The Govt. of India, Ministry of Commerce and Industry announces Export Import Policy every
five years. The current policy cover the period 2009-2014. The Export Import Policy (EXIM
Policy) is updated every year on the 31st of March and the modifications, improvements and new
schemes are effective w.e.f. 1st April of every year.
The salient features of India's foreign trade are as under:
1. More Share of GNP:
India's foreign trade has great significance for its GNP. In 1980-81, India's foreign trade
constituted 12% of its G.N.P. In 2001-02 it increased to 23.4% of gross national product.
2. Less Percentage of World Trade:
India's share in world trade has been sliding down. In 1950-51, India's share in total import trade
of the world was 1.8% and in total export trade was 2%. In 2001-02, it came down to 0.5% in
import trade and to 0.2% in export trade.
3. Change in Composition of Exports:
After independence, there was change in the composition of India's export trade. Before,
independence, India used to export agricultural products and raw materials. Now on export side,
various types of finished products have been added to the number of export commodities.
4. Change in the Composition of Imports:
In the post independence era, composition of India's import trade has also undergone a change.
Prior to independence, India used to import finished products comprising of medicines, cloth,
motor vehicles, electrical goods, iron and steel etc. But now, its imports comprises of largely
petrol, machines, chemical fertilizers, oilseeds, raw materials, steel, oil etc.
5. Dependence on Few Ports:
India's foreign trade is handled mainly by Bombay, Calcutta, Madras ports. Therefore, these
ports remain over busy. During planning period Government of India has developed three more
ports viz; Kandla, Cochin and Vishakhapatnam.
6. Balance of Trade:
Prior to independence, India's balance of trade was favourable. But soon after independence, it
became unfavourable. In 1995-96, balance of trade was Rs. 42 crore which was favourable. From
1995-96 to onwards, it became unfavourable. Ending 1998-99, deficit of balance of trade was of
Rs. 28580 crore and Rs. 36181 in 2000-01. It is again expected to decline to Rs. 26014 crore in
7. Foreign Trade by Government:
In order to conduct foreign trade smoothly, Government has set up many corporations like State
Trading Corporation (1946), Minerals and Metal Trading Corporation (1963) etc.
8. Oceanic Trade:
Most of India's foreign trade is by sea routes. India has very little trade relations with
neighboring countries like Nepal, Afghanistan, Burma, Sri Lanka etc. About 68% of India's trade
is by sea.
9. Export Import Ratio:
Export import ratio refers to the percentage of total bill that can be paid out of export earnings. In
1991-92, export-import ratio was 92%. It means that. 8% of total imports were paid either by
foreign loans or by drawing from foreign exchange resources. In 1999-2000, export-import ratio
has increased to 95.4 per cent.
10. Dependent Trade:
India's foreign trade depends mostly on foreign shipping companies, insurance companies and
banks. After independence, government has been paying special attention towards these aspects
of foreign trade
EXPORT IMPORTPOLICY OF INDIA
EXIM POLICY The foreign trade of India is guided by the Export Import policy of the govt.of
India Regulated by the foreign trade development and regulatory Act 1992. Exim policy
contains various policy decisions with respect to import and exports from the country Exim
policy is prepared and announced by the central govt.
OBJECTIVE OFEXIM POLICY:
To establish the framework for globalization
To promote the productivity competitiveness
Indian Industry To Encourage the attainment of high and internationally accepted
standards of quality .
SPECIAL FOCUS INITIATIVES
market diversification of Indian exports to other markets. DIVERSIFICATION (a) 27 new
countries have been included within the ambit of Focus (b) The incentives provided under Focus
Market Market Scheme. Scheme (c) There has been a significant have been increased from
2.5% to 3%. increase in the outlay under „Market Linked Focus Product Scheme‟ by inclusion of
more markets and products.
