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What is TRADE?
The voluntary exchange of goods and services among people and countries. Trade and voluntary exchange occur when buyers & sellers freely and willingly engage in market transactions. When trade is voluntary and nonfraudulent, both parties benefit and are better off after the trade than they were before the 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 its economic, social, and political importance has been on the rise in recent centuries.
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 in India.
50000 40000 30000 20000 10000 0 1999-2000 2000-01 2001-02 2002-03 2003-04
All commodities
Petroleum Products
Non-POL items
Argentina
Brazil India
29.4
73.1 57.0
13.1
48.3 74.3
129.7
492.1 588.8
32.8
24.7 22.3
TRADE BARRIERS
There are costs and benefits related to free trade as well as trade barriers.
Increased competition means lower prices. Less money will go into the domestic market place and this can cause factories to be closed and jobs to be eliminated.
However, this trade allows people in the US to buy quality clothing imports at good prices, which results in a higher standard of living for people in the US and for our trading partners. For this reason, most economists agree that it is good to let countries trade as much as possible.
Economic barriers : government rules that restrict, block or discourage international trade between countries.
Tariffs
A tariff is a tax put on goods imported from abroad The effect of a tariff is to raise the price of the imported product.
It makes imported goods more expensive so that people are more likely to purchase domestic products. EXAMPLE: The European Union removes tariffs between member nations, and imposes tariffs on nonmembers.
Quotas
A quota is a limit on the amount of goods that can be imported. Putting a quota on a good creates a shortage, which causes the price of the good to rise and makes the imported goods less attractive for buyers. This encourages people to buy domestic products, rather than foreign goods.
EXAMPLE: Brazil could put a quota on foreign made shoes to 10,000,000 pairs a year. If Brazilians buy 200,000,000 pairs of shoes each year, this would leave most of the market to Brazilian producers.
Embargos
Embargos are government orders which completely prohibits trade with another country. If necessary, the military actually sets up a blockade to prevent movement of merchant ships into and out of shipping ports.
ASSIGNMENT II
THINK ABOUT THIS.. WHAT WOULD YOU MISS IF ALL FOREIGN GOODS AND SERVICES WERE KEPT OUT OF INDIA? WHAT WOULD YOUR LIFE BE LIKE WITHOUT INTERNATIONAL TRADE? WHAT GOODS MADE IN FOREIGN COUNTRIES DO YOU USUALLY ENJOY?
TRADING BLOCKS
TRADING BLOCKS
Definition : Regional trade blocks are intergovernmental associations that manage and promote trade activities for specific regions of the world They have political as well as political implications for example the European union , the worlds largest trading block has harbored political ambitions. The Maastricht treaty which gave birth to EU calls for joint policies in regard to military , defense, and citizenship
What is the EU? 27 member states The Economic and Monetary Union (EMU): 15 member states, soon to be 16 on January 1, 2009 with the addition of Slovakia -10th Year of the Euro
EU
IT IS A FAMILY OF DEMOCRATRIC EUROPEAN COUNTRIES. COMMITED TO WORKING TOGETHER FOR PEACE AND PROSPERITY. ITS HISTORICAL ROOTSLIE IN THE SECOND WORLD WAR. IDEA OF EUROPEAN INTEGRATION WAS CONCEIVED TO PREVENT SUCH KILLING AND DESTRUCTION FROM EVER HAPPENING AGAIN.
FIVE EU INSTITUTIONS
EUROPEAN PARLIAMENT.(ELECTED BY PEOPLES OF MEMBER STATES) COUNCIL OF EUROPEAN UNION(REPRESENTING THE GOVERNMENTS OF MEMBER STATES). EUROPEAN COMMISION(DRIVING FORCE AND THE EXECUTIVE BODY). COURT OF JUSTICE. COURT OF AUDITORS.
THE RULE OF LAW IS FUNDAMENTAL TO THE EUROPERAN UNION.ALL EU DECISIONS ARE BASED ON TREATIES.,WHICH ARE AGREED BY ALL EU CONTRIES. EU CONSISTED OF JUST 6 COUNTRIES: BELGIUM,GERMANY,FRANCE,ITALY,LUXEMB OURG & NETHERLANDS. FURTHER ADDITIONS HAVE BEEN REAPEATEDLY TAKEN PLACE. LAST INCREASE TOOK PLACE IN 2004,WITH 10 NEW COUNTRIES JOINING IN.
