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INTERNATIONAL TRADE

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INTERNATIONAL TRADE

Institutions in the World EconomyProtection is harmful to Economic Growthand Consumer Welfare

Bretton Woods Conference 1944 suggested

formation of IMF, World Bank and ITOGATT in 1948 instead of ITO, started with23 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

GATT

Guided International Trade System

Objectives:Changes in Tariffs or Commercial Policiesshould not take place without consultationswith other parties to the agreements

Countries should work towards reductionsin Tariffs and Trade Barriers

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INTERNATIONAL TRADEGATT adapted the following principles for

the objectives

Non discrimination

MFN Status to all

Free Trade Areas or Custom Unions canbe formed but should not restrict othernations, should not raise barriers

Prohibition of Quantitative Restrictions

However restrictions can be applied byDeveloping Countries

By countries facing BOP problems

Agriculture and Fishery Products

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INTERNATIONAL TRADEConsultations between the membercountries to resolve the problems

Meeting every four years

Uruguay round lasted for seven years

GATT helped developed nations more thandeveloping nations

UR to be implemented in 10 years.Different periods for different countries

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INTERNATIONAL TRADE

Three Basic Issues Taken up by UR

Reducing specific trade barriers and

improving market accessStrengthening GATT principles

TRIPs (Trade Related IntellectualProperty Rights)

TRIMs (Trade Related InvestmentMeasures)

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INTERNATIONAL TRADEW T O

22,000 page document signed on Jan 1st,1995 by 128 countries

WTO Single Institutional frame work

encompassing GATT and results of URSpecific Functions

Facilitate implementation, administration &operation, and further the objectives of

Multilateral Trade AgreementProvide framework for implementation,

administration & operation of PlurilateralTrade Agreements

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INTERNATIONAL TRADEW T O

Provide forum for negotiations amongmembers concerning their multilateraltrade relations

Administer understanding on Rules andProcedures governing settlements ofdisputes

Administer trade review mechanism

Monitor National Trade PoliciesCooperate with IMF and other bodies for

achieving greater coherence in GlobalEconomic Policy making

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INTERNATIONAL TRADE

W T O4 Main Functions Supervise on regular basis

operations related to declarationsrelated 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

LDCs feel that GATT benefits are not evenlydistributed

Tariff reductions favour manufactured goodsand not primary goods, LDCs have exportof primary goods

UN Conference on Trade and Development isa response to the LDC needs (1964)

Permanent organ of UN

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INTERNATIONAL TRADE

UNCTAD

Efforts led to New International EconomicOrder (NIEO) Programme

NIEO seeks

Stabilization of prices of primary products

Expansion of LDCs manufacturing capacity

Acquisition of advanced technologyNo

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INTERNATIONAL TRADEUNCTAD

Principal FunctionsPromote international sales with a view to

accelerate economic development

To formulate principles and policies oninternational trade and related economicdevelopment

To negotiate multilateral trade agreements

To make proposals for putting its principlesand policies into effect

Goal: To encourage development of thirdworld countries and enhance their

exports

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Basic PrinciplesEvery country has sovereign right to disposeits natural resources for economicdevelopment and well being of societyand freely trade with other countries

Economic relations based on respect forsovereign equality of states, selfdetermination of people and non-interference in the international matters

of other countriesNon discrimination on the basis of

socioeconomic systems. Adaptation oftrading practices and methods will beconsistent with this principle

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Basic PrinciplesUNCTAD played role in Maritime Shipping

Code, International Aid Targets,

International programmes are designedto help the LDCs

GSP (Generalised System of Preferences) isachievement of UNCTAD

14 GSP Schemes and 29 preference givingcountriesN

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INTERNATIONALBUSINESS

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

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IMF - Major Objectives To Promote International Monetary

Cooperation

To Facilitate Expansion and BalancedGrowth of International Trade

To Promote Exchange Rate Stability

To Establish Multilateral System ofpayment To Make Its Resources Available to

Its Members Who Are Experiencing

Balance of Payment Difficulties

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INTERNATIONALBUSINESSIMFBretton 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 to2.25% In 1971

US had 70% of Worlds Gold Reserve

in 1947

Redemption of Dollar in Gold

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IMF

Member Countries Contribute to IMF -Quota

Quota Depends Upon National Income,Monetary Reserves, Trade Balance andOther Economic Indicators