TECHNOLOGICAL UPGRADATION Zero duty has been introduced for certain
engineering products, electronic products, basic chemicals and pharmaceuticals, apparel and
textile, plastics, handicrafts, chemicals and allied products and leather and leather products. The
existing 3% EPCG Scheme has been considerably simplified. A number of products including
automobiles and other engineering products have been included for incentives under Focus
Product, and Market Linked Focus Product Schemes. Steps to encourage Project Exports shall
SUPPORT TO STATUS HOLDERS The Government recognized „Status Holders‟ contribute
approx. 60% of India‟s goods exports. additional duty credit scrip can be used for import of
capital goods by these status holders. The status holder incentive scrip scheme is being
expanded to cover more export product groups.
AGRICULTURE Capital Vishesh Krishi and Gram Udyog Yojana. AND VILLAGE
INDUSTRY goods imported under EPCG will be Import of restricted permitted. New towns of
Import of inputs such as pesticides are permitted. items. export excellence with a threshold limit
of Rs 150 crore shall be notified. Specific funds for 2% bonus benefits. HANDLOOMS Duty
free import entitlement of specified promoting handloom exports. Trimmings Duty free import
entitlement of hand and embellishments. Knotted carpet Duty free import of old pieces of
Specific funds are Duty free import. HANDICRAFTS Machinery CVD is exempted on
duty free import of trimmings earmarked. And equipment are exempt from All handicraft
exports customs duty. Would be treated as special 2% bonus benefits under Focus products.
Focus Product Scheme for Handicraft exports.
GEMS & JEWELLERY Import of gold of 8k and above is allowed
Entitlement of Consumables, Tools and additional items.
Duty Free Import
LEATHER Additional 2% bonus benefits under Focus Product AND FOOTWEAR Machinery
and Duty free import entitlement of specified items Scheme. Equipment shall be exempted from
basic customs duty.
MARINE SECTOR Duty free import of specified specialized inputs / chemicals and flavorings
oils. Marine products are incentivized at special higher rate Marine sector included for benefits
under zero duty EPCG scheme.
Duty free import SPORTS GOODS AND TOYS of specified specialized inputs Sports goods
and toys shall allowed be treated as a Priority Treated as Fast track clearance sector 2%
bonus benefits for Sports Goods special focus products & Toys.
GREEN India aims to become a hub for production Products and technologies and export
special initiative of green products and technologies. Will be taken to promote development and
manufacture of such products and technologies for exports.
A bilateral agreement is made between two and only two states. The agreement can be
political, military or economic. The major reason states might pursue bilateral agreements
is because it is easier to negotiate with just one country rather than with several.
Multilateral agreements include more than two countries. States get involved in
multilateral agreements because the responsibilities and risks are distributed among the
group and thus the situation is more advantageous for individual states.
Economic agreements often take a bilateral form because they only have to take
into account the specific economic characteristics of two states. Sometimes states
make agreements to trade specific goods and sometimes they make agreements
saying that they will not trade specific goods if they have protectionist concerns.
Military agreements are usually multilateral, with several countries providing
troops for specific operations. NATO and the forces of the African Union are
Sometimes organizations produce agreements about how people ought to be
treated. The more countries sign on, the more credible the agreement. An example
would be the UN's Universal Declaration of Human Rights in 1948.
NEED FOR INTERNATIONAL BUSINESS
1. Rapid increase in international trade
2. Increasing role of multinational corporations
3. Increase in foreign investment
4. Free flow of goods
5. Increasing role of international organizations like IMF ,world rank, wto etc.,
6. Free flow of technology
7. Increase in international trade agreements in different nations
8. Effect of economic, political, legal, sociocultural and technology.
SIGNIFICANCE OF IB
2. Growth opportunity
3. Domestic market constraint
Domestic market demand constraints drive many companies towards expanding the
market beyond the national binder.
By the IB competition among the countries will be improve.
5. govt policies and regulation
Government policies and r regulations may also, motivate internationalization.
6. Monopoly powers
Monopoly power may arise from such factors as, monopolization of certain resources.
7. Wider market
8. High living standards.
9. Reduced effects on business cycles
10. Potential untapped markets
Ex;- Bata shoes
11. Economic growth of the world
12. Proper utililsation of resources
13. Cultural transformation
14. Quality management
15. Avoiding child labor
16. Providing employment opportunities
„Providing employment one for all and all for one‟.
