Q1. The world economy is globalizing at an accelerating pace. Discuss this statement and list the benefits of globalization.

Globalization is the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture. Put in simple terms, globalization refers to processes that increase world-wide exchanges of national and cultural resources. Advances in transportation and telecommunications infrastructure, including the rise of the telegraph and its posterity the Internet, are major factors in globalization, generating further interdependence of economic and cultural activities. To begin with, globalization has contributed to the worlds economy in many valuable ways. Globalisation has brought in new opportunities to developing countries. Greater access to developed country markets and technology transfer hold out promise improved productivity and higher living standard. But globalisation has also thrown up new challenges like growing inequality across and within nations, volatility in financial market and environmental deteriorations. Another negative aspect of globalisation is that a great majority of developing countries remain removed from the process. Till the nineties the process of globalisation of the Indian economy was constrained by the barriers to trade and investment liberalisation of trade, investment and financial flows initiated in the nineties has progressively lowered the barriers to competition and hastened the pace of globalization. The advances in science and technology have allowed businesses to easily cross over territorial boundary lines. Accordingly, companies tend to become more creative, competitive thus raising quality of goods, services and the worlds living standard. Secondly, several companies from the more developed countries have already venture to begin foreign operations or branches to take benefit of the low cost of labor in the poorer countries. This kind of business activity will provide more arrival of cash or asset funds into the less developed countries. However, one cannot reject the harmful effects which have resulting from globalization. One crucial social aspect is the risk and danger of outbreak diseases which can easily be multiply as the mode transportation is easier and faster in todays advance society. This is

evidenced in the recent birds flu disease which has infected most Asian countries over a short time frame. As large corporations spend or take over many off shore businesses, a modern form of immigration will also change which may fake certain power force on the local governments of the less developed countries.

Merits: 1. Imported goods are available 2. The country can produce what it produces best and import the rest 3. There is a feeling of an international economy 4. The local industries work hard to compete with international firms 5. Raw material is available 6. The standard of life becomes better 7. More jobs are created 8. There is security from famine, disease, etc as international firms intervene.

Q2. Compare the Adam Smith and David Ricardos theories of international trade with examples. In 1817, David Ricardo, an English political economist, contributed theory of comparative advantage in his book 'Principles of Political Economy and Taxation'. This theory of comparative advantage, also called comparative cost theory, is regarded as the classical theory of international trade. According to the classical theory of international trade, every country will produce their commodities for the production of which it is most suited in terms of its natural endowments climate quality of soil, means of transport, capital, etc. It will produce these commodities in excess of its own requirement and will exchange the surplus with the imports of goods from other countries for the production of which it is not well suited or which it cannot produce at all. The principle of comparative advantage expressed in labour hours by the following table.

Portugal requires less hours of labour for both wine and cloth. One unit of wine in Portugal is produced with the help of 80 labour hours as above 120 labour hours required in England. In the case of cloth too, Portugal requires less labour hours than England. From this it could be argued that there is no need for trade as Portugal produces both commodities at a lower cost.

International trade, which is the idea that David Ricardo talks about, is a bit more slippery, and its best explained in an example. Lets say that Annie and Bonnie both have small gift shops in a small town where they both sell their homemade soaps and their homemade candles. Annie can make a homemade candle for fifty cents, but making a bar of soap costs her a dollar. Meanwhile, Bonnie can make homemade soap for a quarter, but a candle costs her a dollar to make. In other words, Annie is much more efficient at making candles and Bonnie is much more efficient at making soap. If theyre willing to trade Annie gives candles to Bonnie in exchange for soap theyll both make substantially more profit that way. Thats comparative advantage in a nutshell.

Q3. Regional integration is helping the countries in growing their trade. Discuss this statement. Describe in brief the various types of regional integrations. Regional integration is vital to creating the infrastructure that many poor countries are unable to build on their own: trade corridors, transport networks, energy development, water resources management, and telecommunications connectivity. Effective collaboration among countries can meet the critical gaps in basic access and service delivery that promote growth and development. Various types of regional integrations: Preferential Trade Agreement (PTA), which is formed with the reduction of custom duties (mainly tariffs) on trade among members relative to those on trade with non-members. Free Trade Area (FTA), which involves the elimination of tariffs and quotas on the trade among member countries. Customs Union (CU), which goes a step further than the FTA as in addition to free trade within the union, there is a common external tariff (CET) against nonmembers. Common Market (CM), which is a CU that allows for the free movement of factors of production among member countries. Thus, it encompasses intra-union free trade, a common external tariff against non-member countries and free movement of factors of production (labour and capital) within the union. Economic and Monetary Union (EMU), which is a common market in which there is a single currency and monetary policy, and in which major economic policies (particularly fiscal policy) are coordinated or harmonized.

