Detailed Information about WTO and Indian foreign trade policies.

1. WTO and
Regulation of
Foreign Trade
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-Prashant Singh
MBA – 1st Sem

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WTO (History)
Before WTO , GATT (The general Agreement on Tariffs
and Trade) was made in 1947 after the second world war
and signed by 23 nations. The main objective of GATT was
to expand the international trade by liberalising trade so as
to bring all round economic prosperity.
 GATT was transformed into the World Trade
Organisation (WTO) with effect from 1st January 1995.
 Objective of WTO is to supervise and liberalise
international trade.
 WTO is more powerful body than GATT, has a larger
role too than GATT.
 GATT dealt with only with trade in goods, whereas
WTO agreements cover services and intellectual as well.

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WTO formed after the Uruguay round conference of
GATT.
It is the largest International economic organization in
the world.
 Current Director General of WTO is Roberto Azevedo
having it’s headquarter in Geneva, Switzerland.
As of now, there was 164 member countries of WTO.
 Budget for 2018 was 197,203,900 Swiss Franc Dollar.
Currently over 600 people are working in WTO in
Geneva, Switzerland.
Introduction-

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Objectives of WTO-
To help trade flow as freely as possible.
To achieve further liberalisation gradually through
negotiations.
To set up an impartial means of settling disputes.
Provide technical assistance and training for
developing countries.
Raising standard of living and income.
Introduce sustainable development.

5. Functions of WTO-
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Administer WTO trade agreements.
Provide a forum for trade negotiations.
Handle Trade disputes.
Cooperate with other international organisations like
IMF and World Bank.
Acting as a management consultant for world trade.
Maintaining Trade related Database.

6. Principles of WTO
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.
*T & D – training and development
*T & E -- Trade and Environment

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Conclusions -
 The WTO is for transparency of policies, rules, and
procedures for multilateral conformism.
The WTO is for greater and greater market access.
The WTO is for competition and globalisation.
The WTO is not subsidies, but for wider and effective use
of pricing mechanism for allocation of resources
domestically and globally.
The WTO is for promoting a climate for FDI flow based on
undistorted trade and investment regime.

9. WTO in recent-
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On 12th Nov US says India paid bigger cotton subsidies
than WTO allows.
On 16th Nov Australia took India to WTO on the matter
on sugar subsidies.
On 20th Nov India asks WTO to set up a panel against US
for imposing high import duty on steel and aluminium.
On 21st WTO agrees to set up panels to rule on US tariffs
disputes related to steel and aluminium.
ON 21st India and other 44 WTO members object to
penalty plan proposed by US, EU and Japan that requires
member to increase their funding to WTO. Otherwise
they will be deemed as non active member and no other
member will be liable to give answers to their questions.
On 22nd WTO says G20 trade restrictions soar, cover
$481 billion of trade.

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Contribution of G-20 nations in WTO
Member 2018 contribution
(in Swiss franc dollar)
2018 contribution
( in percentage)
USA 22,251,810 11.382%
UK 7,407,495 3.789%
Japan 8,091,745 4.139%
Germany 13,939,150 7.130%
France 7,427,045 3.799%
Mexico 3,612,840 1.848%
Saudi Arabia 2,455,480 1.265%
Italy 5,233,535 2.677%
India 4,480,860 2.292%
Australia 2,680,305 1.371%
Argentina 760,495 0.389%
Brazil 2,519,995 1.289%
South Africa 1,024,420 0.524%
Turkey 2,017,560 1.032%

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Member 2018 contribution
(in Swiss franc dollar)
2018 contribution
( in percentage)
South Korea 5,913,875 3.025%
Canada 4,971,565 2.543%
China 19,237,200 9.840%
Indonesia 1,769,275 0.905%
European Union* 0 0%
Russia 4,236,485 2.167%
*The European Union is not subject to contributions. However, its
28 members are assessed individually. The total share of members
of the European Union represents 33.6 per cent of the total assessed
contributions for 2018.
Source- www.wto.org

12. Top 10 major import countries
12Source- www.matrade.gov
Data Acc. To -Department of
Statistics, Malaysia
Compiled By: MATRADE

13. World’s Top 10 exported product
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Rank Product 2017 export sales Since 2013
1 Crude oil $843.8 billion -46%
2. Cars $749.2 billion +10.6%
3. Processed petroleum oils $658.2 billion -37%
4. Integrated
circuits/microassemblies
$623.5 billion +23.8%
5. Phone system devices
including smartphones
$562.4 billion +17.7%
6. Automobile parts/accessories $388.7 billion +6.6%
7. Computers, optical readers $334.1 billion -3%
8. Medication mixes in dosage $328.5 billion +0.6%
9. Gold (unwrought) $321.3 billion -32.8%
10. Petroleum gases $272.2 billion -40.2%
Source - www.worldexports.com