Challenges and mechanisms
Increasing globalization poses its own challenges to trading countries. There are eight
areas in which each country must excel in order to emerge as strong player.
1. Maintaining Competitiveness:Many factors contribute to the competitiveness of a nation. It is being argued that labour
costs. Interest rates, exchange rates and economics of scale make a nation. These traditional
factors, no doubt contribute to the competitiveness of a country but not to be ignored are other
sources which make a nation enjoy competitive advantage over others.
It has been demonstrated that the best way for companies to achieve competitive
advantage is with innovation.
2. Government and Trade Regulations:The government of any country can influence its international business significantly. For
example, government intervention for the purpose of protecting domestic industries usually
results in less movement of goods and services across borders. A governments major role in
global business may stem from its being a world trade negotiation.
Negotiations among countries to ease trade restrictions and prevent unfair trade practices
3. Developing on international perspective:Firms operating in cross border markets need develop an international perspective. Three
areas need special attention. Experience, focus & attitude
I) Experience:- one way to acquire International perspective is to hire people with global
ii) Focus:- the second way to acquire International orientation is by emphasizing global
orientation to human resource activities such as hiring, remunerating, performance appraisal,
iii) Attitude:- changing the attitude of managers towards their work.
4. Managing Diversity:Diversity is the outcome of globalization. Work force of any MNC comprises people
from different countries with in this diversity of national origins, culture, religions, languages,
and dialects, educational attainment, skills, values, ages, genders and other differentiating
variables managing such a cosmopolitan work force is a challenging task for any executive.
5. Need to maintain good corporate citizenship:As MNC‟s disperse their activities worldwide, they become highly visible and are
required to operate under diverse compulsions such as cultural, political, economic and legal
factors of different host countries, an international business will successfully if only it creates
and sustains the image of a good corporate citizenship. The two hallmarks of which are honesty
and social responsiveness.
6. Threat to Globalization:The economic crisis that has gripped the nations in the recent past has made people
conclude that era of globalization is over and it is under fire. Countries are no more enthusiastic
about free trade. Doha round of negotiations has lost its urgency. In fact countries are becoming
Thus one can go on digging into arguments to predict doomsday for globalization. Future
of International business is bright but the roles of players may be different. In the days to come
active players will no more be developed countries but the emerging economies.
7. Managing Bureaucracy:Any country, more so the developing one shall carry huge Bureaucracy and for the
International manager, managing it remains a big challenge .
The top heavy government machinery is not peculiar to India
8. Brand India Challenge:Worldwide, brand India is presently receiving good publicity. Yet brand India is weak in
several ways. In the developed countries , India still conjures up visions of snake charmers,
beggars, cows, poverty and dust & dirt.
Compared to china, India may be weak in certain areas. But when it comes to areas like
functional democracy, autonomous institutions like planning commission and election
commission, rich heritage, long history, skills, values and innovations, knowledge of English and
diversity, India is much ahead of other nations.
As sir Martin Sorrell, chief executive of agency iff remarked “India and china might have
been on the wrong side of history for the past 200 years but for the next 200 years they will be on
the right side of it.”
Trade between and among countries has occurred for many thousands of years. But it was
not until the 15th century that people tried to explain why trade occurs and how trade benefits
both parties to an exchange.
Below diagram shows a time line of when the main theories of International trade were
proposed. Efforts are being made to modify existing theories and develop new ones.
Mercantilism is the first international trade theory and it emerged in England in the mid
16th century. The main hypothesis of mercantilism is that gold and silver are main stays of
national wealth and essentials to vigorous commerce. During the 17th century, gold and silver
were the currency of trade between countries. A country could earn gold&silver by exporting
goods. By the same taken Importing goods from other countries would result in an outflow of
gold&silver to other countries to trade with each other.
The main tenant of mercantilism is that it is in a country‟s best Interest to maintain trade
surplus to Export more than what it Imports. By doing so, a country can accumulate gold&silver
and Increase its wealth and prestige.
Mercantalist policy is being criticized Govt. resorts to subsidizing Exports and putting
restrictions on imports in order to build surplus.
