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REG. NO- 10901750


(1) Introduction of import export or international trade.

(2) Impediment to the growth of foreign trade.

(3) Future Challenges in import export sector.

(4) Initiatives taken by Indian Govt. to promote import

export sector.

(5) References.
(1) Introduction of import export or international
Import export businesses, also known as international trading, are one of the hottest commercial
trends of this decade. American companies trade in over 2.5 trillion dollars a year in
merchandise, of which small businesses control over 95 percent. As the owner of an import
export enterprise, you can work as a distributor by focusing on exporting and importing goods
and services that cannot be obtained on national soil (e.g., Russian caviar and French perfumes)
or those that are cheaper when imported from other countries (e.g., Chinese electronics). In
addition, you can also open an export management company (EMC), where you can help an
existing corporation market its products in a foreign country by arranging the shipping and
storing of the merchandise for them without doing the actual selling. EMCs can specialize in one
industry or work with different types of import export manufacturers. It is also possible to act as
a broker for a company, working on commission over the actual sales. This is a great choice for
products that are guaranteed to sell because of high demand or an established brand name.
International trade is exchange of capital, goods, and services across international borders or
territories.[1]. In most countries, it represents a significant share of gross domestic product
(GDP). While international trade has been present throughout much of history (see Silk Road,
Amber Road), its economic, social, and political importance has been on the rise in recent
centuries. Industrialization, advanced transportation, globalization, multinational corporations,
and outsourcing are all having a major impact on the international trade system. Increasing
international trade is crucial to the continuance of globalization. Without international trade,
nations would be limited to the goods and services produced within their own borders.
International trade is in principle not different from domestic trade as the motivation and the
behavior of parties involved in a trade do not change fundamentally regardless of whether trade
is across a border or not. The main difference is that international trade is typically more costly
than domestic trade. The reason is that a border typically imposes additional costs such as tariffs,
time costs due to border delays and costs associated with country differences such as language,
the legal system or culture. Another difference between domestic and international trade is that
factors of production such as capital and labour are typically more mobile within a country than
across countries. Thus international trade is mostly restricted to trade in goods and services, and
only to a lesser extent to trade in capital, labor or other factors of production. Then trade in
goods and services can serve as a substitute for trade in factors of production. Instead of
importing a factor of production, a country can import goods that make intensive use of the
factor of production and are thus embodying the respective factor. An example is the import of
labor-intensive goods by the United States from China. Instead of importing Chinese labor the
United States is importing goods from China that were produced with Chinese labor.

International trade is also a branch of economics, which, together with international finance,
forms the larger branch of international economics.

Top trading nation

Rank Country Exports + ImportsDate of
- European Union (Extra-EU27) $3,197,000,000,000 2009]
1 United States $2,439,700,000,000 2009 est.
2 People's Republic of China $2,208,000,000,000 2009 est.
3 Germany $2,052,000,000,000 2009 est.
4 Japan $1,006,900,000,000 2009 est.
5 France $989,000,000,000 2009 est.
6 United Kingdom $824,900,000,000 2009 est.
7 Netherlands $756,500,000,000 2009 est.
8 Italy $727,700,000,000 2009 est.
- Hong Kong $672,600,000,000 2009 est.
9 South Korea $668,500,000,000 2009 est.
10 Belgium $611,100,000,000 2009 est.
11 Canada $603,700,000,000 2009 est.
12 Spain $508,900,000,000 2009 est.
13 Russia $492,400,000,000 2009 est.
14 Mexico $458,200,000,000 2009 est.
15 Singapore $454,800,000,000 2009 est.
16 India $387,300,000,000 2009 est.
17 Taiwan $371,400,000,000 2009 est.
18 Switzerland $367,300,000,000 2009 est.
19 Australia $322,400,000,000 2009 est.
20 United Arab Emirates $315,000,000,000 2009 est.

Top traded commodities (exports)

Rank Commodity Value in US$('000) Date of
1 Mineral fuels, oils, distillation products, etc $1,658,851,456 2009
2 Electrical, electronic equipment $1,605,700,864 2009
3 Machinery, nuclear reactors, boilers, etc $1,520,199,680 2009
4 Vehicles other than railway, tramway $841,412,992 2009
5 Pharmaceutical products $416,039,840 2009
6 Optical, photo, technical, medical, etc apparatus $396,337,696 2009
7 Plastics and articles there of $386,628,064 2009
8 Pearls, precious stones, metals, coins, etc $320,174,080 2009
9 Organic chemicals $310,106,432 2009
10 Iron and steel $273,024,416 2009

