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IV SEM, II YEAR CSE A-2

International trade is the exchange of services, goods, and capital among various countries and regions, without much hindrance. The international trade accounts for a good part of a countrys gross domestic product. It is also one of important sources of revenue for a developing country. Trade barriers are government-induced restrictions on international trade. Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency, this can be explained by the theory of comparative advantage. In theory, free trade involves the removal of all such barriers, except perhaps those considered necessary for health or national security. In practice, however, even those countries promoting free trade heavily subsidize certain industries, such as agriculture and steel.

Import duties Import quotas Import licenses Tariffs Export licenses Subsidies Non-tariff barriers to trade Voluntary Export Restraints

Import tax, better known as Import Duty is an indirect tax levied by the Central Board of Excise & Customs (CBEC) which is a part of the Depart of Revenue in the Ministry of Finance. The customs will levy an import duty on nearly any goods or products that you try to bring into the national borders. The rate of this duty can vary from the basic 5% to 45% depending upon the type and quantity of the product.

An import quota is a limit on the quantity of a good that can be produced abroad and sold domestically. It is a type of protectionist trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time. If a quota is put on a good, less of it is imported. Quotas, like other trade restrictions, are used to benefit the producers of a good in a domestic economy at the expense of all consumers of the good in that economy.

An import license is a document issued by a national government authorizing the importation of certain goods into its territory. Import licenses are considered to be non-tariff barriers to trade when used as a way to discriminate against another country's goods in order to protect a domestic industry from foreign competition. Each license specifies the volume of imports allowed, and the total volume allowed should not exceed the quota. Licenses can be sold to importing companies at a competitive price, or simply a fee. However, it is argued that this allocation methods provides incentives for political lobbying and bribery. Government may put certain restrictions on what is imported as well as the amount of imported goods and services. For example, if a business wishes to import agricultural products such as vegetables, then the government may be concerned about the impact of such importations of the local market and thus impose a restriction.

The word comes from the Italian word tariffa "list of prices, book of rates," which is derived from the Arabic ta'rif "to notify or announce.

A tariff is either a tax on imports or exports (an international trade tariff), or a list of prices for such things as rail service, bus route, and electrical usage (electrical tariff, etc.).

An export license is a document issued by the appropriate licensing agency after which an exporter is allowed to transport his product in a foreign market. The license is only issued after a careful review of the facts surrounding the given export transaction. Export license depends on the nature of goods to be transported as well as the destination port. So, being an exporter it is necessary to determine whether the product or good to be exported requires an export license or not. While making the determination one must consider the following necessary points: What are you exporting? Where are you exporting? Who will receive your item? What will your items will be used?

A subsidy, often viewed as the converse of a TAX, is an instrument of fiscal policy. Derived from the Latin word 'subsidium', a subsidy literally implies coming to assistance from behind. However, their beneficial potential is at its best when they are transparent, well targeted, and suitably designed for practical implementation. Like indirect taxes, they can alter relative prices and budget constraints and thereby affect decisions concerning production, consumption and allocation of resources. Subsidies in areas such as education, health and environment at times merit justification on grounds that their benefits are spread well beyond the immediate recipients, and are shared by the population at large, present and future. For many other subsidies, however the case is not so clear-cut. Arising due to extensive governmental participation in a variety of economic activities, there are many subsidies that shelter inefficiencies or are of doubtful distributional credentials. Subsidies that are ineffective or distortionary need to be weaned out, for an undiscerning, uncontrolled and opaque growth of subsidies can be deleterious for a country's public finances.

Nontariff barriers include quotas, regulations regarding product content or quality, and other conditions that hinder imports. One of the most commonly used nontariff barriers are product standards, which may aim to serve as barriers to trade. For instance, when the United States prohibits the importation of unpasteurized cheese from France, is it protecting the health of the American consumer or protecting the revenue of the American cheese producer? Other nontariff barriers include packing & shipping regulations, harbor & airport permits, & onerous customs procedures, all of which can have either legitimate or purely anti-import agendas, or both.

A voluntary export restraint (VER) or voluntary export restriction is a government imposed limit on the quantity of goods that can be exported out of another country during a specified period of time. Typically VERs arise when the importcompeting industries seek protection from a surge of imports from particular exporting countries. VERs are then offered by the exporter to appease the importing country and to deter the other party from imposing even more explicit (and less flexible) trade barriers.

The effect of tariffs and quotas is the same: to limit imports and protect domestic producers from foreign competition. A tariff raises the price of the foreign good beyond the market equilibrium price, which decreases the demand for and, eventually, the supply of the foreign good. A quota limits the supply to a certain quantity, which raises the price beyond the market equilibrium level and thus decreases demand. Tariffs come in different forms, mostly depending on the motivation, or rather the stated motivation. (The actual motivation is always to limit imports.) For instance, a tariff may be levied in order to bring the price of the imported good up to the level of the domestically produced good. This so-called scientific tariffwhich to an economist is anything buthas the stated goal of equalizing the price and, therefore, leveling the playing field, between foreign and domestic producers. In this game, the consumer loses.

EU NAFTA

ASEAN

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

What is NAFTA?

Began on January 1, 1994

Between Canada the United States and Mexico

NAFTA pros and cons

What is ASEAN?

Established on August 8th, 1967

10 member countries -Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippians, Singapore, Thailand, and Vietnam

India has had its share of prosperity due to the development of foreign trade. From times immemorial, India was considered as the workshop of the world. Articles produced by India skilled artisans were considered worth their weight in gold. That explains why, even in the absence of plentiful gold mines, India was a repository of gold. The opening of Suez Canal in 1869 led to a reduction of distance between India and Europe which led to an increase in the demand for India commercial crops. As a result, production and exports of commercial crops increased. The process was encouraged by the import of foreign capital for the provision of irrigation facilities and railway lines to connect the interior with the port towns. The rise in the output of such agricultural crops as oilseeds, cotton, jute and tea, was largely due to a flourishing export trade. This initiated the process of economic growth in India, albeit on not very desirable lines.

Even now foreign trade continues to engender growth in India. For example, many export processing zones and special economic zones have been established to facilitate manufacture or reprocessing for export. All such efforts create a lot of employment opportunities and lead to an increase in incomes which lead to the demand for many new products which are very often manufactured in the country itself. Foreign trade induces economic growth in other ways too. The appearance of imported commodities in a country invariably creates new demands. This provides an inducement to the people in general to work hard and earn enough money to be able to purchase some of the imported articles. This necessarily leads to economic growth. Again, there is an urge in enterprising industrialists to produce the things imported in the country itself. Japan provides an excellent example of this type. It is said Japan never imports a manufactured article twice. This has happened in almost all countries including India. In fact, this natural urge for import substitution provides a strong stimulus to economic growth.

INDIAN EXIM POLICY (EXIM export import) of the government also known as the foreign trade policy was announced on 27th August 2009 by the Ministry of commerce and industry for the period 2009-2012. Announced every five years. General provisions regarding exports and imports promotional measures, duty exemption schemes, export promotion schemes special economic zone programmes and other details for different sectors. Every year, on the 31st of march the government announces a supplement to this policy. Trade policy governs exports from and imports into a country. It is one of the various policy instruments used by a country to attain the goals of economic development DGFT (Directorate General of Foreign Trade) in matters related to the import and export of goods in India.