INTERNATIONAL TRADE

INTERNATIONAL TRADE
Institutions in the World Economy
Protection is harmful to Economic Growth and Consumer Welfare Bretton Woods Conference 1944 suggested formation of IMF, World Bank and ITO GATT in 1948 instead of ITO, started with 23 countries had 128 members in 1995 Uruguay Round in 1995 GATT WTO (Similar to ITO) WTO - More powerful that GATT India founder member of IMF, World Bank, GATT and ITO
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INTERNATIONAL TRADE
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GATT Guided International Trade System Objectives: Changes in Tariffs or Commercial Policies should not take place without consultations with other parties to the agreements Countries should work towards reductions in Tariffs and Trade Barriers

INTERNATIONAL TRADE
GATT adapted the following principles for the objectives Non discrimination MFN Status to all Free Trade Areas or Custom Unions can be formed but should not restrict other nations, should not raise barriers Prohibition of Quantitative Restrictions However restrictions can be applied by Developing Countries By countries facing BOP problems Agriculture and Fishery Products
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INTERNATIONAL TRADE
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Consultations between the member countries to resolve the problems Meeting every four years Uruguay round lasted for seven years GATT helped developed nations more than developing nations UR to be implemented in 10 years. Different periods for different countries

INTERNATIONAL TRADE
Three Basic Issues Taken up by UR
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Reducing specific trade barriers and improving market access Strengthening GATT principles TRIPs (Trade Related Intellectual Property Rights) TRIMs (Trade Related Investment Measures)

INTERNATIONAL TRADE
WTO
22,000 page document signed on Jan 1st, 1995 by 128 countries WTO Single Institutional frame work encompassing GATT and results of UR Specific Functions Facilitate implementation, administration & operation, and further the objectives of Multilateral Trade Agreement Provide framework for implementation, administration & operation of Plurilateral Trade Agreements
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INTERNATIONAL TRADE
WTO
Provide forum for negotiations among members concerning their multilateral trade relations Administer understanding on Rules and Procedures governing settlements of disputes Administer trade review mechanism Monitor National Trade Policies Cooperate with IMF and other bodies for achieving greater coherence in Global Economic Policy making
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INTERNATIONAL TRADE
WTO
4 Main Functions Supervise on regular basis operations related to declarations related to Goods, Services, TRIPS Act as dispute settlement body To serve as Trade Review Mechanism Establish Goods Council, Services Council and TRIPS Council as subsidiary bodies
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INTERNATIONAL TRADE
UNCTAD
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LDCs feel that GATT benefits are not evenly distributed Tariff reductions favour manufactured goods and not primary goods, LDCs have export of primary goods UN Conference on Trade and Development is a response to the LDC needs (1964) Permanent organ of UN

INTERNATIONAL TRADE
UNCTAD
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Efforts led to New International Economic Order (NIEO) Programme NIEO seeks Stabilization of prices of primary products Expansion of LDCs manufacturing capacity Acquisition of advanced technology

INTERNATIONAL TRADE
UNCTAD
Principal Functions Promote international sales with a view to accelerate economic development To formulate principles and policies on international trade and related economic development To negotiate multilateral trade agreements To make proposals for putting its principles and policies into effect Goal: To encourage development of third world countries and enhance their exports
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INTERNATIONAL TRADE
Basic Principles Every country has sovereign right to dispose its natural resources for economic development and well being of society and freely trade with other countries Economic relations based on respect for sovereign equality of states, self determination of people and noninterference in the international matters of other countries Non discrimination on the basis of socioeconomic systems. Adaptation of trading practices and methods will be consistent with this principle

UNCTAD

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INTERNATIONAL TRADE
UNCTAD
Basic Principles UNCTAD played role in Maritime Shipping Code, International Aid Targets, International programmes are designed to help the LDCs GSP (Generalised System of Preferences) is achievement of UNCTAD 14 GSP Schemes and 29 preference giving countries
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INTERNATIONAL BUSINESS
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IMF

Bretton Woods Conference, 1945 ITO, World Bank, IMF Unstable currencies & inadequate monetary reserves could not develop & function world markets 01.03.1947 IMF Functioning

29 Signatories to startwith, 184 by 2002 end

INTERNATIONAL BUSINESS
IMF - Major Objectives To Promote International Monetary Cooperation To Facilitate Expansion and Balanced Growth of International Trade To Promote Exchange Rate Stability To Establish Multilateral System of payment To Make Its Resources Available to Its Members Who Are Experiencing Balance of Payment Difficulties
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INTERNATIONAL BUSINESS
IMF Bretton Woods Agreement Established Fixed Exchange Rates for Each Member Country USD 35 = Gold 1 Oz. par Value was same whether Gold or USD was used Variation of 1% allowed, raised to 2.25% In 1971 US had 70% of Worlds Gold Reserve in 1947 Redemption of Dollar in Gold
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INTERNATIONAL BUSINESS
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IMF

