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Chronological Order
UNCTAD 1964
EXIM BANK 1982ECGC 1983
EU 1993
NAFTA 1994ASEAN 1967
SAARC 1985
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UNCTAD
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UNCTAD
It stands for United Nations Conference On Trade and
Development.
UNCTAD has 193 members.
The UNCTAD has its permanent secretariat in Geneva, Switzerland. UNCTAD has 400 staff members and an annual regular budget of
approximately US$50 million and US$25 million of extra budgetary
technical assistance funds.
The Conference ordinarily meets once in four years.
The United Nations Conference on Trade andDevelopment (UNCTAD) was established in 1964 as a permanent
intergovernmental body. It is the principal organ of the United
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OBJECTIVES OF UNCTAD
The organization's goals are to "maximize the trade, investment and
development opportunities of developing countries and assist them in
their efforts to integrate into the world economy on an equitable basis.
UNCTAD was established in order to provide a forum where the
developing countries could discuss the problems relating to their
economic development. UNCTAD grew from the view that existing
institutions like WTO, the IMF , and World Bank were not properlyorganized to handle the particular problems of developing countries.
The primary objective of the UNCTAD is to formulate policies relating to all
aspects of development including trade, aid, transport, finance and
technology.
UNCTAD conducts certain technical cooperation in collaboration withthe World Trade Organization through the joint International Trade Centre
(ITC), a technical cooperation agency targeting operational and enterprise-
oriented aspects of trade development.
UNCTAD hosts the Intergovernmental Working Group of Experts on
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GENERALISED SYSTEM OF
PREFERENCES (GSP)
It was argued in UNCTAD, that in order to promote exports of
manufactured goods from developing countries, it would be
necessary to offer special tariff concessions to such exports.
Accepting this argument, the developed countries formulated the
GSP Scheme under which manufacturers' exports and someagricultural goods from the developing countries enter duty-free or
at reduced rates in the developed countries. Since imports of such
items from other developed countries are subject to the normal
rates of duties, imports of the same items from developing
countries would enjoy a competitive advantage.
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REPORTS
UNCTAD produces a number of topical reports, including:
The Trade and Development Report
The Trade and Environment Review
The World Investment Report
The Economic Development in Africa Report
The Least Developed Countries Report
UNCTAD Statistics
The Information Economy Report
The Review of Maritime Transport
The International Accounting and Reporting Issues Annual
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EXIM
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Exim Bank (India)
Export-Import Bank of India(EXIM) is the premier export finance
institution of the country, set up in 1982 under the Export-Import Bank of
India Act 1981.
Government of India launched the institution with a mandate, not just to
enhance exports from India, but to integrate the countrys foreign tradeand investment with the overall economic growth.
Exim Bank of India has been both a catalyst and a key player in the
promotion of cross border trade and investment.
Exim Bank of India plays a major role in partnering Indian industries,
particularly the Small and Medium Enterprises, in their globalizationefforts, through a wide range of products and services offered at all stages
of the business cycle, starting from import of technology and export
product development to export production, export marketing, pre-
shipment and post-shipment and overseas investment.
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Products of EXIM
Investment Banking
Commercial Banking
Retail Banking
Private Banking
Asset Management
Mortgages
Credit Cards
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Organization Structure
Exim Bank is managed by a Board of Directors, which has representatives
from the Government, Reserve Bank of India, Export Credit Guarantee
Corporation of India, a financial institution, public sector banks, and the
business community.
The Bank's functions are segmented into several operating groups suchas
Corporate Banking Group which handles a variety of financing
programmes for Export Oriented Units (EOUs), Importers, and overseas
investment by Indian companies.
Project Finance / Trade Finance Group handles the entire range of exportcredit services such as supplier's credit, pre-shipment Agri Business Group,
to spearhead the initiative to promote and support Agri-exports. The
Group handles projects and export transactions in the agricultural sector
for financing.
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Organization Structure.
Small and Medium Enterprise: The group handles credit proposals
from SMEs under various lending programmes of the Bank.
Export Services Group offers variety of advisory and value-added
information services aimed at investment promotion.
Export Marketing Services Bank offers assistance to Indian
companies, to enable them establish their products in overseas
markets.
Besides these, the Support Services groups, which include:
Research & Planning, Corporate Finance, Loan Recovery, InternalAudit, Management Information Services, Information Technology,
Legal, Human Resources Management and Corporate Affairs.