ACHIEVEMENTS
IT HAS ENSURE FREEDOM,SECURITY & JUSTICE. JOB CREATION. REGIONAL DEVELOPMENT & ENVIRONMENTAL PROTECTION. IT HAS HELPED RAISED LIVING STANDARDS,BUILT A SINGLE EUROPE WIDE MARKET. LAUNCHED THE SINGLE EUROPEAN CURRENCYTHE EURO. IT HAS STRENGTHNED EUROPES VOICE IN THE WORLD.
What is NAFTA?
NAFTA
BORN IN JANUARY 1994. MEMBER NATIONS:US,CANADA AND MEXICO. its the WORLD LARGEST FREE TRADE AREA. UNDER NAFTA, ALL NON TARIFF BARRIERS TO AGRICULTURE WERE ELIMINATED. MANY TARRIFFS ARE BEING ELIMINATED OVER A PEROID OF 5-15 YRS.
The North American Free Trade Area is the trade bloc in North America created by the North American Free Trade Agreement (NAFTA) and its two supplements, the North American Agreement on Environmental Cooperation (NAAEC) and the The North American Agreement on Labor Cooperation (NAALC), whose members are Canada , Mexico and the United States . It came into effect on 1 January 1994 .
NAFTA Initialing Ceremony, October 1992. From left to right: (Standing) Mexican President Salinas , US President Bush , Canadian Prime Minister Mulroney (Seated) Jaime Serra Puche , Carla Hills , Michael Wilson .
Objectives
a) eliminate barriers to trade in, and facilitate the cross-border movement of, goods and services between the territories of the Parties; b) promote conditions of fair competition in the free trade area; c) increase substantially investment opportunities in the territories of the Parties; d) provide adequate and effective protection and enforcement of intellectual property rights in each Party territory;
Objectives (contd..)
e) create effective procedures for the implementation and application of this Agreement, for its joint administration and for the resolution of disputes; and f) establish a framework for further trilateral, regional and multilateral cooperation to expand and enhance the benefits of this Agreement.
TWO WAY TRADE BETWEEN US & MEXICO HAS INCREASED BY MORE THAN 55%.($11.6 BILLION). TWO WAY TRADE BETWEEN US &CANADA INCREASED MORE THAN 50%(16.3 BILLION.) HUGE BENEFITS HAVE ACCRUED TO THE NAFTA MEMBER COUNTRIES. NAFTA HAS BEEN A ROARING SUCCESSS.
Functions:
The OPEC MCs coordinate their oil production policies in order to help stabilise the oil market and to help oil producers achieve a reasonable rate of return on their investments. This policy is also designed to ensure that oil consumers continue to receive stable supplies of oil.
OPEC FUND: The OPEC Fund for International Development is a multilateral development finance institution. It was established in January 1976, by the member countries of the Organization of the Petroleum Exporting Countries. OPEC Secretariat The Secretariat carries out the executive functions of the Organization in accordance with the provisions of the OPEC Statute and under the direction of the Board of Governors Members: Algeria, Angola, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, UAE, Venezuela.
ITS A PERMANENT ORGANIZATION ESTABLISHED IN 1960 AT THE BAGHDAD CONFERENCE BY IRAN IRAQ, KUWAIT, SAUDI ARABIA, AND VENEZUELA. IT WAS LATER JOINED 8 OTHER MEMBERS. ITS HEAD QUARTER IS IN VIENNA. ITS OBJECTIVE IS TO COORDINATE AND UNIFY PETROLEUM POLICIES AMONGS THE MEMBER COUNTRIES TO SECURE FAIR AND STABLE PRICES FOR PETROLEUM PRODUCERS. PROPER PRICE AND REGULAR SUPPLY OF PETROLEUM FOR CONSUMING NATIONS.