Regulation in international trade

Traditionally trade was regulated through bilateral treaties between two nations. For centuries
under the belief in mercantilism most nations had high tariffs and many restrictions on
international trade. In the 19th century, especially in the United Kingdom, a belief in free trade
became paramount. This belief became the dominant thinking among western nations since then.
In the years since the Second World War, controversial multilateral treaties like the General
Agreement on Tariffs and Trade (GATT) and World Trade Organization have attempted to
promote free trade while creating a globally regulated trade structure. These trade agreements
have often resulted in discontent and protest with claims of unfair trade that is not beneficial to
developing countries. Free trade is usually most strongly supported by the most economically
powerful nations, though they often engage in selective protectionism for those industries which
are strategically important such as the protective tariffs applied to agriculture by the United
States and Europe. The Netherlands and the United Kingdom were both strong advocates of free
trade when they were economically dominant, today the United States, the United Kingdom,
Australia and Japan are its greatest proponents. However, many other countries (such as India,
China and Russia) are increasingly becoming advocates of free trade as they become more
economically powerful themselves. As tariff levels fall there is also an increasing willingness to
negotiate non tariff measures, including foreign direct investment, procurement and trade
facilitation. The latter looks at the transaction cost associated with meeting trade and customs
procedures. Traditionally agricultural interests are usually in favour of free trade while
manufacturing sectors often support protectionism. This has changed somewhat in recent years,
however. In fact, agricultural lobbies, particularly in the United States, Europe and Japan, are
chiefly responsible for particular rules in the major international trade treaties which allow for
more protectionist measures in agriculture than for most other goods and services. During
recessions there is often strong domestic pressure to increase tariffs to protect domestic
industries. This occurred around the world during the Great Depression. Many economists have
attempted to portray tariffs as the underlining reason behind the collapse in world trade that
many believe seriously deepened the depression. The regulation of international trade is done
through the World Trade Organization at the global level, and through several other regional
arrangements such as MERCOSUR in South America, the North American Free Trade
Agreement (NAFTA) between the United States, Canada and Mexico, and the European Union
between 27 independent states. The 2005 Buenos Aires talks on the planned establishment of the
Free Trade Area of the Americas (FTAA) failed largely because of opposition from the
populations of Latin American nations. Similar agreements such as the Multilateral Agreement
on Investment (MAI) have also failed in recent years.

Risk in international trade

Companies doing business across international borders face many of the same risks as would
normally be evident in strictly domestic transactions. For example,

• Buyer insolvency (purchaser cannot pay);

• Non-acceptance (buyer rejects goods as different from the agreed upon specifications);
• Credit risk (allowing the buyer to take possession of goods prior to payment);
• Regulatory risk (e.g., a change in rules that prevents the transaction);
• Intervention (governmental action to prevent a transaction being completed);
• Political risk (change in leadership interfering with transactions or prices); and
• War and other uncontrollable events.

In addition, international trade also faces the risk of unfavorable exchange rate movements (and,
the potential benefit of favorable movements).

(2) Impediment to the growth of foreign trade

Even though, International Trade is doing very well these days, there lies a challenge at every
step. With increase in competition, international trade is subjected to many challenges.
Challenge of international trade may be psychological, infrastructural, and physical. The
challenge of international trade and other associated information and guidelines are usually made
known in the trade policies. The above mentioned three challenges affect the economy at the
enterprise and micro levels. In addition to the trade associated challenges in international trade, a
new challenge, which is lurking large, and had practically devastated the United States of
America, is the fight against terrorism. After the terrorist attacks on the World Trade Center,
there was global economic slowdown. International trade suffered massively. There were
tremendous fluctuations in the exchange rates. Starting from anthrax attacks to the terrorist
attacks on Sept 11th, the trade scenario worldwide has changed dramatically since then. It is
argued that International Trade adversely affects wages, particularly when trade takes place
between two countries in one of which wages are very low and in the other very high. Like the
trade between countries like America and China or Japan.

Certain Arguments against International Trade

Some of the arguments advanced against international trade include the following:
* A country which depends on imports is in a vulnerable position during war.
* International Trade become a reason for economic instability and result into
conflicts with economic planning.
* International Trade inflicts harm on those home industries whose prduct are
displaced by the imports.
* It implied dependence on foreign markets as sources of supply and as outlets
for domestic production. Some people felt dependence to be dangerous.
They felt to reduce such dependence or entirely eradicated.

Hindrances Faced

International trade involves many countries. Every country is expected to abide by certain
norms, which govern the logistics in international trade. The economic condition, political make
up of a particular nation is never constant. In the event of an unforeseen event, taking place in
any country, the trading partners are also affected to a great extent.

National Defence

If a nation is depended on foreign sources of supply is in a woeful situation during war. Taking
the experience of England world war is a cited proof, in which the blockade of England by
German submarines had brought England to their knees by cutting off imports of food and
essential raw materials.

Instability and Economic Planning

In 1930s when the Great Depression spread from one country to another by disrupting the
international flow of goods, services and capital. Today the argument against international trade
has been reinforced by government policies directed toward achieving full employment and
economic growth. Most nations are unable to achieve the objectives of full employment and
growth as members of an in international trading system.


Attacks on international trade have been directed against imports. There is always a risk for the
protection of domestic industry against foreign competition. It also affects national security,
economic stability, employment, protectionism and others.
Non Tariff Barriers

There are certain restrictions such as Quantitative Restrictions, Voluntary Export Restraint
(VER), Licensing and Administered Protection. Quotas are aimed at reducing the quantity of
imports/exports in order to protect the interests of domestic producers or to conserve foreign
exchange. There are certain chances for misusing the liberalization.

Other Barriers

There are also other common barriers which are faced by all nations like Language Barrier,
Political Barrier, Infrastructure Barriers, Currency Barriers which becomes impediments to
International Trade. It also affects Growth of the country which affects their GDP and also
relationship between two countries.