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ROLE OF EXIM Exim Bank of India has been the prime mover in encouraging project
exports from India. The Bank provides Indian project exporters with acomprehensive range of services to enhance the prospect of their securing
export contracts, particularly those funded by Multilateral Funding
Agencies like the World Bank, Asian Development Bank, African
Development Bank and European Bank for Reconstruction and
Development. The Bank extends lines of credit to overseas financial institutions, foreign
governments and their agencies, enabling them to finance imports of
goods and services from India on deferred credit terms. Exim Banks lines
of Credit obviate credit risks for Indian exporters and are of particular
relevance to SME exporters.
The Banks Overseas Investment Finance programme offers a variety of
facilities for Indian investments and acquisitions overseas. The facilities
include loan to Indian companies for equity participation in overseas
ventures, direct equity participation by Exim Bank in the overseas venture
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ROLE OF EXIM.
The Bank provides financial assistance by way of term loans in Indianrupees/foreign currencies for setting up new production facility,expansion/modernization/upgradation of existing facilities and foracquisition of production equipment/technology. Such facilitiesparticularly help export oriented Small and Medium Enterprises for
creation of export capabilities and enhancement of internationalcompetitiveness.
Under its Export Marketing Finance programme, Exim Bank supports Smalland Medium Enterprises in their export marketing efforts includingfinancing the soft expenditure relating to implementation of strategic andsystematic export market development plans.
The Bank has launched the Rural Initiatives Programme with the objectiveof linking Indian rural industry to the global market. The programme isintended to benefit rural poor through creation of export capability inrural enterprises.
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ROLE OF EXIM
In order to assist the Small and Medium Enterprises, the Bank has put in
place the Export Marketing Services (EMS) Programme. Through EMS, the
Bank seeks to establish, on best efforts basis, SME sector products in
overseas markets, starting from identification of prospective business
partners to facilitating placement of final orders. The service is providedon success fee basis.
Exim Bank supplements its financing programmes with a wide range of
value-added information, advisory and support services, which enable
exporters to evaluate international risks, exploit export opportunities and
improve competitiveness, thereby helping them in their globalisation
efforts.
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ECGC
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EXPORT CREDIT GUARANTEE
CORPORATION OF INDIA The Export Credit Guarantee Corporation of India Limited (ECGC in short)
is a company wholly owned by the Government of India.
It provides export credit insurance support to Indian exporters and is
controlled by the Ministry of Commerce.
Government of India had initially set up Export Risks InsuranceCorporation (ERIC) in July 1957. It was transformed into Export Credit
and Guarantee Corporation Limited (ECGC) in 1964 and to Export Credit
Guarantee of India in 1983.
ECGC of India Ltd, was established to strengthen the export promotion
by covering the risk of exporting on credit. It functions under the administrative control of the Ministry of
Commerce & Industry, Department of Commerce, Government of India.
ECGC is the fifth largest credit insurer of the world in terms of coverage
of national exports. The present paid-up capital of the company is Rs.900
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Functions:
Provides a range of credit risk insurance covers to exporters
against loss in export of goods and services
Offers guarantees to banks and financial institutions to enable
exporters to obtain better facilities from them Provides Overseas Investment Insurance to Indian companies
investing in joint ventures abroad in the form of equity or loan
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ECGC helps exporters as follows:
Offers insurance protection to exporters against payment risks
Provides guidance in export-related activities
Makes available information on different countries with its
own credit ratings Makes it easy to obtain export finance from banks/financial
institutions
Assists exporters in recovering bad debts
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EU
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THE EUROPEAN UNION (EU)
The EU was established by the Treaty of Maastricht in 1993 upon the
foundations of the European Communities.
The European Union (EU) is an economic and political union of 27 member
states which are located primarily in Europe.
With over 500 million citizens, the EU combined generated an estimated28% share (US$ 16.5 trillion) of the nominal and about 21%
(US$14.8 trillion) of the PPP gross world product in 2009.
Sixteen member states have adopted a common currency, the euro,
constituting the euro zone.
Important institutions of the EU include the European Commission,the Council of the European Union, the European Council, the Court of
Justice of the European Union, and the European Central Bank. The
European Parliament is elected every five years by EU citizens.
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Functions of EU
The EU has developed a single market through a standardised system of
laws which apply in all member states, and ensures the free movement of
people, goods, services, and capital, including the abolition of passport
controls by the Schengen Agreement between 27 EU states.