Quota is Pool of Money IMF can Lend toMember Countries, Basis of How MuchCountry Can Borrow as Allocation of SDR

Quota determines Voting Rights

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IMF

Total SDR - 213 billion

Largest Quota USA 17.5%, Japan6.6%,Germany 6.11%, France and UK5.05% each

Board of Governors is Final Authority

Day to Day Business with 24 ExecutiveDirectors

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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%) byend 2002

SDR designed to take over Gold

Several Countries Have SDR Base for

Value for Their Currencies

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IMFThe currency value of the SDR isdetermined by summing the values in

U.S. dollars, based on market exchangerates, of a basket of major currencies(the U.S. dollar, Euro, Japanese yen, andpound sterling). The SDR currency valueis calculated daily (except on IMFholiday or whenever the IMF is closed forbusiness) and the valuation basket is

reviewed and adjusted every five years.

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INTERNATIONALBUSINESSIMF

Friday, September 03, 2010

Currency Currency

amount under

Rule O-1

Exchange

rate

USD eq % change in Exrate against

USD from

previous

calculationEuro 0.4100 1.28410 0.526481 0.156

JPY 18.4000 84.51000 0.217726 -0.379

GBP 0.0903 1.54000 0.139062 0.006

USD 0.6320 1.00000 0.632000

SDR 1.515269

U.S.$1.00 = SDR 0.659949

SDR1 = US$ 1.51527

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SDRs per Currency unit 2

July 26,2011

July 25,2011

July 22,2011

July 21,2011

Euro 0.8991050000 0.8969310000 0.8968890000 0.8930990000

Japanese Yen 0.0079655800 0.0079578300 0.0079291200 0.0079681500

U.K. PoundSterling 1.0190800000 1.0153200000 1.0163600000 1.0154900000

U.S. Dollar 0.6213150000 0.6237350000 0.6232290000 0.6279700000


Indian Rupee 0.0140283000 0.0140430000 0.0141339000

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INTERNATIONALBUSINESSWORLD BANK

Lending Money to the governments ofdeveloping countries to finance development

projects in education, health andinfrastructure

Providing assistance to governments fordevelopmental projects to the poorest

developing countries Lending directly to private sector to help

strengthen the private sector in developingcountries with long-term loans equityinvestments and other financial assistance

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INTERNATIONALBUSINESSWORLD BANK

Providing investors with investmentguarantees against non-commercial risks,

to create an environment in developingcountries to attract foreign investments

Promoting increased flow of internationalinvestments by providing facilities for

conciliation and arbitration betweengovernments and foreign investors

Advise, Research, Publication

Contributed for trade since WW2

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INTERNATIONAL TRADEREGIONAL TRADE BLOCKS

REGIONAL INTEGRATIONFree Trade Area

No Barriers To Trade of Goods and Services

Among Member CountriesNo Discrimination of Quota, Tariff, Subsidies

Among Member Countries

Member Countries Can Decide Own Policies

for Non-member Countries

Variable Tariffs By Each Member Country OnSame Products Imported From Non-

member Countries

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REGIONAL INTEGRATIONCustoms Union

Step Towards Economic and Political

IntegrationNo Barriers To Trade of Goods and Services

Among Member Countries

Common External Trade Policy Among

Member Countries

Administrative Mechanism To Oversee TradeRelations With Non-members

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REGIONAL INTEGRATIONCommon Market

Similar To Customs Union

No Barriers To Trade of Goods and ServicesAmong Common and Same ExternalTrade Policy

Free Movement of Factors Like Labour and

Capital

No Restrictions on Immigration and CapitalMovements


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REGIONAL INTEGRATIONEconomic Unions

Closer Economic Integration andCooperation Than Common Market

No Barriers To Trade of Goods andServices Among Common and SameExternal Trade Policy and Free

Movement of Factors Like Labour andCapital

Common Currency, Hormonisation of TaxRates and Common Fiscal & Monetary

Policy. A Step Towards Political Union


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Initiated by EECEFTA (European Free Trade Association,

Stockholm Convention 1960)LAFTA (Latin American Free Trade Area,

Montevideo 1961)NAFTAANZCERTA (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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