International trade Experts also criticize doctrine of mercantilism on the ground that it
believes in a Zero-sum game (zero-sum game is one in which a gain by one country results in a
loss to another country).But multinational trade positive sum-game in which all countries can
2) Theory of absolute advantage:
The theory of absolute advantage has been propounded by Adam smith (father of
economics).In his book “The wealth of Nations”, smith argued that countries in their ability to
produce goods efficiency. In his time, the English by virtue of their superior manufacturing
process were the world‟s most efficiency textile manufacturers. Due to the combination of
favorable climate, good soils and accumulated expertise, the French had the world‟s most
efficient wine Industry. The English had an absolute advantage in the production of textiles,
while the French had the absolute advantage in the production of wine.
According smith countries should specialize in the production of goods for which they
have an absolute advantage and then trade these goods for the goods traded by other countries.
Thus the English should specialize in the production of Textiles while the French should
specialize in wine. England could get all the wine it needed by selling its textiles to France and
buying wine in Exchange. Similarly France could got all the textiles it needed by selling wine to
England and buying textiles in exchange.
3) Theory of comparative advantage:
This theory is holds that nations should produce those goods for which
they have they greatest relative advantage. This theory was developed by David Rechardo.In his
book principles of political economy (1817), Richardo argued that it makes sense for a country to
specialize in the production of those goods that it produces most efficiently and to buy the goods
that it produces less efficiently from other countries even if this means buying goods from other
countries that it could produce itself efficiently.
“England may be so circumstanced that to produce the cloth must require the
labour of 100mwn per one year and if it to make the wine, require the labour of 120 men for the
same time England would therefore find it &interest to Import wine, by the Exportation of cloth.
To produce the wine in Portugal might require only the labour of 80 men for one
year and produce the cloth its require labour of 90 for same time.
It would therefore be advantageous to her to export wine in exchange for cloth.
This exchange might even take place not with standing that the commodity imported by Portugal
could be produced there with less labour than in England.
The difference between the theory of absolute advantage and the theory of comparative
advantage is subtle. Absolute advantage looks at absolute productivity differences, comparative
advantage looks at relative productivity differences.
4) Factor proportions theory (or) Factor Endowments theory:
This theory develop by Swedish Economists Eli Huckster (in 1919)and bertil ohlin(in
1933).They argued that comparative advantage arise from difference in national factor
The Heckscher Ohlin theory postulates that countries will Export
those goods that make intensive use of those factors that are locally abundant. While importing
goods that make intensive use of factors that are locally scarce.
The theory posits that a country with capital abundance will export capital. Intensive
goods while the labour abundant countries will export labour.
When trades take place, profit –seeking firms will move higher prices. Thus the capital abundant
country will export the capital intensive goods; the price will be temporarily higher in the other
country. Similarly, the labour country will export the labour intensive goods. Trade flows will
rise until the prices of both goods are equalized in the both the markets.
Firm specific theories:In the international business how, focus is shifting from country centralism to firm
specificity. This is justified because the MNCs are dominating international business and are
setting agenda for direction and composition of world trade.
Product life cycle theory
New trade theory
Porter‟s competitive advantage
5. Product life cycle theory:This theory was developed by Raymond Vernon in 1960. This theory also
called the international product life cycle theory. The theory seeks to explain how a
company will begin by exporting its products and eventually undertake foreign direct
investment, as the product moves through its life cycle. The theory also says that for a
number of reasons, eventually becomes its import.
Raymond Vernon does not agree with the earlier trade theories.
The theory has identified three stages in the life of a product.
1. New product stage
2. Maturing product stage
3. Standardized product stage
1. New product stage:In this stage, a firm introduces an innovative product in response to a felt need in the domestic
market, it is produced in a limited quantity and is sold mainly in the domestic market. Exports
are non-existent or take place in a limited way, gradually growing late in the new product stage.
2. Maturing product stage:As the product picks up in consumer acceptance and popularity demand for it
rises both in the domestic as well as in foreign markets.
3. Standardized product stage:Here market for the product stabilizes the product becomes a commodity, the
market becomes price sensitive and the manufacturers are motivated to search for low
cost producing countries in order to bring down the cost of production.