In order to overcome the challenges faced by the international trade market, several
measures can be adopted. With regard to shipments, export and import of
commodities, if the shipment can be traced in real time, loss worth several million dollar can be

Problems faced in import export sector

CPPCC Vice Chairman Bai Lichen on August 2, 2008 at the second session of the APEC
Business Advisory Council SME Summit, the opening ceremony of the Asia-Pacific, said the
size and the market prices due to the influence of other factors, the SME development is faced
with Many common problems, where the financing problem is encountered in the development
of SMEs, the biggest bottleneck. Bai Lichen said that China's small and medium enterprises
account for about 99% of total number of enterprises, the output value accounts for 58% of gross
domestic product, the export volume of 68%, paid 48% taxes, providing 75 percent of urban
employment opportunities. Whether the State rich and powerful people, whether rich, life is rich
and colorful, the economy is vibrant, with this country is closely related to the degree of
development of SMEs. SME is less than five million yuan registered capital, total assets of 20
million yuan the following annual sales income of 40 million yuan the following business.
Along with the deepening of China's economic restructuring, SMEs in the national economy is
playing an increasingly important role. Since the removal of non-public economy countries to
engage in foreign trade restrictions, more and more SMEs to obtain foreign trade rights.
However, late start due to small and medium enterprises, small own capital accumulation, capital
shortage has become a bottleneck restricting the further development of small and medium
enterprises. Although the mode of operation of China's small and medium enterprises and
marketing initiatives and flexible than the large enterprises, the difficulty of financing have to
much higher than on large enterprises. As the banks continue to develop new financing products,
and work intensity increased, trade finance income in total income in the bank gradually increase
the proportion. At the same time, the face of the credit crunch this year, the new situation, for
various commercial regarded development objectives aimed at the SME credit market. In this
way, how to combine the features of the development of SMEs in international trade finance for
SMEs has a major research and practical significance.
Second, the main reason for SMEs to trade finance difficult
International Trade Finance is based on relying on international settlement in the international
settlement of the related links provided on the financial intermediation, importers and exporters a
choice of method of settlement will determine the types of trade financing and operational
processes, through the settlement areas of financing, to accelerate the enterprise's liquidity to
solve the enterprise accounts receivable payments and external financial difficulties faced.
International Trade Finance is based on the international trade-based, and it involves not only
both domestic and foreign trade market, with different rules of law and multi-faceted aspect of
the complex, but also closely integrated with the import and export related banking and
commercial dual-credit . Relative to large enterprises, SMEs, trade finance faces more risk
factors, and therefore face more difficulties.
1, SMEs internal reasons. Small and medium enterprises operating in China's import and
export large number, but the overall poor efficiency. Some loss-making enterprise management
confusion, poor credit, often due to lack of funds and the use of financing, loans, letters of credit
financing means packing cash in bank funds. Short-term bank financing is often long-term
occupation in fact, seriously affect the liquidity of banking assets, and security. At the same time
the existence of trade speculation course of business operations, for example, in a certain period,
a difference larger domestic and foreign goods, domestic traders competing imports of such
goods. Such as newsprint, pulp, chemical fiber, steel, sugar, refined oil, but once the domestic
market prices of these commodities decline, payment can not be recycled, they pose a risk to the
bank funds.
International import and export trade, from negotiation, contract to fulfillment is a kind of
commercial credit. To this end, the two sides of the credit status of import and export enterprises,
management capabilities, import and export of goods, price, quality, delivery period, market
conditions and exchange rate movements as well as the productivity of enterprises and many
other factors will affect the trade, whether it completed successfully. During this period, any one
part of a problem, are likely to lead to business failure, resulting in trade disputes and claims, a
trade risk. To mechanical and electrical equipment imports the project, for example, SMEs due
to lack of adequate technical support, once the imported equipment not working correctly, or can
not meet the technical requirements of the end-user situation, refused to pay end-users will be
faced with the problem, leading to the risk of lending.
From the bank's point of view, the banks as a financial enterprise, commercial banks
operating principle is the mobility, safety and profitability. Which profit is the fundamental
purpose of security is the basic premise. Therefore, in business activities, commercial banks
must ensure that their funds were safe, that is, losses and shortages can not occur, so that
commercial banks loans to SMEs want the enthusiasm is not high.
2, the reasons for the banking system. Import and Export Bank to promote trade, the two
sides played a key role in the completion of foreign banks are operating according to commercial
principles in the management, such as poor management and are subject to the possibility of
failure. And medium-sized bank in the selection agent, in the absence of adequate capacity to
conduct a full investigation agents abroad, the lack of experience in long-term cooperation and
their agents, while some developing countries, external trade, financial practices, insufficient
knowledge of foreign trade management policy , in the trade settlement from time to time may
have been unreasonably refuse to pay and so on. A general lack of domestic bank financing for
SMEs applicable to financial products, credit evaluation system and guarantee system. China's
financial policies and financial systems are based on state-owned enterprises, especially large
state-owned enterprises as the main target of design implementation, the bank's credit evaluation
