World Trade Organization

The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. Also in this section

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The History of Globalization

Globalization

Globalization is the spread of products, technology, information, and jobs across national borders and cultures. In economic terms, it describes an interdependence of nations around the globe fostered through free trade.
On the upside, it can raise the standard of living in poor and less developed countries by providing job opportunity, modernization, and improved access to goods and services. On the downside, it can destroy job opportunities in more developed and high-wage countries as the production of goods moves across borders.
Globalization motives are idealistic, as well as opportunistic, but the development of a global free market has benefited large corporations based in the Western world. Its impact remains mixed for workers, cultures, and small businesses around the globe, in both developed and emerging nations. 1:39

Globalization Explained

Corporations gain a competitive advantage on multiple fronts through globalization. They can reduce operating costs by manufacturing abroad. They can buy raw materials more cheaply because of the reduction or removal of tariffs. Most of all, they gain access to millions of new consumers.
Globalization is a social, cultural, political, and legal phenomenon.
Socially, it leads to greater interaction among various populations.
Culturally, globalization represents the exchange of ideas, values, and artistic expression among cultures.
Globalization also represents a trend toward the development of single world culture.
Politically, globalization has shifted attention to intergovernmental organizations like the United Nations (UN) and the World Trade Organization (WTO).

KEY TAKEAWAYS

Globalization has sped up to an unprecedented pace since the 1990s, with public policy changes and communications technology innovations cited as the two main driving factors.
China and India are among the foremost examples of nations that have benefited from globalization.
One clear result of globalization is that an economic downturn in one country can create a domino effect through its trade partners.

Disadvantages of Globalization

One clear result of globalization is that an economic downturn in one country can create a domino effect through its trade partners. For example, the 2008 financial crisis had a severe impact on Portugal, Ireland, Greece, and Spain.

Globalization detractors argue that it has created a concentration of wealth and power in the hands of a small corporate elite which can gobble up smaller competitors around the globe.

Globalization has become a polarizing issue in the U.S. with the disappearance of entire industries to new locations abroad. It’s seen as a major factor in the economic squeeze on the middle class

For better and worse, globalization has also increased homogenization. Starbucks, Nike, and Gap Inc. dominate commercial space in many nations. The sheer size and reach of the U.S. have made the cultural exchange among nations largely a one-sided affair.

Real World Examples of Globalization

A car manufacturer based in Japan can manufacture auto parts in several developing countries, ship the parts to another country for assembly, then sell the finished cars to any nation.

China and India are among the foremost examples of nations that have benefited from globalization, but there are many smaller players and newer entrants. Indonesia, Cambodia, and Vietnam are among fast-growing global players in Asian

MNC’S

Introduction to Multinational Corporations:

An important development in the post-war period is that of the spread of multinational corporations (MNCs) as the vehicle of foreign direct investments. These are also called as Transnational Corporations (TNCs).

Salvatore has defined them in these words, “These are the firms that own, control or manage production facilities in several countries.” Paul Streeten and S. Lal have defined MNCs from economic, organisational and motivational viewpoints. The economic definition of MNCs lays stress on the size, geographical spread and magnitude of investment.

Role of MNCs:

The MNCs have become a very powerful force in the world economy during the last few decades. They have exercised a revolutionary effect on international economic system in general and industrial organisation in particular. It has been truly regarded as a remarkable economic phenomenon of the twentieth century. We assess here the role of MNCs from the point of view of the LDCs. The benefits of these organisations are based upon the theory of foreign direct investments.

These are given below:

(i) Transfer of Capital:

The LDCs are invariably faced with the problem of acute shortage of capital. On account of the paucity of domestic saving, these countries are unable to raise the rate of investment upto a desirable level necessary for their long-term steady growth.

The MNCs have abundance of surplus capital resources which become available for the industrial and commercial development of the poor countries. The MNCs become important conduits through which transfer of capital takes place from the capital-abundant to the capital-scarce countries.