It enacts legislation in justice and home affairs, and maintains commonpolicies on trade agriculture, fisheries and regional development.
The EU operates through a hybrid system
of supranationalism and intergovernmentalism.
In certain areas, decisions are taken by independent supranational
institutions, while in others, they are made through negotiation betweenmember states.
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Functions of EU.
The core objectives of the European Economic Community were the
development of a common market, subsequently renamed the single
market, and acustoms union between its member states. The single
market involves the free circulation of goods, capital, people and
services within the EU, and the customs union involves the applicationof a common external tariff on all goods entering the market. Once
goods have been admitted into the market they cannot be subjected
to customs duties, discriminatory taxes or import quotas, as they travel
internally.
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Free Movement in EU
Free movement of capital: It is intended to permit movement of
investments such as property purchases and buying of shares
between countries. Until the drive towards Economic and Monetary
Union the development of the capital provisions had been slow.
Post-Maastricht there has been a rapidly developing corpus of ECJjudgements regarding this initially neglected freedom. The free
movement of capital is unique insofar as it is granted equally to
non-member states.
The free movement of persons: It means citizens can move freely
between member states to live, work, study or retire in anothercountry. This required the lowering of administrative formalities
and recognition of professional qualifications of other states.
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Free Movement in EU.
The free movement of services and of establishment: It allows self-
employed persons to move between member states in order to
provide services on a temporary or permanent basis. While services
account for between sixty and seventy percent of GDP, legislation in
the area is not as developed as in other areas. This lacuna has beenaddressed by the recently passed Directive on services in the
internal market which aims to liberalise the cross border provision
of services. According to the Treaty the provision of services is a
residual freedom that only applies if no other freedom is being
exercised.
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Competition Policy
The EU operates a competition policy intended to ensure
undistorted competition within the single market. The
Commission as the competition regulator for the single
market is responsible for antitrust issues, approving mergers,
breaking up cartels, working for economic liberalisation and
preventingstate aid.
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NAFTA
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NAFTA
It stands for The North American Free Trade Agreement.
NAFTA is an agreement signed by the governments
of Canada, Mexico, and the United States, creating a trilateral trade
bloc in North America.
The agreement came into force on January 1, 1994.
It superseded the Canada-United States Free Trade Agreement
between the U.S. and Canada.
In terms of combined purchasing power parity GDP of its members,
as of 2007 the trade bloc is the largest in the world and secondlargest by nominal GDP comparison.
NAFTA has two supplements, the North American Agreement on
Environmental Cooperation (NAAEC) and the North American
Agreement on Labor Cooperation (NAALC).
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NAFTA
The goal of NAFTA was to eliminate barriers of trade and
investment between the USA, Canada and Mexico. The
implementation of NAFTA on January 1, 1994, brought the
immediate elimination of tariffs on more than one half of U.S.
imports from Mexico and more than one third of U.S. exports toMexico. Within 10 years of the implementation of the agreement,
all US-Mexico tariffs would be eliminated except for some U.S.
agricultural exports to Mexico that were to be phased out in 15
years. Most US-Canada trade was already duty free. NAFTA also
seeks to eliminate non-tariff trade barriers.
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NAFTA
TradeOverall, NAFTA has not caused trade diversion, aside
from a few industries such as textiles and apparel, inwhich rules of origin negotiated in the agreement were
specifically designed to make U.S. firms prefer Mexican
manufacturers. The World Bank also showed that the
combined percentage growth of NAFTA imports wasaccompanied by an almost similar increase of non-NAFTA
exports.
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ASEAN
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ASEAN
It stands for Association of Southeast Asian Nations.
It is a geo-political and economic organization of 10 countries locatedin Southeast Asia, which was formed on 8 August 1967by Indonesia, Malaysia, the Philippines, Singapore and Thailand. Sincethen, membership has expanded to include Brunei, Burma
(Myanmar), Cambodia, Laos, and Vietnam. ASEAN spans over an area of 4.46 million km2 with a population of
approximately 580 million people, 8.7% of the world population. In 2009,its combined nominal GDP had grown to more than USD $1.5 trillion. IfASEAN was a single country, it would rank as the 9th largest economy inthe world in terms of nominal GDP.
Its aims include the acceleration of economic growth, social progress,
cultural development among its members, the protection of the peaceand stability of the region, and to provide opportunities for membercountries to discuss differences peacefully.