system, lack of evaluation module for small and medium enterprises, but rather refer to large
enterprise standards, too much to consider corporate financial targets, leading to a financing
needs of enterprises are unable to obtain loans. Therefore, to solve the problem of SME
financing difficulties, we must address the characteristics of small and medium enterprises, the
development of more effective financing model.
3, the external policy reasons. Importers and exporters in countries where political and
economic stability, legal soundness, trade, foreign exchange control is strict and other factors
critical to the smooth conduct of trade. Because trade finance between different countries
involved in claims settlement and payment of debt, when the trading partner appears political
instability, exchange controls, sanctions and other factors, can make it difficult to fulfill trade
contracts, so that the bank's trade finance at risk. So, ignore the country and political risks, there
are still potential risk loans. [Free Paper Download Center hi138/Com]
3, SME trade finance measures
1, drawing on the experience of developed countries in international trade financing. The
developed countries in international trade financing, start early, rapid development, there are
many success stories we can learn from:
1) to support national exports. Developed countries generally adhere to their export financing
for the purchase of machinery and equipment and other commodities.
2) The loan approval separation. Export credit and guarantees for critical review of the
project, and strive to ensure the repayment of loans. USA review the loan request transaction-
and decide to review the status of foreign importers and the creditworthiness of the property.
3) financing the diversification of funds. Mainly the state budget funds, multi-party to raise
other funds. Western countries, the source of export financing relies mainly on the state budget,
in addition, there are private funds and local funding. Such as Italy's export credit and
guarantees, mainly depend on the state budget funds, lack of funds at home and abroad to issue
bonds to raise funds.
2, enhance the credit rating of SMEs. The implementation of the policy on the need
predictability, stability and continuity, in which predictability is the key. Of disloyal behavior
must be severely punished, so that disloyal people can get benefits, so that enterprises can
become consciously disloyal behavior; the same time, small and medium enterprises in order to
obtain bank support to a large extent determined by the enterprise itself, so enterprises will have
to practice hard, "Strength", and strive to create a good business performance.
3, to increase the capital supply side and the mutual communication between the lenders. At
present, China mainly come from the banks lending to SMEs, therefore, allow banks to learn
more about their business situation and future development prospects and timely payment of
interest repayment, to maintain a good credit history. SMEs should also be understood that the
bank's trade finance business and banking conditions for approval of trade finance, process and
audit the focus of Bank trade financing business do not understand the situation, it is very
difficult to expand the effective use of the banking trade finance business volume of SMEs.
Accordingly, banks should also be based on the current trade market, the emergence of new
trends and new requirements for the development and launch of the actual needs of SMEs, trade
finance products.
4, to improve China's trade financing system. Banks to speed up the pace of reform, and
actively adjust the credit structure, vigorously develop diversified financial services, especially
in trade finance for SMEs should be conducted to financial services, and promote the
development of SMEs. As soon as possible to formulate relevant laws and regulations,
strengthening self-regulation as well as the construction of credit system for private security
agencies to create a good living environment and guide private investment into the area of trade
finance for SMEs. To create a policy-oriented financial system for SMEs, and should gradually
improve relevant systems, with a view to SME trade finance solution to the problem. The
legislative branch should be integrated with the international trade in the actual work and future
development trends, based on national conditions and also with international standards as soon
as possible to establish a sound legal system for trade financing. Banks and SMEs should
carefully examine the existing laws and regulations, analysis of international practices and
China's current problems between the legal environment to develop feasible operating plans to
build the product-oriented business operating procedures in order to carefully study the standard
contract certificate format the text to avoid business legal risks that may arise.
5, train relevant professionals. First, banking, foreign trade enterprises to personnel on the
business of international trade, international finance, law and other related knowledge and
training so that they understand the bank's trade finance products, understanding the
characteristics of various products; followed by operational staff to strengthen the sense of risk.
In peacetime work, should pay attention to lessons learned continue to accumulate experience
and knowledge, especially versed in international trade and transport insurance, pay close
attention to international trade market trends, understand the commodities market on changes in
foster international trade market insight, enhance recognition the potential risks.
6, the development of low-risk bank financing Forfaiting. Banks should be able in due course
of business to the enterprise to promote the appropriate species, to play the role of financial
advisers. According to small and medium enterprises to conduct normal business, trade, import
and export financing needs to be a positive innovation in financial services, for traditional
products, to run out of new ideas. If packaged loan business is not limited to operations under the
letter of credit, should be gradually expanded to the collection and export invoice financing,
import business in turn can be used to open letters of credit, standby letters of credit and other
forms of business to meet the various financing needs of SMEs to promote enterprise
development. In addition, domestic letters of credit, government procurement, closed credit,
business and other derivative instruments are also more suitable for international financing of