Vernon‟s life cycle approach possesses veracity as it can be applied to a variety of
NEW TRADE THEORY:A new theory to explain foreign trade emerged during the 1970s and 1980s. The new
trade theory states that
1. There are gains to be made from specification and economies of scale.
2. The movers in to any market can create entry barriers to others. And
3. Governments may have a role to play in assisting its home based firms. Because the theory
emphasizes productivity rather than a country resources.
According to the new trade theory, a company increases it output
because of specification and its consequent rise in efficiency. As the output increases, the fixed
costs of production per unit minimize. The firm is now in a position to force potential
competitors to produce at the same level and fix identical prices. Obviously, the first entrant
gains first mover advantage. The economic and strategic advantage gained by being the first
entrant into an industry. The first mover advantage can create a formidable barrier to entry for
7. Competitive advantage:This theory was developed by Michael porter. His opinion that classical theories fail to
explain adequately. Why trade takes place across countries. He studied 100 companies in 10
developed countries to learn how a firm can become competitive. A company which enjoys
competitive advantage is in stronger position to trade with firms in other countries. According to
Porter‟s, a firm‟s competitive advantage from
Strategy and rivalry
Factor conditions:Factor conditions include land, labour ,natural resources and infrastructure . these factors
will give initial competitive advantage to a nation . but a sustained competitive advantage comes
from what Porter‟s calls advanced factors. Include skilled labour ,capital, infrastructure.
Demand conditions in a country include the size and specification of its market and
the appropriateness of product standards. Sophisticated local customers enhance the country‟s
competitiveness by providing firms with insight into emerging customer needs.
Related and supporting industries:Extant related and supporting industries enhance competitive advantage of a firm through
close working relation ships ,joint research, problem solving and sharing knowledge and
experience. While it is possible to outsource some of these facilitates to distant suppliers, using
near by vendors is better.
Firm strategy ,structure and rivalry:The ability of a firm to compete successfully in global markets depends on its strategy.
Its structure and rivalry.
GATT: The general agreement on tariffs and trade (GATT). The predecessor of WTO was born in 1948
as result of the international desire to liberalize Trade.
The GATT was transformed into WTO with effect from Jan 1995.
GATT standard as a general agreement for trade concessions among 23 nations. Including
India and its membership increased to 124 countries as on Dec 31, 1994.
PRINCIPELS:1) Trade should be carried on non discriminatory base.
2) Domestic industry should be only protected by means of custom tariff and not through other
3) The aim of consultation should be the avoidance of damage to member‟s interest.
Objectives:The preamble to the GATT mentioned the following as its important objectives.
1) Raising standard of living.
2) Ensuring full employment and a large and steadily growing volume of real income and
3) Developing full use of the resources of the world.
4) Expansion of production international trade.
The developed countries had abolished the majority of tariff barriers. But they were
relevant to abolish others.
The GATT was side tracked due to the increased use of subsidies.
It is also known as “rich man‟s club”.
THE URUGUAY ROUND:Uruguay round (UR) is the name by which the eighth round of the multilateral trade
negotiations (MINS) held under the auspices of the GATT is popularly known because it was
launched in Punta del Este in Uruguay , a developing country, in September 1986.
MAIN FEATURES:1. First of all it carried out the unfinished agenda of Tokyo round .they where primarily ,
a) Reforms in the safeguard measures
b) Reforms in agriculture
2. Secondly, The traditional tariff-axing measures that brought down the average level of
tariff to 3.9% by mid 1990‟s compared to about 40% during late 1940‟s refurbish the dispute
5. Fifthly, they sought to settlement system
6. Finally, then coffered upon the GATT a legal status through th
3. Thirdly, stressed the constitution of trade policy review mechanisms (TPRM)
4. Fourthly, they covered also same new aspects related to TRIMS,TRIPS,GATS.
e creation of WTO
Agreement at the Uruguay Round:The contracting parties at the Uruguay Round concluded 18 separate agreements: 14
where multilateral and 4 where plurilateral. It may be noted that multilateral agreements are
beginning on all members, while plurilateral agreements are binding only on their signatories.