14. World top 10 exporting countries
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1. China – $1.904 trillion
2. Germany – $1.547 trillion
3. United States- $1.497 Trillion
4. Japan-$787 Billion
5. France-$589.7 billion
6. South Korea-$552.8 Billion
7. Netherland-$550.2 Billion
8. Italy-$524.9 Billion
9. Russia-$520.3 Billion
10. United Kingdom-$479.2 Billion
On 2015 – India is on 19th position
On 2017 – India is on the 25th position – 216.9 Billion Dollar
Currently India is on 20th position – 268.6 Billion Dollar
Source- Trendrr.net

15. How does a Country become a
member of WTO:-
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Any country that is in control of its trade policies is
eligible to apply for membership in the World Trade
Organization. The country seeking membership is
called an Observer. It can remain an observer for five
years. That gives it time to learn more about the WTO.
An observing country can participate in WTO meetings
and receive technical assistance. In return, it must
contribute to the WTO.
A WTO membership is so important especially for a
developing country because of the competitive trading
benefits this organization can offer.

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Regulation
of Foreign
Trade-

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History
• Import control was introduced in 1940.
• In 1946, the emergency provision Ordinance was
promulgated to continue the import trade control.
• On 25th March 1947, it was replaced by Imports and
Exports Act.
• On 19th June 1992, the Imports and Exports control Act
was replaced by Foreign Trade development and
regulation Act (FTDRA).
• No export and import shall be made by any person except
in accordance with the provisions of this Act, and the
orders and rules made under this Act.
• The objective of the Act is to provide for the development
and regulation of foreign trade by facilitating imports into,
and augmenting exports from India.

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Provisions of FTDR Act, 1992
1. Prohibition And restriction- The Act also empowers the
Central Government to make provisions for prohibiting,
restricting of otherwise regulating the import or export
of goods as and when required.
2. Exim policy – The Act lays down that the Central
Government may, from time to time, formulate and
announce the export and import policy and may also
amend that policy.
3. Director General of Foreign Trade – Appointed by the
Central Government and advice the same in the
formulation of the export and import policy and shall be
responsible for carrying out the policy.

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4. Importer- Exporter Code Number – It is important to get
for any person who is making import and export. It is
provided by DGFT and DGFT can also suspend and cancel
the Importer-Exporter Code by having a valid reason.
5.Issue and Suspension/Cancellation of Licence.
6. Search, Inspection and Seizure- If any good which are
imported is suspected then any person authorised by the
Central Government may search, inspect and seize such
goods, documents, things.
7. Penalty for Contravention – One thousand rupees or five
times the value of the goods involved, whichever is more.

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Export-Import (EXIM) Policy-
Due to globalisation , economies of the world are connected to
each other. The exchange of goods and services between
nations has a considerable role in enhancing the economic
development of developed or developing countries. The
emergence of global institutions like UNCTAD, WTO, ASEAN
etc, has resulted in rapid growth of world trade.
• EXIM policy or trade policy outlines the set of laws and
regulations for export and imports of a country.
• It was formed on the recommendation of FTDR Act,1992.
• The policy is formed by union ministry of government for
the period of five years, and revised on 31st march of every
year.
• It helps in exports promotion and controlling imports of a
country by following specific policies and guidelines
formulated by the government.
• EXIM policy has liberalised the exports and imports since
1992.

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EXIM Policy Of India (2015-2020)
The main aim of India’s Foreign trade policy is to become an
important participant in world trade by applying a
comprehensive approach. The economic development is
based on stability and rationality of trade and economic
policies with their mutual participation.
Government aims to increase India’s exports of merchandise
and services from USD 465.9 billion in 2013-14 to
approximately USD 900 billion by 2019-2020 and to raise
India’s share in world exports from 2 percent to 3.5 percent.
But in current scenario India is not nearby of this target of 900 billion dollar
export. Acc. To The Hindu most realistic goal should be 700-750 billion dollar.
To achieve the target of $900 billion India need to grow its export by compound
rate of 27% but acc. To current global scenario it could only be possible to
achieve the growth rate in export about 15% And by this growth rate India can
only achieve the target of about 700-750 billion dollar.

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Objectives of EXIM policy of India (2015-2020)-
o To provide a stable and sustainable policy
environment for foreign trade in merchandise and
services.
o To link rules, procedures and incentives for exports and
imports with other initiatives such as Make in India,
Digital India and Skill India to create a ”Export
Promotion Mission” for India.
o To provide a mechanism for regular appraisal in order
to rationalise imports and reduce the trade imbalance.
o To promote the diversification of India’s export basket
by helping various sectors of the Indian economy to
gain global competitiveness with a view to promoting
exports.