(3) Future Challenges in import export sector

The World Trade Report 2007 has traced sixty years of multilateral trade co-operation, starting
with the birth of the GATT on 1 January, 1948. The world has changed a good deal over those
six decades and so too has the multilateral trading system. Globalization has brought economic
interaction among nations closer than ever before, thanks in no small part to revolutions in
information and transport technology and growing openness in government policy. The trend
towards increased inter-dependency has rendered international economic co-operation more
complex and multi-faceted. Co-operation among nations has become harder to manage and more
influential in shaping the circumstances in which people live. The subject matter covered by the
system has expanded significantly and many more players are involved in shaping the system.
The 23 original signatories of the GATT have now become the 151 Members of the WTO.
This report has attempted to provide a better understanding of why countries have chosen to
cooperate with one another in trade matters down the years. This may seem a simple question,
but it turns out to have several answers. Governments embrace varying objectives at different
times, reflecting, among other things, the relative standing of their economies in the international
order, and the priorities imposed by their level of economic development. By demonstrating the
sheer heterogeneity of interests at stake, there port highlights the fragile and incomplete nature of
cooperative endeavors in a changing and uncertain world – in other words, the continuing
challenge of shaping and maintaining mutually advantageous co-operative arrangements.
Effective co-operation among diverse economies with differing priorities requires clarity of
thought and foresight, as well as a willingness to seek accommodation. A failure to
secure co-operative outcomes may well disadvantage all parties to a potential agreement in one
way or another, but deals can nevertheless prove elusive. An additional requirement for
sustainable and stable co-operation is that governments find ways of addressing adjustment costs
and the re-distributional impact of change – in other words, of managing the challenges of
globalization. Adjustment and income distribution have not been explored here, and they pose
challenges that go well beyond the impact of trade policy changes in an economy.
An historical review of trade relations prior to the establishment of the GATT/WTO strongly
points to the importance of building and sustaining institutional arrangements to underwrite
international trade relations. International institutions can become moribund, with shrinking
relevance, if governments do not take care of them, and institutional decline will likely be harder
to reverse the further it goes. At the same time, it has been repeatedly demonstrated that if
institutions do not adapt to change, they will wither, becoming increasingly regarded as vestiges
of an older world driven by different interests than
those that shape the present. Even when governments show willing to adapt and refashion their
co-operative arrangements in recognition of changing circumstances, there will always be a
sense in which trade agreements remain incomplete. Agreements cannot foresee every
eventuality. So while institutions and contractual provisions can mitigate the uncertainties
connected with contractual incompleteness, they can hardly eliminate them. This brings with it
two implications. One is that disputes are a natural outflow of contractual in completeness. The
other is that dealing with incompleteness requires a delicate balance between flexibility and
adaptation on the one hand, and the preservation of predictability and stability on the other.
The report has reviewed a rich history of change and institutional adaptation in the multilateral
trading system. It has identified lessons from past experience as well as a number of challenges
to come. History shows how the multilateral trading system’s focus of purpose proved to be its
strength in the early years. The system expanded inexorably over the decades, in terms of
membership, issue coverage and institutional purpose, culminating in the establishment of the
WTO in 1995. A rather uniform set of issues has tended to dominate the multilateral trading
agenda over the life of the institution. Sometimes the idiom has changed and the details may
differ through time, but many of the essential challenges involved in searching out mutually
beneficial cooperative arrangements remain much the same. II Moving beyond the general
requirements of successful cooperation – adaptability and flexibility in the face of change,
effective management of increasingly complex agendas among ever more numerous and
diverse economies, and an ability to manage the effects of change on domestic populations –
mention may be made of specific challenges that are still with us and others that may emerge.
Among the greatest challenges that the multilateral trading system faces is how to integrate
developing economies into the system in a manner that contributes to their growth and
development aspirations. Managing the relationship between the multilateral trading system and
regional/bilateral trade agreements is another continuing challenge. Thirdly, over at least the last
thirty years governments have had to manage a continuing debate on the shape and content of
the multilateral trading rules, especially around the question of whether and how to bring new
topics onto the agenda. The world changes and institutions have to find new accommodations
within this shifting environment. Fourth, the system has had to manage trade disputes among
parties that centre on their perceptions of acquired rights and obligations. Not with standing a
continuing interest among some parties in modifying the GATT/WTO dispute settlement system,
it has done an impressive job of this over the years. These are all issues we have taken up and
analyzed at some length in the report.
But what of future challenges, of issues that are beginning to emerge and that call for new co-
operative efforts? These are not issues we have explored in this retrospective on the trading
system, and any listing of future challenges is inevitably speculative and incomplete. It is
nevertheless interesting to consider briefly what might demand the attention of the international
trading community in the years to come. Multilateral, plurilateral and unilateral actions to reduce
tariffs have raised the profile of other measures that determine trade flows, the conditions of
competition and opportunities to gain from trade. Often referred to generically as non-tariff
measures, these cover a wide range of interventions. They have long been a GATT/WTO
concern and the subject of negotiated agreements. These concerns will probably assume greater
prominence in the future. More generally, there is the whole question of how regulation
affects economic conditions and what challenges are implied in regulatory co-operation
internationally, not least in terms of minimizing discrimination among countries. Another issue
bound to increase in prominence is trade in services. Indeed, the WTO’s efforts to provide
a framework for co-operation in the services area since 1995 – which we have dealt with only
scantily in this report – provides a good example of creative international co-operation in a new
field, but also a stark illustration of how much remains to be done. The complexity of services
transactions complicates the architecture of institutional arrangements for co-operation. But there
is growing realization of how vital services are in the workings of all economies, and what the
role of trade might be in providing opportunities to benefit from an efficient and well priced
supply of services. Trade in services has become even more important in recent years in light of
evolving business practices, including growing trends in production sharing and off-shoring. A
final issue that might be mentioned here is not a new one, but one that will almost certainly
assume greater prominence. We refer to environmental issues and their relationship to trade.
While we arguably understand better today than we did two or three decades ago how
environment and trade interact, many new and more intensified environmental concerns, such as
global warming, are assuming greater prominence in the public mind and in policy circles. How
trade and the multilateral trading system will contribute to managing environmental challenges is
doubtless an issues about which we shall hear a lot more. Continuing and future challenges
notwithstanding, the shared international experience of sixty years of the GATT/WTO is a
positive story. Plenty of governments, non-state actors, commentators and critics want to
improve the system, but very few would gainsay its core contribution to a more stable and
prosperous world. An unvarnished look at the less than fully resolved issues of the past, the
outstanding challenges, and the successes – as attempted in this report – will, we hope, stimulate
thought on how best to manage the future.