Multilateral Agreements:1. Agriculture:
The agreement on agriculture induced aspects :
a) Market access
b) Domestic support
c) Export subsidies
Market access provision included:
b) Non-tariff barriers
c) Gradual reduction of barriers
2. Sanitary and phytosanitary measures:These measures were covered under GATT, the Uruguay round set out detailed
guidelines in the scheme. A committee in this area has been set up to monitory
3. Textiles and clothing:-
A regards textiles and clothing, the trade had been taken away from the GATT
preview by the 1974 multi-fiber agreements. The uruguay round put it back to the
GATT fold the restrictions under this agreement were to reduced.
4. Technical barrier to Trade:The agreement on technical barriers to trade was meant for the protection of
environment. It says that the members countries have rite to introduce regulations.
The agreement sought to establish a committee on Technical barrier to trade.
5. T RIMS: It was stated that no member country should attach conditions on EDI that could
in turn restrict the trade.
6. Anti-Dumping:The GATT has permitted imposing of anti dumping duties. The agreement at the
Uruguay round provided grater clarity to this issue. A “SunSet” clause was
introduced for monitoring of Anti dumping to every 5 years.
7. Customs valuation:The agreement in the Uruguay round reemphasized that the basis for the valuation
of goods for customs purpose should be at the maximum of the transaction value
of the goods.
8. Preshipment inspection:It involves the use of specialized private companies to check shipment details,
such as the price, quality and quantity of goods.
9. Rules of Origin:Origin means “nationality” of a product. It is important particularity in case where
a product is manufactured in more than one country.
10. Import licensing procedures:The agreement tried to bring in transparency to the import licensing procedure.
11. Subsidies and countervailing measures:The agreement introduced new rules for the computation OF THE VALUE OF
12. Safeguards:In case of safeguards involving protective measures to save domestic industry
from injury. If at all safeguards measures were adjusted , their life was set at 4
years with the possibility of one four year extension.
13. GATS:The agreement involved reduction and elimination of barriers to international
trade in services and establishment if MFNT(Most Favored Nations Treatment) principle
in this area.
The Uruguay round agreement covered TRIPS in view of the fact that the
plurilaterall trade agreement:Besides the multilateral agreement that the member countries have to abide by ,there were
4 plurilateral agreements concluded at the Uruguay round.
15. Public Procurement:It means that the foreign suppliers must be given equal treatment in government
procurement as the domestic suppliers get.
16. Trade in civil aircraft:It aims at elimination of import duties on all aircraft.
17.International dairy agreement:The agreement tries to introduce greater stability in the market by seeking to limit
surpluses, shortages and fluctuation u price. International dairy council has been establish
18.International bovine meat:This agreement purpose is to regulate bovine meat trade.
WTO:-(world trade organizations)
WTO was established on 1st January 1995 govts had concluded the Uruguay
round negotiations on 15th December 1993.
WTO is the embodiment of the Uruguay Round results and the successor to the
The WTO has larger membership than GATT. The present number
of member‟s standards at 151.India is one of the founder members of WTO.
OBJECTIVES OF WTO:- The WTO reiterates the objectives of GATT
1) Promote trade flows by encouraging nations to adopt nondiscriminatory and
predictable trade policies
2) Raising standards of living, income, promoting full employment, Expand production,
full utilization of world resources.
3) Introduce sustainable development.
4) Taking positive steps to ensure that developing countries.
5) Establish procedures for resolving trade disputes among members.
Functions of WTO:WTO is based in Geneva, Switzerland, its functions are
1) Administering and implementing the multilateral and plurilateral trade agreements
which together make up the WTO.
2) Acting as a form for multilateral trade negotiations.
3) Seeking to resolve trade disputes.
4) Overseeing national trade policies
5) Cooperating with other international institutions involved in global economic
6) Acting as a watch dog of International trade.
7) Acting as a management consultant for world trade.
8) Technical assistance and training for developing countries.
As the functions make it clear, WTO does not aim at economic or political Integration,
but seeks to promote free trade among member countries.