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Instruments of Foreign Trade
Regulation
As it is in the principle no country permits a totally
unregulated flow of goods and services across its border.
Protectionism refers to those government restrictions and
incentives that are specifically designed to help a
country’s domestic firms compete with foreign
competitors at home and abroad.
Government implements Tariffs (Taxes on import/
Export) which discourage international trade and raise
revenue for the government or to protect domestic
industries.
But now government are doing more to reduce barriers
to trade because they see the benefits of international
trade.

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Types of Barriers:-
1). Tariff Barriers :- A tariff is a tax that levied on goods that
move internationally. It is most common Instrument that used
for controlling exports and imports.
Import tariff is more commonly used than export or transit
tariff. This is the barrier in form of duties, taxes, etc because of
this barrier, import decreases and price of imported product
increases.
Classification of Tariff:-
a). Direction – Import and Export Tariffs.
b).Purpose – Protective and revenue Tariffs.
( to protect home industry, agriculture and labour against
foreign competitors by keeping foreign goods out of country).
c). Length – Tariff surcharges (temporary action) versus
Countervailing Duty (Permanent surcharge).

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d). Rates : Specific, Ad valorem and combined.
Specific duties – It is fixed or specified amount of money
per unit of weight, gauge or other measure of quantity.
Ad valorem duties -This is according to value. They are
stated as a fixed percentage of the invoice value and applied
at a percentage to the dutiable value of the imported goods.
This is the opposite of specific duties, since the percentage
is fixed but the total duty is not.
Combined Rates – Combined rates are the combination
specific and ad valorem duties on a single product.

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5). Distribution Point : Distribution and
Consumption Taxes:
a). Single stage Taxes – The tax collected at only one point in
the manufacturing and distribution chain. The single stage
sales tax is not collected until the products are purchased by
the final consumers.
b). Value added tax – It is a multi stage national tax levied at
each stage of production and distribution system. Its
important feature is that it credits taxes paid by companies on
their material inputs against taxes they must collect on their
own sales.
c). Cascade Taxes – Most severe tax system of all.
d). Excise Tax – One time charge levied on the specified
product like alcohal, cigrattes. It accounts for about 19 percent
of all tax revenues.

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Non Tariff Barriers
Subsidies ( Given by
govt. to a company to make
it more competitive.) Import Quotas ( A
quantitative form of
restrictions imposed on
imports and exports.)
Voluntary Export
Restraints (Variation of
import quota is the VER.) Administrative Policy
(rules and procedures to be
followed , with objective of
discouraging import and
encouraging export.)
Anti Dumping
Policy (Govt. charge
extra import duty in
order to bring the price of
foreign goods closer to
domestic goods.)
Standards ( are set for
health, welfare, safety, quality,
size and measurements in
order to create barriers for
foreign products.)

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Reasons for Foreign Trade
Regulation
Infant Industry Argument – To protect the new
domestic company from foreign competitors.
Improving the terms of trade – It is argued that the
terms of trade can be improved by imposing import
duty and quota.
Anti- Dumping
Bargaining – If a country has already tariff then they can
use it as a means of bargaining to obtain from other
countries.
Key industries Argument.
Equalisation of costs of production- To equalise the cost
of production between the foreign and domestic
producers.

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Laws of Foreign Trade Regulations in India
1). Foreign Exchange Regulation Act (FERA)
An act to consolidate and amend the law regulating
certain payments, dealings in foreign exchange and
securities, transactions indirectly affecting foreign
exchange and the import and export of currency.
2). Smugglers and Foreign Exchange Manipulators
(Safema 1976) –
An act to provide the power to government to acquire
the illegally acquired property by smugglers and
foreign exchange manipulators.
3). Prevention of Money Laundering Bill Act, 1999-
An act to prevent money laundering and to provide
confiscation of property derived from, or involved
in.

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4). Enemy Protection Act, 1968-
It is Act to provide for the continued vesting of enemy
property vested in the Custodian of Enemy Property for India
under the Defence of India rules 1962 and 1971. This act
applicable all over the country except Jammu and Kashmir.
5). Baggage Rules, 1998 –
An Indian resident or a foreigner residing in India, returning
from any country other than Nepal, Bhutan, Myanmar or
China shall be allowed clearance free of duty articles in his
bona fide baggage up to a value of ₹35,000. These articles
include items of personal effects and daily necessities.
Articles under exception are-
Cigarettes exceeding 200 or tobacco exceeding 250 gms.
Alcoholic liquor or wines in excess of two litres.
Gold or silver in any form other than ornaments.

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