(4) Initiatives taken by Indian Govt. to promote

import export sector
Promotion of export has been a major thrust area of the Ministry of Commerce and Industry for
the last three decades. Apart from this. many other Central / State Ministries have also been
involved in the promotion of India’s exports. Many Export Promotion Councils, Public Sector
Undertakings, Chambers of Commerce, Industries’ Associations and Services Organizations are
also contributing towards the promotion of Indian exports. The facilities and incentives presently
available to the Indian exporters include the following.
Marketing Development Assistance (MDA)
The Ministry of Commerce and Industry has a scheme of MDA, which was launched in 1963
with a view to stimulate and diversify the export trade, along with the development of marketing
of Indian products and commodities abroad. The MDA is utilized for: Market research,
commodity research, area survey and research; Participation in trade fairs and exhibitions;
Export publicity and dissemination of information; Trade delegation and study teams;
Establishment of offices and branches in abroad; Grant-in-aid to Export Promotion Councils and
other approved organizations for the development of exports and the promotion of foreign trade;
and any other scheme which is generally aimed at promoting the development of markets for
Indian products and commodities abroad.
Market Access Initiative (MAI)
The Ministry of Commerce and Industry has introduced the MAI in April 2001 with the idea that
the Government shall assist the industry in R&D, market research, specific market and product
studies, warehousing and retail marketing infrastructure in select countries and direct market
promotion activities through media advertising and buyer-seller meets. Financial assistance shall
be available under the scheme to EPCs, industry and trade associations and other eligible
activities, as may be notified from time to time. A small allocation of Rs 42 crore has been made
for 2002-03. 83
Central Assistance to States
The State Governments shall be encouraged to fully participate in encouraging exports from
their respective States. For this purpose, a new scheme “Assistance to States for Infrastructural
Development for Exports” (ASIDE) has been initiated which would provide funds to the States
based on the twin criteria or gross exports and the rate of growth of exports from different States.
Eighty per cent of the total funds would be allotted to the States based on the above criteria and
remaining 20 per cent will be utilized by the Centre for various infrastructure activities that cut
across State boundaries, etc. A sum of Rs 49.5 crore has already been sanctioned for 2001-02
and further a sum of Rs 330 crore has also been approved for 2002-03. The State shall utilize this
amount for developing complementary and critical infrastructure.
Towns of Export Excellence
A number of towns in specific geographical locations have emerged as dynamic industrial
locations and handsomely contributing to India’s exports. These industrial cluster-towns have
been recognized with a view to maximizing their export profiles and help in upgrading them to
move up the higher value markets. A beginning is being made to consider industrial cluster
towns such as Tirupur for Hosiery, Panipat for Woollen Blankets and Ludhiana for Woollen
knitwear. Common service providers in these areas shall be entitled for EPCG Scheme, funds
under the MAI scheme for creating focused technological services, priority assistance for
identified critical infrastructural gaps from the Scheme on Central Assistance to States. Units in
these notified areas would be eligible for availing all the Exim Policy Scheme.

Special Economic Zones (SEZ)