What is ASEAN? Established on August 8th, 1967 10 member countries -Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippians, Singapore, Thailand, and Vietnam
ASEAN BEYOND TRADE HAS POLITICAL ROLE AS VISIBLE BY THE FORMATION OF ASEAN REGIONAL FORUM OF WHICH CHINA, INDIA AND USA ARE MEMBERS. ASEAN AS A TRADING BLOC HAS BEEN A HUGE SUCCESS LEADING TO PROSPERITY AND ELIMINATION OF POVERTY IN THE MEMBER COUNTRY
The South Asian Association for Regional Cooperation (SAARC) was established when its Charter was formally adopted on December 8, 1985 by the Heads of State or Government of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. SAARC provides a platform for the peoples of South Asia to work together in a spirit of friendship, trust and understanding. It aims to accelerate the process of economic and social development in Member States.
AREAS OF COOPERATION
Agriculture and Rural Development; Health and Population Activities; Women, Youth and Children; Environment and Forestry; Science and Technology and Meteorology; Human Resources Development; and Transport. Recently, high level Working Groups have also been established to strengthen cooperation in the areas of Information and Communications Technology, Biotechnology, Intellectual Property Rights, Tourism, and Energy.
The Heads of State or Government welcomed the entry of the Islamic Republic of Afghanistan into SAARC. This was a historic moment as Afghanistan assumed its rightful place as a valued member of the SAARC fraternity
CASE STUDY
WHY ASEAN IS SUCCESSFUL AND SAARC HAS BEEN UNSUCCESSFUL. ASEAN IS ONE OF THE MAJOR TRADING BLOCS IN THE WORLD IT REPRESENTS 420 MILLION PEOPLE. It is a LARGER TRADE BLOCK THAN NORTH AMERICA AND WESTERN EUROPE. SAARC REPRESENTS 22% OF HUMANITY. THERE IS A CONTRADICTION, AN IRONY BETWEEN ASEAN & SAARC. WHILE ASEAN HAS BEEN A ROARING SUCCESS & CALLED ASIAN TIGERS ,SAARC HAS BEEN A SHEER FAILURE.
REASONS
IN ASEAN ALL COUNTRIES ARE OF EQUAL GEOGRAPHIC SIZE. LEVEL OF ECONOMIC DEVELOPMENT IS THE SAME IN ALL COUNTRIES. COMMON FEAR OF COMMUNIST CHINA ALL OF THEM HAD SIMILAR ECONOMIC POLICIES.THEY ALL INTRODUCED ECONOMIC LIBERALIZATION IN 1960s WHICH FURTHER ACCLERATED ECONOMIC GROWTH. WAY OF FUNCTIONING OF ASEAN BASED ON TWO PRINCIPLES: 1.MUSYAURARAH(CONSENSUS). 2.MUFAKAT(CONSULTATIONS).
ASSIGNMENT III
PREPARE A PRESENTATION ON: SAARC ASEAN NAFTA EU SAFTA OPEC
INDIAs TRADE WITH ASEAN IS MORE THAN 20 TIMES THAN IN CASE OF SAARC. IN SOUTH ASIA INDIA IS THE LARGEST COUNTRY.IT OCCUPIES MORE THAN 70% OF GEOGRAPHICAL AREA. SO OTHER NATIONS FEEL THAT STRENGTHENING SAARC MEANS EMPOWERING INDIA. SERIOUS BILATERAL DISPUTES BETWEEN TWO MAJOR SOUTH ASIAN POWERS i.e INDIA & PAKISTAN.
INDIA,BANGLADESH DISPUTE. INDIA ,NEPAL DISPUTE. NEPAL MYNMAR DISPUTE. PAKISTAN BANGLADESH DISPUTE.
VAST DIFFERENCE IN ECONOMIC DEVELOPMENT.. INDIA IS A DEVELOPED ECONOMY OF SOUTH ASIA .OTHER CONTRIES ARE LESS DEVELOPED. PURCHASING POWER OF T HESE CONTRIES IS VERY LOW.THEY CANNOT ACT EVEN AS A MARKET OF INDIAN GOODS.
Ongoing: Indo-ASEAN CECA South Asian Free Trade Agreement (SAFTA) BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical & Economic Cooperation) India - MERCOSUR PTA
FTAs /PTAs under Study and Consideration: Gulf Cooperation Council (GCC) China South Korea Japan Malaysia Pakistan Southern African Customs Union (SACU) Egypt Israel Russia Australia