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OBJECTIVES OF ASEAN
Mutual respect for the independence, sovereignty, equality,
territorial integrity, and national identity of all nations;
The right of every State to lead its national existence free
from external interference, subversion or coercion;
Non-interference in the internal affairs of one another;
Settlement of differences or disputes by peaceful manner;
Renunciation of the threat or use of force; and
Effective cooperation among themselves.
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Policies of ASEAN
Apart from consultations and consensus, ASEANs agenda-settingand decision-making processes can be usefully understood in termsof the so-called Track I, Track II and Track III.
Track I refers to the practice of diplomacy among governmentchannels. The participants stand as representatives of their
respective states and reflect the official positions of theirgovernments during negotiations and discussions. All officialdecisions are made in Track I. Therefore, "Track I refers tointergovernmental processes".
Track II differs slightly from Track I, involving civil society groups andother individuals with various links who work alongside
governments. This track enables governments to discusscontroversial issues and test new ideas without making officialstatements or binding commitments, and, if necessary, backtrackon positions.
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Policies of ASEAN.
Track II dialogues are sometimes cited as examples of the
involvement of civil society in regional decision-making process by
governments and other second track actors, NGOs have rarely got
access to this track, meanwhile participants from the academic
community are a dozen think-tanks. However, these think-tanks are,in most cases, very much linked to their respective governments,
and dependent on government funding for their academic and
policy-relevant activities, and many working in Track II have
previous bureaucratic experience. Their recommendations,
especially in economic integration, are often closer to ASEANsdecisions than the rest of civil societys positions.
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Policies of ASEAN.
The track that acts as a forum for civil society in Southeast Asia is
called Track III. Track III participants are generally civil society groups
who represent a particular idea or brand. Track III networks claim to
represent communities and people who are largely marginalised
from political power centres and unable to achieve positive changewithout outside assistance. This track tries to influence government
policies indirectly by lobbying, generating pressure through
the media. Third-track actors also organise and/or attend meetings
as well as conferences to get access to Track I officials.
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Free Trade Area in ASEAN
ASEAN Free Trade Area (AFTA), is a common external preferentialtariff scheme to promote the free flow of goods within ASEAN.
The ASEAN Free Trade Area(AFTA) is an agreement by the membernations of ASEAN concerning local manufacturing in all ASEANcountries.
The AFTA agreement was signed on 28 January 1992 inSingapore. When the AFTA agreement was originally signed, ASEANhad six members, namely, Brunei, Indonesia, Malaysia, thePhilippines, Singapore and Thailand. Vietnam joined in 1995, Laosand Myanmar in 1997, and Cambodia in 1999. The latecomers havenot fully met the AFTA's obligations, but they are officially
considered part of the AFTA as they were required to sign theagreement upon entry into ASEAN, and were given longer timeframes in which to meet AFTA's tariff reduction obligations
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ASEAN Comprehensive Investment
Area The ASEAN Comprehensive Investment Area (ACIA) will
encourage the free flow of investment within ASEAN. Themain principles of the ACIA are as follows.
All industries are to be opened up for investment, with
exclusions to be phased out according to schedules National treatment is granted immediately to ASEAN investors
with few exclusions
Elimination of investment impediments
Streamlining of investment process and procedures Enhancing transparency
Undertaking investment facilitation measures
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Trade in Services in ASEAN
An ASEAN Framework Agreement on Trade in Services wasadopted at the ASEAN Summit in Bangkok in December1995.
Under AFAS, ASEAN Member States enter into successive
rounds of negotiations to liberalise trade in services withthe aim of submitting increasingly higher levels of commitments. The negotiations result in commitments thatare set forth in schedules of specific commitments annexedto the Framework Agreement. These schedules are oftenreferred to as packages of services commitments.
At present, ASEAN has concluded seven packages of commitments under AFAS.
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Free Trade Agreements With Other
Countries
ASEAN has concluded free trade agreements with PR China,
Korea, Japan, Australia, New Zealand and most recently India.
The agreement with People's Republic of China created
the ASEANChina Free Trade Area (ACFTA), which went into
full effect on January 1, 2010.
In addition, ASEAN is currently negotiating a free trade
agreement with the European Union.
Republic of China (Taiwan) has also expressed interest in an
agreement with ASEAN but needs to overcome diplomatic
objections from China.
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SAARC
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SAARC
It stands for The South Asian Association for Regional
Cooperation.
