Global Trade & Bop

GLOBAL TRADE & BALANCE OF PAYMENT

SHIVALI KAMAL M.B.A+PGPM

2nd SEM Rbs,Hyd.

CONTENT       

Trade Performance Index Competition Policy Paction-The Model international sale contract Balance Of Payment The Balancing Act Liberalizing the Accounts Analysis of INDIA’s BOP

World Trade grows faster than GDP:-Global Trade in 2002-over $2,000,000/sec

Commodity Dependency-Value Added manufacturing-Tech based products-High Tech based services.

Trade Performance Index The TPI Comprises a set of 24 quantitative indicators benchmarking the export performance of 184 countries:

It ranks 14 different product sectors in each country like wood products,food,chemicals etc.

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It summarizes performance indicators into current index as well as change index.

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It throws light on comparative & competitive advantages.

Competition Policy

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It is important for developing countries in order to counter the potential of privatization, deregulation , liberalization & the international merger movement. Policies adopted by developed countries are not appropriate for developing countries . Because:Developing countries’ perceptions towards Policy are concerned with - Dynamic efficiency & ‘Optimal degree of competition’ to promote Long-term growth. Optimal combination of competition and co- operation between firms . So, they must establish an international competition authority to prevent restrictive business practices & competitionreducing actions of MNCs

PACTION -The Model International Sale Contract Web-based application which allows a buyer & seller to prepare, negotiate & contracts for the international sale & purchase of goods online. The contracts are based on the International Chamber of Commerce’s model international sale contract, which provides a clear & concise set of conditions , balancing the interests of both the parties. It was developed by Allagraf Limited to provide easy access to contracts. Benefits: Contract text are concise & deliver only relevant clauses.  Offers help, advice and further related readings.  Convenience of making partners over the Web & provides ability to sign contracts online, using a secure & ICC approved digital ID.  Tracking of contract revisions.  Secure storage of contracts .

BALANCE OF PAYMENT The IMF definition: "Balance of Payments is a statistical statement that summarizes transactions between residents and non- residents during a period. The BOP is determined by the country's exports and imports of goods, services, and financial capital, as well as financial transfers.  It is an Indicator of a country’s status in International Trade  It is a method to monitor all international monetary transactions at a specific period of time.  Theoretically, the BOP should be ‘ZERO'. But we observe it as deficit or surplus, called as favorable (if Export> Import). Categories:(a) The Current Account (b) The Capital Account (c) The Financial Account

The Balancing Act    

Current account =Capital A/C +Financial A/C (rare situation) Fluctuating Exchange rates add to BOP discrepancies. In case of a deficit , the difference can be funded by the capital A/C. It will appear as an inflow of foreign capital in the BOP.

Liberalizing The Accounts  

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Capital flows into market in 1980s:-USD 50 million to USD 150 million Developing countries were urged to lift restrictions on capital & financial transactions to take advantages of capital inflows. Formation of more transparent & sophisticated market for investors , but also given rise to FDI. Liberalization can facilitate less risk by allowing diversified markets.

Import (US $ 142 billion for India) sourcesChina(10.7%),USA(7.8%)

Export (US $103 bn) markets - USA (17.2%), UAE (8.6%) & China (6.7%)

DIRECTION OF INDIA'S FOREIGN TRADE

Current Analysis of INDIA’S BOP 

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Export growth turned negative during Q3 of 2008-09 for the first time after 2001-02 due to global economic slowdown. The current account deficit at US$ 14.6 billion during Q3 of 2008-09 was the highest quarterly deficit since 1990. For the first time since Q1 of 1998-99, the capital account balance turned negative during Q3 of 2008-09 mainly due to net outflows under portfolio investment, banking capital and short-term trade credit. India’s merchandise exports during April-November 2008 increased by 18.7 percent while imports recorded a higher growth of 32.5 per cent due to rise in POL import.

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