India: Foreign Trade Policy

In performing this reflective analysis on countries that are members of the World Trade Organization, I chose the following; Singapore, China, Germany, Japan, and the United States, placing focus on their GDP, trade to GDP ratio, current account balance, contribution to WTO budget, and their rank in the World Trade.I chose these particular members based on the fact, they were either ranked in the top 5 as exporters and importers or they provided a high Trade to GDP ratio.

Asia-Pacific Economic Cooperation (APEC) is a forum for 21 Pacific Rim economies. APEC members are described as ‘economies’ because the APEC cooperative process is predominantly concerned with trade and economic issues, with members engaging with one another as economic entities. APEC promotes free trade throughout the Asia-Pacific region. It was established in 1989 in response to the growing interdependence of Asia-Pacific economies and the advent of regional trade blocs in other parts of the world; to fears that highly industrialised Japan (a member of G8) would come to dominate economic activity in the Asia-Pacific region; and to establish new markets for agricultural products and raw materials beyond Europe.(Andrew Elek)

Over the years, the World Trade Organization (WTO) has prided itself as the central element in the international economic management system across the world. This system incorporates other international bodies such as the World Bank, the International Monetary Fund as well as a series of other regional trade regimes that are growing. Collectively, these structures provide a mechanism that addresses international economic interdependence as well enhancing economic interactions that offer the promise of maximizing social welfare across the globe. These aspects have been brought about due to the focus given in the post-Cold War era where international relations have evolved beyond a narrow emphasis on politico-military affairs.

With the lowest integrated level in regional economic integration, Free Trade Arrangement (FTA) is applied most frequently, accounting for almost 90% of regional integration. (Hill 2007) Theoretically, all trade barriers both tariffs and non-tariff ones are eliminated in an ideal FTA. However, each member countries are free to determine independent trade policies against nonmember countries. (Hill 2007) Currently, the number of free trade arrangements is proliferating. FTA spread almost all over the world with the European Free Trade Association (EFTA), the North American Free Trade Agreement (NAFTA) and the Association of Southeast Asian Nations (ASEAN) are the most famous trade blocs. Additionally, in the Northeast Asia, China, Japan and

In 1994, the leaders of the thirty-four democratic countries of the Western Hemisphere launched the process of creating a Free Trade Area of the Americas (FTAA). The FTAA will be established by 2010 with the aim of gradually eradicating barriers to trade and investment in the region. The final characteristics of the FTAA will be determined through negotiations by government officials from the thirty-four participating countries. The trade issues that are presently under discussion are: market access; investment; services; government procurement; dispute settlement; agriculture; intellectual property; antidumping, subsidies and countervailing duties; and competition policy. Guiding principles for these negotiations

According to the U.S. State Department (2012), “India's population is estimated at more than 1.1 billion and is growing at 1.3% annually. India has the world's 12th-largest economy with the third-largest in Asia behind Japan and China”. The improvement in India’s economy was influenced in part by encouragement from the World Trade Organization, which aided in negotiating a decrease in import taxes; allowing India to function from a healthier position economically. This move momentously changed India’s ability to offer goods and services. (U.S. Department of State)

The policy issue I have chosen is trade with foreign nations. The approach that the United States government has adopted to address foreign trade is varied depending on the nation in question. For some nations, the United States has what is called a Free Trade Agreement which is an “arrangement among two or more countries under which they agree to eliminate tariffs and nontariff barriers on trade in goods among themselves” (Cooper, "Free Trade Agreements: Impact on U.S. Trade and Implications for U.S. Trade Policy."). This means that the countries within these arrangements are agreeing not to place taxes on imports or exports and to drop other restrictions. Some countries that are included in Free Trade Agreements with the United States are Israel (since 1985), Canada (since 1989), and Mexico (since 1994) (Cooper, "Free Trade Agreements: Impact on U.S. Trade and Implications for U.S. Trade Policy."). Canada and Mexico are included in a special Free Trade Agreement known as the North American Free Trade Agreement or NAFTA which was created in January 1994. Although these nations are able to trade freely with the United States, there are some that are not included in Free Trade Agreements. The countries that work under these other forms of trade agreements are those that have not agreed to be free from tariffs or other barriers. In fact, in 1934, the Reciprocal Trade Agreements Act gave the power to set tariffs to the President

The trade policies around the world are different depending on which country a person lives in. There are many different regulations because there are so many different foreign policies. If a person wants to be successful in doing business globally, then they would have to abide by the country they are interested in doing business with, standards of how to do business. It would be disrespectful to try to do business with another country and not know any of their customs or beliefs, because what you are bringing to the table could be offensive to them which could leave you empty handed if one does not operate right under the business standards of the foreign company.