SAARC is an organization of South Asian nations, founded in
1985 and dedicated to economic, technological, social, and
cultural development emphasizing collective self-reliance.
Its seven founding members are Bangladesh, Bhutan, India,
the Maldives, Nepal, Pakistan, and Sri
Lanka. Afghanistan joined the organization in 2007.
Meetings of heads of state are usually scheduled annually;
meetings of foreign secretaries, twice annually.
Headquarters are in Kathmandu, Nepal.
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The Objectives of the SAARC
To promote the welfare of the people of South Asia and to improve theirquality of life
To accelerate economic growth, social progress and cultural developmentin the region and to provide all individuals the opportunity to live indignity and to realize their full potential
To promote and strengthen collective self-reliance among the countries ofSouth Asia
To contribute to mutual trust, understanding and appreciation of oneanother's problems
To promote active collaboration and mutual assistance in the economic,social, cultural, technical and scientific fields
To strengthen cooperation with other developing countries To strengthen cooperation among themselves in international forums on
matters of common interest
To cooperate with international and regional organisations with similaraims and purposes.
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SAFTA
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SAFTA It stands for South Asian Free Trade Area.
The Agreement on the South Asian Free Trade Area is an agreement reached
at the 12th SAARC summit at Islamabad, on 6 January 2004.
It creates a framework for the creation of a free trade area covering 1.4
billion people in India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and
the Maldives. The seven foreign ministers of the region signed a framework
agreement on SAFTA with zero customs duty on the trade of practically allproducts in the region by end 2016. The new agreement i.e. SAFTA, came
into being on 1 January 2006 and will be operational following the
ratification of the agreement by the seven governments.
SAFTA requires the developing countries in South Asia, that is, 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
consisting of Nepal, Bhutan, Bangladesh and Maldives have an additional
three years to reduce tariffs to zero. India and Pakistan have signed but not
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The basic principles of SAPTA
overall reciprocityand mutuality of advantages so as to benefit
equitably all Contracting States, taking into account their respective
level of economic and industrial development, the pattern of their
external trade, and trade and tariff policies and systems;
negotiation oftariff reform step by step, improved and extended insuccessive stages through periodic reviews;
recognition of the special needs of the Least Developed Contracting
States and agreement on concrete preferential measures in their
favour;
inclusion of all products, manufactures and commodities in their
raw, semi-processed and processed forms.
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TRADE
BARRIERS
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Trade Barriers
A trade barrier is a general term that describes any
government policy or regulation that restricts international
trade.
Most trade barriers work on the same principle: the
imposition of some sort of cost on trade that raises the price
of the traded products. If two or more nations repeatedly use
trade barriers against each other, then a trade war results.
The barriers can be majorly divided in two types, namely:
Tariff barriers
Non-tariff barriers
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Tariff Barriers
Tariff is a tax levied on goods traded internationally.
When imposed on goods being brought into the country,
it is referred to as an import duty.
Import duty is levied to increase the effective cost ofimported goods to increase the demand for domestically
produced goods.
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Tariff Barriers
Another type of tariff, less frequently imposed, is the export
duty, which is levied on goods being taken out of the country,
to discourage their export. This may be done if the country is
facing a shortage of that particular commodity . It may also be
done to discourage exporting of natural resources.
When imposed on goods passing through the country, the
tariff is called transit duty.
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Classification of Tariffs on the
basis of quantification of tariffs
Specific Duty: Is a tax of so much local currency per
unit of the goods imported (based on weight, number,
length, volume or other unit of measurement). For example, Rs 800 on each TV set or washing
machine or Rs.3000 per metric ton of cold rolled steel
coils.
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Ad-Valoremduty: This kind is most commonly used; it is
calculated as a percentage of the value of the importedgoods - for example, 10, 25 or 35 per cent. This duty is
imposed at a fixed percentage on the value of an
imported commodity.
In the ad-valorem duty, the percentage of the duty isdecided, but the actual amount of the duty changes as
per the FOB value of a product.
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Comp
oun
dd
uty: The "specific" part of the compound duty(called compensatory duty) is levied as protection for the local
raw material industry.
A tariff is referred to as a compound duty when the
commodity is subject to both specific and ad-valorem duties.
It is imposed on manufactured goods that contain rawmaterials that are themselves subject to import duty.