(ii) Undertaking of Risk:

There is risk inherent in the development process especially in LDCs in the initial stages of their development. The shortage of capital, small extent of the market, absence of enterprising groups and undeveloped infrastructure signify a high degree of risk in different fields such as mining, oil exploration, power, transport, capital goods industries etc. The MNCs undertake this risk and remove a major barrier in the development of the LDCs.

(iii) Transfer of Superior Technology:

The LDCs are characterised by obsolete and inefficient techniques of production. They lack resources for research and development of better and more efficient techniques. The MNCs attempt to bridge the widening technological gap between the advanced and the LDCs through the transfer of advanced technical know-how sophisticated manufacturing processes and improved skills.

(iv) Development of Markets:

The growth process in LDCs remains inhibited on account of the small size of market. The MNCs have made a unique contribution in enlarging the market for the products manufactured in the LDCs through concerted advertising and global network of sales organisation. They undertake market research and adopt novel and highly efficient methods of marketing.

(v) Development of Human Resources:

The MNCs wants to make use of cheap labour available in LDCs. They provide training to different categories of workers in advanced techniques. In this way they make a highly useful contribution in the creation of skills. This brings about the development of human resources in these countries and raises their productive capacities. It is on account of this contribution of MNCs that they are sometimes called as carriers of knowledge and experience.

Adverse Effects of MNCs:

The MNCs are viewed with much distrust in the LDCs because their operations involve exploitation of men, materials and markets of these countries. They have failed to raise upto their expectations and have many adverse consequences for them.

In view of the serious shortage of capital, India followed a liberal policy right since the early 1950’s to attract foreign capital and enterprise. The MNCs had secured a strong foothold in the Indian economy by the 1960’s. According to the Industrial Licensing Policy Enquiry Committee, there were 112 companies in India in 1966 with assets of Rs. 10 crores or more. Of these 48 companies were either branches of foreign companies or they were their subsidiaries.

outsourcing

Companies today can outsource a number of tasks or services.

Outsourcing pros and cons

In addition to delivering lower costs and increased efficiencies, companies that outsource could see other benefits.

By outsourcing, companies could free up resources (i.e., cash, personnel, facilities) that can be redirected to existing tasks or new projects that deliver higher yields for the company than the functions that had been outsourced.

Companies might find, too, that they can streamline production and/or shorten production times because the third-party providers can more quickly execute the outsourced tasks.

Foreign capital in india

Apart from being a critical driver of economic growth, foreign direct investment (FDI) is a major source of non-debt financial resource for the economic development of India. Foreign companies invest in India to take advantage of relatively lower wages, special investment privileges such as tax exemptions, etc. For a country where foreign investments are being made, it also means achieving technical know-how and generating employment.

The Indian government’s favourable policy regime and robust business environment have ensured that foreign capital keeps flowing into the country. The government has taken many initiatives in recent years such as relaxing FDI norms across sectors such as defence, PSU oil refineries, telecom, power exchanges, and stock exchanges, among others.

Market size

According to Department for Promotion of Industry and Internal Trade (DPIIT), FDI equity inflows in India in 2018-19 stood at US$ 44.37 billion, indicating that government’s effort to improve ease of doing business and relaxation in FDI norms is yielding results.

The net foreign direct investment stood US$ 3.034 billion in May 2019 and US$ 7 billion in June 2019. India invited US$ 7.8 billion of foreign investment in month of June 2019 as compared to US$ 1.6 billion in previous year.

Investments/ developments

India emerged as the top recipient of greenfield FDI Inflows from the Commonwealth, as per a trade review released by The Commonwealth in 2018.

Some of the recent significant FDI announcements are as follows:

In August 2019, Reliance Industries (RIL) announced one of India’s biggest FDI deals, as Saudi Aramco will buy a 20 per cent stake in Reliance’s oil-to-chemicals (OTC) business at an enterprise value of US$ 75 billion.

Government Initiatives

In Union Budget 2019-2020, the government of India proposed opening of FDI in aviation, media (animation, AVGC) and insurance sectors in consultation with all stakeholders.
In February 2019, the Government of India released the Draft National e-Commerce Policy which encourages FDI in the marketplace model of e-commerce.