Q4. Write short note on: a) GATS (General Agreement on trade in services) b) ILO (International Labour organization) a) GATS (General Agreement on trade in services) The General Agreement on Trade in Services (GATS) is a treaty of the World Trade Organization (WTO) that entered into force in January 1995 as a result of the Uruguay Round negotiations. The treaty was created to extend the multilateral trading system to service sector, in the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for merchandise trade. All members of the WTO are signatories to the GATS. The basic WTO principle of most favoured nation (MFN) applies to GATS as well. However, upon accession, Members may introduce temporary exemptions to this rule.

b) ILO (International Labour organization) Underlying the ILOs work is the importance of cooperation between governments and employers and workers organizations in fostering social and economic progress. The ILO aims to ensure that it serves the needs of working women and men by bringing together governments, employers and workers to set labour standards, develop policies and devise programmes. The very structure of the ILO, where workers and employers together have an equal voice with governments in its deliberations, shows

Q5. What is the difference between domestic and international accounting and how will you measure this difference

INTERNATIONAL ACCOUNTING is the international aspects of accounting, including such matters as accounting principles and reporting practices in different countries and their classification; patterns of accounting development; international and regional harmonization, foreign currency translation; foreign exchange risk; international comparisons of consolidation accounting and inflation accounting; accounting in developing countries; accounting in communist countries; performance evaluation of foreign subsidiaries. Measurement of differences between IAS and DAS: Literature on international accounting differences Various data sources have been used to measure international accounting differences in prior literature. Most of the prior studies interpret international accounting differences as different options adopted by different nations for the same accounting issues, which corresponds to our divergence concept. Framework of analysis Prior studies have established some links between differences in accounting standards across countries and financial reporting quality. In a widely cited study, find that differences in countries accounting standards affect the in formativeness of reported financial information. The effect of institutional factors on the financial reporting quality has also been studied Measurement of absence and divergence One of the contributions of this study is that we construct a measure of differences national GAAP and IAS based on the survey GAAP 2001: A Survey of National Accounting Rules Benchmarked against International Accounting Standards. This survey was published jointly by seven large audit firms: Andersen, BDO, Deloitte Touche Tohmatsu, Ernst & Young, Grant Thornton, KPMG and PricewaterhouseCoopers.

Q6. Discuss the various payment terms in international trade. Which is the safest method and why? There are many ways to make and receive payment in international trade. Due to the physical distances between buyer and seller, and the fact that the transaction may have taken place without the two parties actually meeting, minimizing exposure to risk is on the minds of both parties. The buyer wants to make sure they receive their order in acceptable condition and on time, and the seller needs to know they will get paid for it. Below is a table of the most popular payment methods for trade, according to Alibaba.com member research: TT or Cash Advance T/T is the easiest payment from and is typically used when samples or small quantity shipments are transported by air. T/T is also used between buyers and sellers who have already established a mutual trust, as this negates the risks associated with this, the fastest and cheapest form of payment. Documents like air waybills, commercial invoices and packing lists will be sent to you along with the shipment in the same aircraft. As soon as the shipment arrives, you, with documentation, can clear the customs and pick up the goods. Shipping happens only after money is safely in seller's. It usually takes 3-4 days for such a wire transfer anywhere in the world. Letter of Credit (L/C) The L/C is a guarantee, given by the buyer's bank, that they will pay for the goods exported, provided that the exporter can provide a given set of documents in accordance with clauses specified in the L/C and in a timely manner. The technical term for letter of credit is "Documentary Credit."Letters of credit deal in documents, not goods. Thus, the process works both in favor of both the buyer and the seller.

Simply put, a letter of credit is a letter written by the importer's bank to the exporter. It verifies that the payment will be guaranteed when the bank is presented with concrete documents (bills of lading and freight documents). Most letters of credit are "irrevocable" once the importer has had them sent, which means it cannot be changed unless both the buyer and seller agree.

Document Against Payment/Bill of Exchange The exporter ships the goods, and then gives the documents (including the bill of lading necessary to claim the goods at the foreign port) to his bank, which will forward them to a bank in the buyer's country, along with instructions on how to collect the money from the buyer. When the foreign bank receives the documents, they will contact the buyer and provide documents to the buyer only when the buyer pays. Open Account Opposite situation to T/T: The exporter receives payment only after the buyer has received and inspected the goods.