VTU MBA Economics for Managers Module 6-F

1. 6
Module 6
Globalization, Foreign Trade &
WTO

2. GLOBALIZATION
Meaning of Globalization:
Globalization refers to the integration of economic
and societies across the Globe, involving
Economic, Political and Cultural Exchanges,
which has made possible due to the advancement
in Communication, Transport and Infrastructure.

3. GLOBALIZATION
Features of Globalization:
1. Borderless World,
2. Sharing of information and technology,
3. Growth of commercilization,
4. Growth of transport and infrastructure,
5. International Co-operation,
6. Talent Mobility and integration,
7. Cultural Diversity,
8. Free Access to Market,
9. Multi-dimentional process,
10. Connectivity.

4. GLOBALIZATION
Features of Globalization:
11. Mobilization of resources like movement of capital, labor,
trade, finished goods and services,
12. Enables to grow market from a locally dealt to transitional
corporation (1st
and 5th
Phase in Globalization process),
(The above points can be used for the advantages for
Globalization)

5. GLOBALIZATION
Barriers in Globalization:
Globalization enable firms to interact, exchange
and grow their business, but certain practical
reasons make it disadvantages, like:
1. Government policies,
2. High cost,
3. International Trade Barriers by WTO/ GATT,
4. Take over of National Firms,
5. Out flow of manpower to other countries,
6. Political instability make it difficult for Globalization.

6. Globalization
Reasons for Globalization:
1. Identifying new markets for commercialization,
2. Identifying foreign partnerships,
3. Profit advantage,
4. Beat Competition,
5. Utilization of Monopoly power, in case of Patent Rights
or Product Differentiation, or Technology Advancement,
6. Business Tactical Vision
7. Be a part of implementation of Govt Policies and
8. Potential for Growth.

7. Globalization
Phases in Globalization:
1. Domestic Firm – (Ethnocentric), - Locally concentrated,
2. International Firm, - Concentrated with 2 countries,
3. Multi-National Firm, - Concentrate in more than 2
countries,
4. Global Firm – Concentrate in almost in every economy,
which will have either Global Marketing Strategy or
Global Sourcing Strategy, BUT NOT BOTH.
and
5. Transitional Firm – These Firms are increase Markets
and dominates markets and industries across the world, its
an Integrated World Enterprises that links Global
Resources with Global Market at a profit.

8. FOREIGN TRADE
● Meaning of Foreign Trade:
Foreign Trade refers to the exchange of
Capital, Goods and Services across the
international borders and territories. It involves
Different Currency of various countries and
is regulated with laws, rules and regulations
of concerned countries.

9. FOREIGN TRADE
Characteristics of foreign trade:
1. Geographically specialization,
2. Rules and Regulation of the parent country,
3. Foreign country's rules and regulations,
4. Foreign competition,
5. Role of Middlemen in foreign trade,
6. Documentation of both country,
7. Role of currency and its acceptability.

10. FOREIGN TRADE
Reasons for development of Foreign Trade:
1. Growth of business,
2. Multiple choice of goods and services,
3. Ensures quality and standard goods and services,
4. Division of labor and their specialization,
5. Raise the living standard of the people,
6. Generates employment,
7. Maintains balance of payments,
8. Promotes world peace,
9. Facilitates economic development,
10. Optimum allocation and utilization of resources.

11. FOREIGN TRADE
Types in foreign trade:
1. Import Trade,
2. Export Trade and
3. Extrepot Trade (Re-Export, purchase from
another country and the same after processing
it is been re-exported to another country –
These are done to reduce cost and due to
availability of resources)

12. FOREIGN TRADE
Advantages and disadvantages of foreign
trade:
Foreign Trade is advantages if the results are
as per plan of the firm, making reasonable profit
but the same can also be disadvantages due to
Political instability, import of goods against the
rules and regulation of another nation, high
inflation and so on

13. Trend's in India's Foreign Trade
● After the 1991 crisis, Foreign Trade was seen
as a crutial aspect of the new approach to the
econimic policy and as an integral part of the
process of reforms.
● The new economic reforms began its changes
in 1991, with focus on: LIBERALIZATION AND
FOCUS ON EXPORT PROMOTION ACTIVITY.

14. Trend's in India's Foreign Trade
India's Major Imports are,
1. Petroluem and Petroleum Products,
2. Fertilizers,
3. Gold
India's Major Exports are,
1. Precious stones,
2. Machinery,
3. Chemicals and
4. Electronic Goods.

15. Trend's in India's Foreign Trade
Outline on India's Exports and Imports:
EXPORTS, from India in 1960-61 was US $ 1,33 Billion,
while in 2010-11 it was US $ 157.2 Billion in 2010-11.
Similarly in IMPORTS, In 1960-61, India's imports was US
$ 2.3 Billion, while in 2010-11 it was US $ 245.6 Billion.
Economic reforms on Trade, were made in 1991, to
encourage for more exports

16. World Trade Organization (WTO)
Introduction:
WTO is the predecessor of GATT (General Agreement on
Tariff and Trade), was established on January 1, 1995 and
India became one of the founder member of WTO by
signing the WTO agreement on December 30, 1994.
During the same formation, a organization named, ITO
(International Trade Organization) was formed and was a
specialized agency of the United Nations, which was not
approved by the US, hence never took into effect.

17. World Trade Organization (WTO)
Basic Rules of WTO:
1. Protection to domestic industry through tariffs, Only
tariff, and prohibits quantitative restrictions, except during a
limited situations.
2. Binding of tariffs: Eliminate protection to domestic
industry and is limited in the listed national schedule.
3. Most Favoured Nation Treatment: This MFN status,
helps to import and export without additional duties on
imports from developing countries like India. AND
4. National Treatment Rule: No-Discrimination between
imported goods and domestically produced goods.

18. World Trade Organization (WTO)
Objectives of WTO:
1. To implement agreement between countries,
2. To eliminate discrimination and benefit every country,
3. To promote business of developing countries,
4. To enhance competitiveness among firms and benefit the customers,
5. To increase production and productivity,
6. To enhance job opportunities,
7. To utilize the available resources,
8. To improve the standard of living,
9. To eliminate all hurdles in world trade,
10. To expand International trade.

19. World Trade Organization (WTO)
Impact of WTO to India and our Industries:
1. Effect on Indian Industries: Reduction on import duties on capital
goods, components, Intermediate goods and raw materials,
2. Impact on import of second hand cars: It was objected by Indian
Industrialists, as it destroys the peace of domestic industrialists,
3. Import of Chinese Goods: China has also become a member of
WTO and now, Chinese Goods are getting flooded into Indian Market.
4. Impact on SSI Units: WTO doesn't discriminates Industries by its
size and Indian SSI units face the competition,

20. World Trade Organization (WTO)
WTO's Favourable impact on our economy:
1. Increase in export earnings,
2. Growth of Agricultural exports,
● 3. Growth of Service exports,
4. Export of Textiles and clothing,
5. FDI liberalized and hence permitted,
6. Multi Lateral Rules and Discipline. (Like Anti-
Dumping, Subsidies, Safeguards and Dispute
Settlements).

21. World Trade Organization (WTO)
WTO's Un-Favourable impact:
1. Tariffs reduction on goods of exports are small and is less favourable to
India,
2. Agricultural goods cannot be exported in bulk, due to its limitations,
3. Textile Industry has hardly got any major favor in the past one and half
decade,
4. India under pressure to liberalize service sector,
5. WTO doesnt measure firms by size, hence its more favourable to large
enterprises and SSI units are likely to disappear,
6. A trend towards a neo-protectionism is required for developing countries