Dating back to 1949, the World Trade Organization was preceded by the General Agreement on Tariffs and Trade. The primary purpose of the General Agreement on Tariffs and Trade was to reduce tariffs and other barriers to trade, as well as to eliminate preferences in order for trade to be mutually advantageous. Currently, the General Agreement on Tariffs and Trade is still in effect under the World Trade Organization, which was established to facilitate international trade, economic growth and development. However, the goals of the World Trade Organization have been called into question. Although the intergovernmental organization was established in order to aid developing states to succeed into developed states, the World Trade Organization has been criticized for widening the social gap between the Global North and South. The World Trade Organization’s agenda and implementation of its agreements have all served to advance the interests of developed states, sidelining the interests of developing states. What is increasingly more alarming is the fact that three-fourths of the members within the World Trade Organization compromise of developing states. This paper will aim to analyze the various ways in which the World Trade Organization has marginalized and allowed for the exploitation of developing states. Through examining the consequences of foreign direct investment, the dispute settlement process, tariff escalation and the TRIPS agreement, this paper will

Trade Policy Reforms: Trade Policy Reform liberalised the policy of import substitution mentioned earlier. As a result of which import license was abolished for capital goods & intermediates in 1993. Also govt. of India had adopted a flexible exchange rate in order to deal with balance of payments through exchange rate flexibility. On April 1, 2001 after 10 years the reforms started finally restrictions imports of manufactured products and agricultural products were removed (Ahluwalia*). So, abolishment of import license was the first element of the trade policy, the second element of this strategy was to reduce tariff protection. Average rate of import duty which was 72.5% in 1991-92 had been reduced to 24.6% in 1996-97. But again in next

Developed nations trumpet the claim that the answer to developing nations’ international trade issues is untrammeled or open market activity as opposed to government intervention by developed nations’ governments. This begs the question as to what extent the governments of developed nations are or should be responsible for supporting developing countries’ growth in international trading markets. Often the protectionist actions of developed nations’ governments to enhance their own international trading activities are the very hindrances faced by the developing countries, so much so that the developed nations are morally obligated to support the developing countries to offset the roadblocks created by these same developed countries with tariffs, quotas and other trade barriers.

Secondly, the governments of the present have accepted the idea that economic openness and business liberalization is a must for any economy to thrive on the global platform. Thus treaties such as ASEAN, WTO, NAFTA etc have helped break much of the global trade barriers that had previously existed and have subsequently contributed to the formation of a global, interdependent and highly sophisticated “World Economy”. As a result of these treaties, governments have customized their trade policies in accordance to them. One of the most significant events of this phenomenon was the introduction of China into the World Trade Organization (Bransetter, 2008, p.655-659).

Trans-Pacific Partnership is considered one of the most ambitious free trade agreements, involving 12 countries—Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Pure, Singapore, United States, and Vietnam. The main goal of the partnership is to promote free trade by decreasing tariffs. Signatories also hope to strengthen relationship on economic policies (“Summary of TPP” 2015). For Vietnam, signing TPP is not only an economic consideration but also a political decision. TPP acts as a way to draw the members closer to US and balance power against China, preventing the rising power from dominating Asian market. Due to the elimination of tariffs, Vietnam will reap more benefits from obtaining raw materials from signatories in the TPP than from China and hence reduces its economic dependence on China for raw materials.

If I were financing trade with India, my biggest worry would be on Foreign Currency Translation Risk. This relates to conversion of a bank's financial statements from one currency to another. At a time when international credit markets experienced gross inflows of short term credit to India, major world economies were facing economic down turn. Even the United States whose currency is used in major international trade was at this time grappling with recession. The dollar lost marginally against major world currencies.

During the 1990s more Asian countries were integrated into the trading system. The developing countries have been catching up with or surpassing high-income countries in their trade openness, reflecting the widespread convergence of low- and middle-income countries’ trade systems toward the traditionally more open trading regimes in place in advanced economies .