The Government of India had announced an SEZ scheme in April 2000 to promote India’s
exports. Four Export Processing Zones (EPZ), namely Noida (UP), Falta (West Bengal),
Chennai (Tamilnadu), and Viskhapatnam (Andhra Pradesh) have been converted into SEZs from
1 January 2003. There are seven EPZs in the country. In addition, three formal approvals and 14
in-principle approvals have been granted for the establishment of SEZs in private, state, and joint
sectors. Policy initiatives taken to promote SEZs include duty-free import/domestic procurement
of goods for development, 84
operation and maintenance of SEZs and SEZ units, external commercial borrowing up to $500
million in a year without any maturity restriction through recognised banking channels and a
facility to set up overseas banking units in SEZs. The SEZ units have also been getting
exemption from central sales tax on sales made from the domestic tariff area to SEZ units and
exemption from service tax to SEZ units and developers.
Duty Drawback on Goods Exported
Under this Duty Drawback scheme export products get relief of incidence of customs and excise
duties paid on raw materials and components used at various stages of production. It is defined
as “rebate of duty chargeable on any imported or excisable material used in the manufacture of
goods exported from India. Duty Drawback is admissible for exports irrespective of mode of
export, i.e. whether dispatched by Sea, Air, Land Customs or by Post.
Export Financing
Financial assistance extended by the banks to exporters at pre-shipment and post shipment
stages. While the pre-shipment finance is provided for working capital for the purchase of raw
material, processing, packing, transportation, warehousing, etc, of the goods meant for export,
post-shipment finance is generally provided in order to bridge the gap between the shipping of
goods and the realization of proceeds. With a view to providing pre-shipment credit to Indian
exporter at internationally competitive rates, interest, Reserve bank of India announced a new
scheme in November 1993 to provide Pre-shipment Credit in Foreign Currency (PCFC) by the
banks in India. The PCFC scheme is in addition to normal packing credit schemes in Indian
rupees presently available to Indian exporters. Exporters are also permitted to draw foreign
exchange from the authorized dealers for the purposes such as foreign travel or for giving
advertisement aboard. Therefore, a person resident in India may open, hold and maintain with an
authorized dealer, a foreign currency to be known as Exchange Earners’ Foreign Currency
(EEFC) Account, subject to the terms and conditions of the EEFC Account Schemes.
Exim Bank Finance
The Export-Import Bank of India (Exim Bank) provides financial assistance to promote Indian
exports through direct financial assistance. Overseas investment finance, term 85 finance for
export production and export development pre-shipment credit, buyers’ buyers credit, lines of
credit, relining credit facility, export bills rediscounting, refinance to commercial banks finance
for computer software export, finance for export marketing, and bulk import finance. The Exim
Bank also extends non-funded facility to Indian exporters in form of guarantees. The diversified
landing of the Exim Bank now covers various stages of export, that is from the development of
export market to expansion of production capacity for exports, production for export and pre-
shipment financing. The Exim Bank’s focus is on export of manufactured goods, project exports
and export of technology services.
Indian JVs / WOS Abroad
Facilities are provided for the proposals from Indian companies for overseas investment in joint
ventures and wholly owned subsidiaries abroad are considered in terms of the Foreign Exchange
Management (Transfer or Issue of any Foreign security) Regulations, 2000.
Technology Trade Promotion
The Department of Scientific & Industrial Research (DSIR) operates a scheme called Transfer
and Trading in Technology (TATT) under which it can grant assistance for technology exports.
Apart from financial assistance, the prospective technology / service exporters can also identify
possible export opportunities by studying profiles of various developing countries, which have
been prepared with the support of DSIR to identify the technology needs of those countries.
Under this scheme, the DSIR provides support by way of grant, to finance efforts for technology
exports. The quantum of grant and eligibility is determined on case-to-case basis, but grant can
be extended to 100 per cent of the eligible expenses.
Exim Policy 2002-07
The objectives of the Exim Policy 2002-07 include the enhancement of the technological
strength and efficiency of Indian agriculture, industry and services, thereby improving their
competitive strength while generating new employment opportunities, and encouraging the
attainment of internationally accepted standards of quality. Objectives to be met through the
coordinated efforts of the State Governments and all the Government Departments. 86
• Entitled for the import of capital goods, raw material, intermediates, components, consumables,
spares, parts, accessories, instruments and other goods, new or second hand capital goods,
equipments, which are importable without any restriction. However, if such imports require a
license/certificate/permission, actual user condition is specifically dispensed with by the
licensing authority.
• Import on export basis without a license/certificate/permission on execution of legal
undertaking/bank guarantee with the customs authority.
• Re-import of goods repaired abroad.
• Equipment may be sent for repairs, testing, quality improvement on up gradation or
standardization of technology and re-imported without a license/certificate/permission.
• After completion of the projects abroad, project contractors may import, without a
license/certificate/permission, used goods including capital goods provided they have been used
for at least one year.
• For duty free import or where otherwise specially stated, importer shall execute a legal
undertaking (LUT), bank guarantee (BG) with the customs authority before clearance of goods
through customs in the prescribed manner.
• Export of spares – warranty spares, whether indigenous or imported, of plant, equipment,
machinery, automobiles or any other goods may be exported up to 7.5 per cent of FOB value of
exports – within contracted warranty period of such goods.
• Service Exports – include all the 161 tradable services covered under the General Agreement
on Trade in Services where payment for such service is received in free foreign exchange. The
Services Sector includes: - Business Services – Computer and Related Services, R&D Services,
Real Estate Services, Rental/Lending Services without Operators, Other Business Services,
Communication Services, Construction and Related Engineering Services, Distribution Services,
Financial Services, Health-Related and Social Services, Tourism and Travel-Related Services,
Recreational, Cultural and Sporting Services, and Transport Services.
• The Duty Remission Scheme enables post-export replenishment/remission of duty on inputs
used in the export product. This Scheme consists of Duty Free Replenishment Certificate
(DFRC) and Duty Entitlement Pass Book (DEPB).
• The Duty Exemption Scheme enables duty-free import of inputs for export production. An
Advance License is issued for Physical Exports, Intermediate Supplies, and Deemed Exports.
• Export Promotion Capital Goods Scheme (EPCG) allows import of new capital goods
including CKD/SKD thereof as well as software system at 5 per cent customs duty 87 subject to
an export obligation equivalent to 5 times CIF value of capital goods to be fulfilled under a
period of 8 years.
• EOUs in Export Processing Zones, Electronics Hardware Technology Parks, and Software
Technology Parks.
- Import without payment of duty all types of goods including capital goods
- Second hand capital goods may be imported without payment of duty
• Deemed Exports – refers to those transactions in which the goods supplied do not leave the
country provided the goods are manufactured in India. Supply of goods against Advance License
/ DFRC under the Duty Exemption/Remission Scheme
- Supply of goods to EOUs, Units in EPZs, SEZs, STPs, EHTPs.
- Supply of capital goods under the EPCG Scheme License holder.
- Supply of goods to projects financed by multilateral or bilateral agencies/funds notified by the
Department of Economic Affairs, Ministry of Finance.
- Supply of projects founded by UN agencies.
Special Focus on Cottage and Handicraft Sector – In recognition of the export performance of
Cottage and Handicraft Sector, a special focus has been made to further increase its
competitiveness and following facilities will be made available to them:
(i) Initially an amount of Rs 5 crore has been earmarked for promoting cottage sector
exports for coming under the KVIC.
(ii) Units in Handicrafts Sector can also access funds from Market Access Initiative.
(iii)Under the EPCG Scheme, these units will not be required to maintain average level of
(iv)Units shall be entitled to the benefit of Export House status on achieving lower average
export performance of Rs 5 crore as against Rs 15 crore for others.
(v) Units in Handicrafts Sector shall be entitled to duty free imports of specified items as
embellishments up to 3 per cent of FOB value of their exports.
Brand Promotion and Quality — The Central Government aims to encourage manufacturers
and exporters to attain internationally accepted standards of quality for their products. The
Central Government will extend support and assistance to trade and industry to launch a
nationwide programme on quality awareness and to promote the concept of total quality
management. 88
Test Houses—The Central Government will assist in the modernization and up gradation of test
houses and laboratories in order to bring them at par with international standards.
Electronic Hardware—The Electronic Hardware Technology Park (EHTP) scheme is being
modified to enable the sector to face the zero duty regimes under Information Technology
Agreement (ITA)-1. Units shall be entitled to following facility:
(i) NFEP positive in 5 years.
(ii) No other export obligation for units in EHTP.
(iii)Supplies of ITA—1 Items having zero duty in the domestic market to be eligible for
counting of export obligation.
Focus Africa Programme—Focus Africa Programme is launched this year giving a boost to
India’s trade with the sub-Saharan African Region. In the first phase of the programme, the
target countries are: Nigeria, South Africa, Mauritius, Kenya, Ethiopia, Tanzania, and Ghana.
These seven countries accounted for nearly 70 per cent of India’s total trade with the sub-
Saharan African Region in 2000-01. Certain target areas for export focus have also been
identified. These are:
• Cotton yarn, fabrics and other textile items
• Drugs & pharmaceuticals
• Machinery & instruments
• Transport equipment
• Telecom and information technology
Exporters exporting to these markets would be given Export House status on export worth Rs 5
crore. Next year “Focus: CIS Programme” would be launched.