Member Countries Contribute to IMF Quota Quota Depends Upon National Income, Monetary Reserves, Trade Balance and Other Economic Indicators Quota is Pool of Money IMF can Lend to Member Countries, Basis of How Much Country Can Borrow as Allocation of SDR Quota determines Voting Rights

INTERNATIONAL BUSINESS
IMF Total SDR - 213 billion Largest Quota USA 17.5%, Japan 6.6%,Germany 6.11%, France and UK 5.05% each Board of Governors is Final Authority Day to Day Business with 24 Executive Directors
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INTERNATIONAL BUSINESS
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IMF
SDR Created in 1969 SDR 213 b = $ 280 billion (Approx) SDR is weighted average of USD (45%), Euro (29%), JPY (15%), GBP (11%) by end 2002 SDR designed to take over Gold Several Countries Have SDR Base for Value for Their Currencies

INTERNATIONAL BUSINESS
IMF
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The currency value of the SDR is determined by summing the values in U.S. dollars, based on market exchange rates, of a basket of major currencies (the U.S. dollar, Euro, Japanese yen, and pound sterling). The SDR currency value is calculated daily (except on IMF holiday or whenever the IMF is closed for business) and the valuation basket is reviewed and adjusted every five years.

INTERNATIONAL BUSINESS
IMF
Friday, September 03, 2010

Currency
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Currency
amount under Rule O-1

Exchange rate

USD eq

% change in Ex rate against USD from previous calculation

Euro JPY GBP USD SDR

0.4100 18.4000 0.0903 0.6320

1.28410 84.51000 1.54000 1.00000

0.526481 0.217726 0.139062 0.632000 1.515269 0.659949 1.51527

0.156 -0.379 0.006

U.S.$1.00 = SDR SDR1 = US$

INTERNATIONAL BUSINESS
SDRs per Currency unit 2

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July 26, 2011

July 25, 2011

July 22, 2011

July 21, 2011

Euro
Japanese Yen

0.8991050000 0.8969310000 0.8968890000 0.8930990000

0.0079655800 0.0079578300 0.0079291200 0.0079681500

U.K. Pound Sterling U.S. Dollar

1.0190800000 1.0153200000 1.0163600000 1.0154900000 0.6213150000 0.6237350000 0.6232290000 0.6279700000 0.0140283000 0.0140430000 0.0141339000

Indian Rupee

INTERNATIONAL BUSINESS

WORLD BANK Lending Money to the governments of developing countries to finance development projects in education, health and infrastructure Providing assistance to governments for developmental projects to the poorest developing countries Lending directly to private sector to help strengthen the private sector in developing countries with long-term loans equity investments and other financial assistance

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INTERNATIONAL BUSINESS

WORLD BANK Providing investors with investment guarantees against non-commercial risks, to create an environment in developing countries to attract foreign investments Promoting increased flow of international investments by providing facilities for conciliation and arbitration between governments and foreign investors Advise, Research, Publication Contributed for trade since WW2

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INTERNATIONAL TRADE
REGIONAL TRADE BLOCKS REGIONAL INTEGRATION Free Trade Area No Barriers To Trade of Goods and Services Among Member Countries No Discrimination of Quota, Tariff, Subsidies Among Member Countries Member Countries Can Decide Own Policies for Non-member Countries Variable Tariffs By Each Member Country On Same Products Imported From Nonmember Countries
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INTERNATIONAL TRADE
REGIONAL TRADE BLOCKS REGIONAL INTEGRATION Customs Union Step Towards Economic and Political Integration No Barriers To Trade of Goods and Services Among Member Countries Common External Trade Policy Among Member Countries Administrative Mechanism To Oversee Trade Relations With Non-members
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INTERNATIONAL TRADE
REGIONAL TRADE BLOCKS REGIONAL INTEGRATION Common Market Similar To Customs Union No Barriers To Trade of Goods and Services Among Common and Same External Trade Policy Free Movement of Factors Like Labour and Capital No Restrictions on Immigration and Capital Movements
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INTERNATIONAL TRADE
REGIONAL TRADE BLOCKS REGIONAL INTEGRATION

Economic Unions Closer Economic Integration and Cooperation Than Common Market No Barriers To Trade of Goods and Services Among Common and Same External Trade Policy and Free Movement of Factors Like Labour and Capital Common Currency, Hormonisation of Tax Rates and Common Fiscal & Monetary Policy. A Step Towards Political Union

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INTERNATIONAL TRADE
REGIONAL TRADE BLOCKS Initiated by EEC EFTA (European Free Trade Association, Stockholm Convention 1960) LAFTA (Latin American Free Trade Area, Montevideo 1961) NAFTA ANZCERTA (Australia, NZCloser Economic Relations Trade Agreement Dec 1988) SADCC (South African Development Coordination Conference) ECOWAS (Economic Community of West African States) GCC ASEAN, SAARC
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