intrinsic value;
historical examples include pigs, rare seashells, whale's teeth, and (often) cattle. In
medieval Iraq, bread was used as an early form of money. In Mexico under Montezuma
cocoa beans were money. [1]
Roman denarius

Currency was introduced as a standardised money to facilitate a wider exchange of goods

and services. This first stage of currency, where metals were used to represent stored
value, and symbols to represent commodities, formed the basis of trade in the Fertile
Crescent for over 1500 years.

Numismatists have examples of coins from the earliest large-scale societies, although
these were initially unmarked lumps of precious metal.[3]

Ancient Sparta minted coins from iron to discourage its citizens from engaging in foreign
trade.

[edit] Current trends

[edit] Doha rounds

Main article: Doha round

The Doha round of World Trade Organization negotiations aims to lower barriers to trade
around the world, with a focus on making trade fairer for developing countries. Talks
have been hung over a divide between the rich, developed countries, and the major
developing countries (represented by the G20). Agricultural subsidies are the most
significant issue upon which agreement has been hardest to negotiate. By contrast, there
was much agreement on trade facilitation and capacity building.

The Doha round began in Doha, Qatar, and negotiations have subsequently continued in:
Cancún, Mexico; Geneva, Switzerland; and Paris, France and Hong Kong.

[edit] China

Beginning around 1978, the government of the People's Republic of China (PRC) began
an experiment in economic reform. In contrast to the previous Soviet-style centrally
planned economy, the new measures progressively relaxed restrictions on farming,
agricultural distribution and, several years later, urban enterprises and labor. The more
market-oriented approach reduced inefficiencies and stimulated private investment,
particularly by farmers, that led to increased productivity and output. One feature was the
establishment of four (later five) Special Economic Zones located along the South-east
coast.

The reforms proved spectacularly successful in terms of increased output, variety,

quality, price and demand. In real terms, the economy doubled in size between 1978 and
1986, doubled again by 1994, and again by 2003. On a real per capita basis, doubling
from the 1978 base took place in 1987, 1996 and 2006. By 2008, the economy was 16.7
times the size it was in 1978, and 12.1 times its previous per capita levels. International
trade progressed even more rapidly, doubling on average every 4.5 years. Total two-way
trade in January 1998 exceeded that for all of 1978; in the first quarter of 2009, trade
exceeded the full-year 1998 level. In 2008, China's two-way trade totaled US$2.56
trillion.

In 1991 the PRC joined the Asia-Pacific Economic Cooperation group, a trade-promotion
forum. In 2001, it also joined the World Trade Organization. See also: Economy of the
People's Republic of China

[edit] International trade

Main article: International trade
International Trade Series
v•d•e

International trade
History of international trade
Political views
Fair trade
Trade justice
Free trade
Protectionism
Economic integration

Preferential trading area

Free trade area
Customs union
Single market
Economic and monetary union
Complete economic integration
Other
Trade pact
Trade bloc
Trade creation
Trade diversion
International trade is the exchange of goods and services across national borders. In most
countries, it represents a significant part of GDP. While international trade has been
present throughout much of history (see Silk Road, Amber Road), its economic, social,
and political importance have increased in recent centuries, mainly because of
Industrialization, advanced transportation, globalization, multinational corporations, and
outsourcing. In fact, it is probably the increasing prevalence of international trade that is
usually meant by the term "globalization".

Empirical evidence for the success of trade can be seen in the contrast between countries
such as South Korea, which adopted a policy of export-oriented industrialization, and
India, which historically had a more closed policy (although it has begun to open its
economy, as of 2005). South Korea has done much better by economic criteria than India
over the past fifty years, though its success also has to do with effective state institutions.

Trade sanctions against a specific country are sometimes imposed, in order to punish that
country for some action. An embargo, a severe form of externally imposed isolation, is a
blockade of all trade by one country on another. For example, the United States has had
an embargo against Cuba for over 40 years.

Although there are usually few trade restrictions within countries, international trade is
usually regulated by governmental quotas and restrictions, and often taxed by tariffs.
Tariffs are usually on imports, but sometimes countries may impose export tariffs or
subsidies. All of these are called trade barriers. If a government removes all trade
barriers, a condition of free trade exists. A government that implements a protectionist
policy establishes trade barriers.

The fair trade movement, also known as the trade justice movement, promotes the use
of labour, environmental and social standards for the production of commodities,
particularly those exported from the Third and Second Worlds to the First World. Such
ideas have also sparked a debate on whether trade itself should be codified as a human
right.[4]

Standards may be voluntarily adhered to by importing firms, or enforced by governments

through a combination of employment and commercial law. Proposed and practiced fair
trade policies vary widely, ranging from the commonly adhered to prohibition of goods
made using slave labour to minimum price support schemes such as those for coffee in
the 1980s. Non-governmental organizations also play a role in promoting fair trade
standards by serving as independent monitors of compliance with fair trade labeling
requirements.