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On the basisofthepurpose they
serve
Revenue Tariff: A revenue tariff aims at collecting substantial
revenues for the government. A revenue tariff increases
government funds, but does not really obstruct the flow of
imported goods. Here, the duty is imposed on items of mass
consumption, but the rate of the duty is low.
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Protective Tariff: It is aimed at protecting home industries by
restricting or eliminating competition. A protective tariff isused to raise the price of imported goods as a protective
measure against the competition from foreign markets. A
higher tariff allows a local company to compete with foreign
competition. Protective tariffs are usually high so as to reduceimports.
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Anti
dumping
duty: Dumping is the commercial practice ofselling goods in foreign markets at a price below their normal
cost or even below their marginal cost so as to capture foreign
markets. It is harmful to less developed countries where the
cost of production is high.
The government of the foreign country will counter thisdumping with imposing "anti-dumping" duties. Anti-dumping
are special duties additional to the normal ones, designed to
match the difference between the price in the home country
and the price abroad.
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Non-tariffBarriers
Non-tariff barriers (NTBs) include all the rules, regulations and
bureaucratic delays that help in keeping foreign goods out of
the domestic markets.
Types of Non-tariff barriers:
1) Quotas
A quota is a limit on the number of units that can be imported
or the market share that can be held by foreign producers. For
example, the US has imposed a quota on textiles imported
from India and other countries. Deliberate slow processing ofimport permits under a quota system acts as a further barrier
to trade.
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2)Emb
argo
When imports from a particular country are totally banned, it
is called an embargo. It is mostly put in place due to political
reasons. For example, the United Nations imposed an
embargo on trade with Iraq as a part of economic sanctions in
1990.3)Voluntary Export Restraint (VER)
A country facing a persistent, huge trade deficit against
another country may pressurize it to adhere to a self-imposed
limit on the exports. This act of limiting exports is referred toas voluntary export restraint. After facing consistent trade
deficits over a number of years with Japan, the US persuaded
it to impose such limits on itself.
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4)Subsidies to Local Goods
Governments may directly or indirectly subsidize localproduction in an effort to make it more competitive in the
domestic and foreign markets. For example, tax benefits may
be extended to a firm producing in a certain part of the
country to reduce regional imbalances, or duty drawbacks
may be allowed for exported goods, or, as an extreme case,
local firms may be given direct subsidies to enable them to
sell their goods at a lower price than foreign firms.
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5) LocalContent Requirement
A foreign company may find it more cost effective orotherwise attractive to assemble its goods in the market in
which it expects to sell its product, rather than exporting the
assembled product itself. In such a case, the company may be
forced to produce a minimum percentage of the value added
locally. This benefits the importing country in two ways it
reduces its imports and increases the employment
opportunities in the local market.
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6) Technical Barriers
Countries generally specify some quality standards to be metby imported goods for various health, welfare and safety
reasons. This facility can be misused for blocking the import of
certain goods from specific countries by setting up of such
standards, which deliberately exclude these products. The
process is further complicated by the requirement that testingand certification of the products regarding their meeting the
set standards be done only in the importing country.
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7)Procurement Policies
Governments quite often follow the policy of procuring their
requirements (including that of government-owned
companies) only from local producers, or at least extend some
price advantage to them. This closes a big prospective market
to the foreign producers.
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8) InternationalPrice Fixing
Some commodities are produced by a limited number ofproducers scattered around the world. In such cases, these
producers may come together to form a cartel and limit the
production or price of the commodity so as to protect their
profits. OPEC (Organization of Petroleum Exporting Countries)
is an example of such cartel formation. This artificial limitation
on the production and price of the commodity makes
international trade less efficient than it could have been.
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9) ExchangeControls
Controlling the amount of foreign exchange available to residents
for purchasing foreign goods domestically or while travelling abroad
is another way of restricting imports.
10) Direct and Indirect Restrictionson Foreign Investments
A country may directly restrict foreign investment to some specificsectors or up to a certain percentage of equity. Indirect restrictions
may come in the form of limits on profits that can be repatriated or
prohibition of payment of royalty to a foreign parent company.
This create problems because, Foreign companies are generally
interested in setting up local operations when they foreseeincreased sales or reduced costs as a consequence.
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Advantages of Trade Barriers
1. Trade barriers increase the competitiveness of domestic
producers both domestically and on foreign markets.
2. They raise money for the government in terms of revenue
which can be used for government spending.
3. They improve the balance of payments position by
decreasing imports as they become more expensive and less
attractive to purchase.
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THANK YOU
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