1. Budget Strategy
• Continue the emphasis on agriculture and food economy reforms.
• Enhance public and private investment in infrastructure.
• Strengthen the financial sector and capital markets.
• Deepen structural reforms and regenerate industrial growth.
2. Agricultural Exports
Agri-export Zones, 15 zones approved so far. APEDA will catalyze development of
infrastructure and flow of credit to the units in these agri-export zones.
3. Infrastructure Development
Power, Roads, Civil Aviation, Ports, Telecommunications, etc. 89
4. Capital Account Liberalization
• Full convertibility of deposit schemes for NIRs.
• Indian companies wishing to invest abroad may now invest up to US$100 million on an annual
basis through the automatic route, up from the existing limit of US$50 million.
• Indian companies making overseas investment in joint venture abroad by market purchases
may now do so without prior approval up to 50 per cent of their net worth, up from the current
limit of 25 per cent.
• Foreign currency convertible bond (FCCB) scheme under the automatic route up to US$50
5. Exports
• Special Economic Zones
• Creation of new export promotion industrial parks and associated facilities through State
Governments, outlay increased from Rs 97 crore to Rs 330 crore in 2002-03. Overall outlay for
Department of Commerce increased by 55 per cent to Rs 775 crore in 2002-03. SEZ would be
entitled to procure duty free equipment, raw materials, components, etc., also to units located
6. Television Channels
India has technical capability to become an uplinking hub for television channels for the SAARC
countries. In order to promote state of the art uplinking facilities at competitive cost, customs
duty to be reduced on certain earth station equipment and studio equipment from 35 per cent to
25 per cent.
7. Fresh Investment
Additional depreciation of 15 per cent on new plant and machinery acquired on or after 1.4.2002
for setting up new industrial units or for expanding the installed capacity of existing units by at
least 25 per cent.
8. Corporate Tax
Corporate tax reduced to 40 per cent from 48 per cent for foreign companies.
9. Indian System of Medicine
Budgetary support increased by 25 per cent to Rs 150 crore next year.
10. Science & Technology (S&T)
Fund for improvement of S&T (FIST) for augmenting laboratory facilities in universities,
increased by 115 per cent to Rs 75 crore. A micro venture capital fund for small innovators to be
initiated by SIDBI, in cooperation with National Innovation Foundation to facilitate the
transitions of innovations into enterprises. 90 Tenth Plan emphasises on promotion of
technology intensive exports. The S&T budget outlay considerably increased for 2002-03.
11. Information Technology
Implementation of zero duty regime under ITAI agreement postponed from 2003 to 2005.
Custom duty on a number of hardware inputs reduced to 5 per cent and on certain capital goods
to 15 per cent duty on certain IT items would be reduced to 1 per cent or 5 per cent as per the
WTO provisions.
12. Free Trade Zones etc. and 100% Export Oriented Units
Restrict the deductions to 90 per cent of profits and gains as are derived by an undertaking from
the export of articles or things or complete software for the assessment year 2003-04 only.
13. FDI
Most of the sectors are open to automatic FDI.
14. Customs Duties
Moving towards customs duty on raw materials/components, etc. to be generally at 10 per cent
and that for finished goods/products at 20 per cent.
15. Auto Policy
Auto policy does not envisage any limitations on investments and is being considered as a thrust
sector for accelerating industrial and economic developments, enhancing exports and
employment. generation. Excise duty exemptions for undertaking R&D in this sector are
16. Small Scale Industry
Removal of small-scale industry reservations for more than 50 items contributing substantially to
the overall small industry production. These include knitwear, agricultural implements, auto
components, some chemicals and drugs. Others will now be reserved. Credit linked capital
subsidy scheme for technology up gradation is announced. PLAN OUTLAY BY SECTOR

(5) References

Export import management justin paul, rajiv aserkar oxford higher education