Principles Of WTO:-
Structure of WTO:-
India And WTO
It is a founder of both GATT (1947) and its success organization the WTO, which
came into effect from 1.1.95 by its membership, India automatically avails of most favoured
nation and national treatment from all WTO members for its exports and its participation. In this
increasingly role based system is aimed towards ensuring more stability and predictability in the
governance of International Trade.
Advantages:1. Edge over competitors: - India has edge over its competitors in the field of clothing,
agriculture, forestry, food & beverages etc.
2. Phasing out of MFA: - Textile & clothing exports will also increases due to the
phasing out of multifibre by 2005.
3. Multilateral rules: - The multilateral rules and disciplines relating to anti dumping,
subsidies and countervailing measures.
4. Better prospectus for agricultural Exports:The reduction in domestic subsidies and removal of barriers to trade shall increase in
the world prices of agricultural products as a result the India expects the improved
prospectus for agricultural exports.
5. Trips:-The agreement of TRIP‟s provides for 10 years transition period for
introduction of product patents in drugs, chemical and food products.
6. Services:- India will now be able to open services sector on MFN basis as opposed to
7. Most favoured Nation:- The new GATT arrangement provides for the development of
multilateral trade system and India will be benefitted from this.
Dumping measures:Dumping means selling the product aat below the on-going market price and/or at the
price below the cost of production.
Definition:HABERLER defines dumping as “the sale of goods abroad at a price which is lower than the
Selling price of the same product at the same time in the same circumstances at a home, taking
account of difference in transport cost”.
Types of dumping:- dumping is of three types, they are
(1)Interprittent dumping:- when the production of a product is more than the demand in the
home country, piled up even after sales, in such a case the producer sells the remaining stock in
foreign countries at low price without reducing the price in domestic country.
(2)persistent dumping:- the monopolist sells the remaining production in foreign countries at a
low price continuously. This type of dumping is called persistent dumping.
(3)predatory dumping:- the monopolist sell the product in foreign country at a low price initially
with a view to drive away the competitors and increase the price after the competitors leave the
market. This type of dumping is called predatory dumping.
Objectives of dumping:To enter the foreign market:- the monopolist adopt the dumping strategy to enter in to
foreign market by eliminating the competitors in the foreign market.
To sell surplus production:- The producers dump the products in foreign countries in
order to sell their surplus production.
To develop trade relating:- The manufacturers sell their products in foreign countries at
lower prices in order to develop trade relations to the foreign countries.
Effects of dumping:- Dumping affects both the importing and exporting countries. However the
effects are more to importing countries.
Effects on importing country:The industry of the importing country experiences decline in sales and profits.
If the dumping is for longer period, it effects the survival of industry and also changes the
Industrial structure in foreign country.
Dumping changes the preferences of consumers of the domestic country. But, if the
dumping is stopped after some time, the country is forced to import at high prices.
Dumping increases the deficit of the balance of payments of the importing country.
Effects on exporting country:The consumers of the exporting country may higher prices when the consumers of the
foreign country enjoy the product at lower price.
The exporting country finds market for the access production.
The exporting country earns foreign exchange and countries for the surplus balance of
payment of payment position.
Anti-dumping measures:- In view of the negative effect of dumping, the importing country
imposes anti-dumping measures like,
Tariff duty:- The importing country imposes high rate of tariffs on dumping , so that the price of
the dumping goods would be either equal to or more than that of the domestic goods.
Import quota:- The importing country in addition to tariff duty, restricts the volume of imports.
this measure reduces the dumping.
Import embargo:- The importing country bans the importing of particular goods or all the goods
from the dumping country.
Voluntary export restraint:- The exporting country realizing the negative effects of dumping,
voluntarily come from bi-lateral agreements to avoid dumping.
As stated earlier, the govt. imposes penalty and such other measures on
the imports, if they cause injury to the domestic country. These penalty duties and tariffs
imposed to reduce the dumping are called as „anti-dumping measures‟. GATT allowed its
member countries to apply anti-dumping measures. The GATT members in the Tokyo round
discuss in detailed the rules and measures to be imposed. Thee anti-dumping measures may be in
the form of duties, undertakings on pricing by exporters etc……
WTO also provides procedure to the followed initiating and conducting
Rules for implementing the anti-dumping measures.