Trips-

TRIPs provide minimum standards in the form of common set of rules for the protection of intellectual property globally under WTO system.
The TRIPs agreement gives set of provisions deals with domestic procedures and remedies for the enforcement of intellectual property rights.
Member countries have to prepare necessary national laws to implement the TRIPs provisions.
TRIPs cover eight areas for IPRs legislation including patent, copyright and geographical indications

The Advantages and Disadvantages of Trade Dumping

The primary advantage of trade dumping is the ability to permeate a market with product prices that are often considered unfair. The exporting country may offer the producer a subsidy to counterbalance the losses incurred when the products sell below their manufacturing cost. One of the biggest disadvantages of trade dumping is that subsidies can become too costly over time to be sustainable. Additionally, trade partners who wish to restrict this form of market activity may increase restrictions on the good, which could result in increased export costs to the affected country or limits on the quantity a country will import.

1. International Attitude on Dumping

2. Special Focus Initiatives:

3. Package for Agriculture:

4. Gems & Jewellery:

(a) Duty free import of consumables for metals other than gold and platinum allowed up to 2% of Free on Board (FOB) value of exports.

(b) Duty free re-import entitlement for rejected jewellery allowed up to 2% of FOB value of exports.

5. Handlooms & Handicrafts:

(a) Duty free import of trimmings and embellishments for Handlooms & Handicrafts sectors increased to 5% of FOB value of exports.

(b) Import of trimmings and embellishments and samples shall be exempt from Counter Vailing Duty (CVD).

(c) Handicraft Export Promotion Council authorized to import trimmings, embellishments and samples for small manufacturers.

6. Leather & Footwear:

(a) Duty free entitlements of import trimmings, embellishments and footwear components for leather industry increased to 3% of FOB value of exports.

(b) Duty free import of specified items for leather sector increased to 5% of FOB value of exports.

(с) Machinery and equipment for Effluent Treatment Plants for leather industry shall be exempt from Customs Duty.

7. Export Promotion Schemes:

8. New Status Holder Categorization:

i. Category Total performance over three years

ii. One Star Export House 15 crores

iii. Two Star Export House 100 crores

iv. Three Star Export House 500 crores

v. Four Star Export House 1500 crores

vi. Five Star Export House 5000 crores

(b) Star Export Houses shall be eligible for a number of privileges including fast-track clearance procedures, exemption from furnishing of Bank Guarantee, eligibility for consideration under Target plus Scheme etc.

9. EOUs:

Minimum investment criteria shall not apply to Brass Hardware and Hand-made Jewellery EOUs (this facility already exists for Handicrafts, Agriculture, Floriculture, Aquaculture, Animal Husbandry, IT and Services).

10. Free Trade and Warehousing Zone:

Each zone would have minimum outlay of Rs.100 crores and Five Lakh sq. mts. built up area.
Units in the FTWZs would qualify for all other benefits as applicable for Special Economic Zones (SEZ) units.

11. Import of Second Hand Capital Goods:

12. Services Export Promotion Council:

13. Common Facility Centres:

14. Procedural Simplification & Rationalization Measures:

Enhanced delegation of powers to Zonal and Regional offices of Directorate General of Foreign Trade (DGFT) for speedy and less cumbersome disposal of matters.
Time bound introduction of Electronic Data Interface (EDI) for export transactions. 75% of all export transactions to be on EDI within six months.

15. Pragati Maidan:

16. Legal Aid:

Financial assistance would be provided to deserving exporters, on the recommendation of Export Promotion Councils, for meeting the costs of legal expenses connected with trade related matters.

17. Grievance Redressal:

18. Quality Policy:

(a) DGFT shall be a business-driven, transparent, corporate oriented organization.

(b) Exporters can file digitally signed applications and use Electronic Fund Transfer Mechanism or paying application fees.

19. Bio Technology Parks:

20. Со-acceptance/ Avalisation introduced:

As equivalent to irrevocable letter of credit to provide wider flexibility in financial instrument for export transaction.