Duration of anti-dumping measures.
The clear roles for dispute settlement panels in setting the disputes relating to antidumping actions taken by the member governments.
TRIPS (Trade Related aspects of Intellectual Property Rights)
One of the most controversial outcomes of the UR is the agreement in TRIPS
including trade in counterfeit goods. TRIPS along with TRIMS and services were called the
“new issues” negotiated in the Uruguay round.
It covers the following categories of intellectual property
1. Copy right & related rights:-
The parties are required to comply with the Berne convention for the protection of literary
and artistic works. Computer programmers are included in literary works.
2. Trade marks:Trade mark is a sign (or) any combination of signs through which product (or) services
can be differentiated with those of other undertakings. The personal names, letters, numerals,
figurative elements, etc.
3. Geographical indications:Article 22 deals with protection of Geographical indications. They refer to identifying a
good as originating in the territory of a member or a locality in that territory where a given
4. Industrial designs:Industrial design protect the ornamental features viz, the shape, lines, designs and colours
of the article etc.
5.Patents:Article 24 explains that protection shall be available for any inventions, whether products
(or) processor, in all fields of technology provided they are new.
6. Trade secrets:Trade secrets and know-how have commercial value, shall be protected against breach of
confidence and other acts.
TRIMS (Trade Related Investment Measures)
TRIMS referred to certain conditions (or) restrictions set by the Govt in respect of foreign
investment in the country.
The agreement in TRIMS provide that no contracting party shall apply any TRIM
which is inconsistent with WTO Articles.
I. Local content requirement
II. Trade balancing requirement
III. Trade & foreign exchange balancing requirements
IV. Domestic sales/requirements
The no. of TRIMS were employed in India prior to liberalization in 1991 and many of them have
been passed out since then.
GATS (The General Agreement on Trade in Services)
GATS which extends multilateral rules and disciplines to services is regarded as land mark
achievement of the UR.
The GATS defines as the supply of a service from the territory of one member
into the territory of any other member.
In short the GATS covers 4 modes of international delivery of services.
I. Cross border supply
II. Commercial presence
III. Consumption abroad(tourism)
IV. Movement of personnel
The framework of GATS include basic obligation of all member countries on international trade
in service including financial services, telecommunications, transport etc.
The GATS lay down that increasing participation of developing countries in world trade
shall be facilitated through negotiated commitments on access to technology.
India submitted its revised offer in august 2005, which is substantial improvement
the initial offer 11 sectors and 95 sub sectors are covered in the revised offer as again sectors and
47 sub sectors in initial offers.
Dispute settlement mechanism
The dispute settlement understanding(DSU) is the legal text that spells out the rules and
procedures for settling disputes between member countries. It contains 27 articles, it is a legally
binding agreement among all the member countries, and is the ultimate means of enforcing the
The WTO also involves itself in settling disputes relating to dumping and granting
A dispute settlement body will be established for the purpose of the complaint
member can ask the DSB to establish a panel of 3 experts with in 30 days. There is also the
provision of the appellate review of by a standing appellate body of 7 members to be established
by the DSB who will report to the DSB between 60-90 days.
Process:First stage:-(consultation upto 60 days).In The first stage countries in dispute talk with each other
and try to solve the issue mutually and if there fail to do so.
Second stage:The panel upto 45 days for a panel to be appointed, 6 months for the panel to conclude.
The report becomes the dispute settlement body‟s ruling (or) recommendation with in 60
days unless a consensus rejects it. The panel‟s final report should normally be given to the
parties to the dispute with in 6 months.
Appeals:Either side can appeal a panel‟s ruling. Each appeal is heard by three members of a
permanent 7 member appellate body set by the dispute settlement body. They have to be
individuals with recognized standing in field of law & international trade, not affiliated with any
Rulings:The dispute settlement agreement stresses, prompt complaints with recommnendations (or)
rulings of the DSB is essential in order ensure effective resolution of disputes to the benefit of all