INTERNATIONAL BUSINESS
Meaning of International Business
Manufacturing and trade beyond the boundaries of one’s own country is known as international business.
International or external business can, therefore, be defined as those business activities that take place across the national
frontiers. It involves not only the inter- national movements of goods and services, but also of capital, personnel, technology
and intellectual property like patents, trademarks, know-how and copyrights.
International trade comprises exports and imports of merchandise (goods). It is also called ‘visible trade’ because goods are
tangible. Items of visible trade include machinery, electronic goods, gold and silver, chemicals, etc.
Difference between Internal Trade and International Trade
Reason for International Business
1. Unequal Distribution of Natural Resources: Countries cannot manufacture the same level of quality and at the same cost.
This is due to the unequal distribution of natural resources and differences in productivity levels among different geographical places.
2. Varied Differences: There is a disparity between labour productivity and manufacturing costs. Because of varied socioeconomic,
geographical, and political factors, it varies in each country.
3. Specialization Advantage: The principle of territorial division of labour can be applied internationally as well. Most developing
countries with plenty of labour, for example, specialize in producing and exporting clothing.
4. Price Differences: Firms also engage in the export and import of goods due to the difference in prices of products. They import
cheaper things from other countries and export goods to other countries where they can fetch better prices for their products.
Benefits of International Trade
Benefits to Nations:
1. Earning of foreign exchange: International business helps a country to earn foreign exchange which can be used for payment for
imports of capital goods, technology, petroleum products, fertilizers, pharmaceutical products, etc.
2. More efficient use of resources: Every country produces select goods and services which it can produce most effectively and efficiently.
Gradually, it attains specialization in the production of these goods and services, leading to efficient utilization of resources.
3. Improving growth prospects and employment potentials: Producing solely for the purposes of domestic consumption severely restricts
a country's prospects for growth and employment. Many countries, especially the developing ones, could not execute their plans to produce
on a larger scale, and thus create employment for people because their domestic market was not large enough to absorb all that extra production.
Later on a few countries such as Singapore, South Korea and China which saw markets for their products in the foreign countries embarked upon
the strategy 'exp- ort and flourish', and soon became the star performers on the world map. This helped them not only in improving their growth
prospects, but also created opportunities for employment of people living in these countries.
4. Collecting market information: Retailers serve as an important source of collecting market information about the tastes, preferences and
attitudes of customers which is useful in taking important marketing decisions.
5. Help in promotion: Manufacturers and distributors have to conduct various promotional activities in order to increase the sale of their
product. Retailers participate in these activities and promotes sales of product.
Benefits to Business Firms:
1. Prospects for higher profits: International business can be more profitable than the domestic business. When the domestic prices are
lower, business firms can earn more profits by selling their products in the international markets where prices are high.
2. Increased capacity utilisation: By procuring ex- port orders, a firm can make use of its surplus pro- duction capacity. Production on
large-scale leads to economies of scale which, in turn, lowers the cost of production.
3. Way out to intense competition in domestic market: Highly competitive domestic market drives many companies to go international
in search of markets for their products.
4. Prospects for growth: When demand of a firm’s products starts getting saturated in the domestic market, the firm has to search overseas
markets for improving its growth prospects.
5. Improved business vision: The growth of inter- national business of many companies (e.g., Pepsi, Samsung, Ford Motors, Hindustan
Unilever Ltd., etc.) is essentially a part of their business policies to become more competitive and to diversify.
Modes of Entry into International Business
1. Exporting and Importing: Exporting means selling or sending goods and services form the home county to foreign country. Importing
means purchasing goods and services from a foreign country or bringing them to the home county.
Advantages Major advantages of exporting include:
• As compared to other modes of entry, exporting/ importing is the easiest way of gaining entry into international markets. It is less complex
an activity than setting up and managing joint-ventures or wholly owned subsidiaries abroad.
• Export ing/ import ing is less involving in the sense that business firms are not required to invest that much time and money as is needed
when they desire to enter into joint ventures or set up manufacturing plants and facilities in host countries.
• Since exporting/ importing does not require much of investment in foreign countries, exposure to foreign investment risks is nil or much
lower than that is present when firms opt for other modes of entry into international business.
Limitations:
• Since the goods physically move from one country to another, exporting/importing involves additional packaging, transportation and
insurance costs. Especially in the case of heavy items, transportation costs alone become an inhibiting factor to their exports and imports.
On reaching the shores of foreign countries, such products are subject to custom duty and a variety of other levies and charges. Taken together,
all these expenses and payments substantially increase product costs and make them less competitive.
• Exporting is not a feasible option when import restrictions exist in a foreign country. In such a situation, firms have no alternative but to opt
for other entry modes such as licensing/franchising or joint venture which makes it feasible to make the product available by way of producing
and marketing it locally in foreign countries.
• Export firms basically operate from their home country. They produce in the home country and then ship the goods to foreign countries. Except
a few visits made by the executives of export firms to foreign countries to promote their products, the export firms in general do not have much
contact with the foreign markets. This puts the export firms in a disadvantageous position visa-vis the local firms which are very near the customers
and are able to better understand and serve them.
2. Contract Manufacturing: Contract manufacturing is a mode of entry into ‘ international business under which a business firm in a country enters
into a contract with local manufacturer in the foreign country to get certain goods produced or services rendered as per its specification! However,
the firm retains with itself the responsibility of marketing the goods.
Advantages:
• Contract manufacturing permits the international firms to get the goods produced on a large scale without requiring investment in setting up
production facilities. These firms make use of the production facilities already existing in the foreign countries.
• Since there isno or little investment in the foreign countries, there is hardly any investment risk involved in the foreign countries.
• Contract manufacturing also gives an advantage to the international company of getting products manufactured or assembled at lower costs
especially if the local producers happen to be situated in countries which have lower material and labour costs.
• Local producers in foreign countries also gain from contract manufacturing. If they have any idle production capacities, manufacturing jobs
obtained on contract basis in a way provide a ready market for their products and ensure greater utilization of their production capacities.
This is how the Godrej group is benefitting from contract manufacturing in India. It is manufacturing soaps under contract for many multinationals
including Dettol soap for Reckitt and Colman. This has considerably helped it in making use of its excess soap manufacturing capacity.
• The local manufacturer also gets the opportunity to get involved with international business and avail incentives, if any, available to the export
firms in case the international firm desires goods so produced be delivered to its home country or to some other foreign countries.
Limitations:
• Local firms might not adhere to production design and quality standards, thus causing serious product quality problems to the international firm.
• Local manufacturer in the foreign country loses his control over the manufacturing process because goods are produced strictly as per the terms
and specifications of the contract.
• The local firm producing under contract manufacturing is not free to sell the contracted output as per its will. It has to sell the goods to the
international company at predetermined prices. This results in lower profits for the local firm if the open market prices for such goods happen
to be higher than the prices agreed upon under the contract.
3. Licensing and Franchising: Licensing is a contract arrangement in which a firm in a country allows a firm in a foreign country to use
its patent or trademarks or technology for a consideration known as royalty. Franchising is very much similar to licensing. The patent company
which gives the franchise for a fed is called the franchiser, and the other company is called the franchisee.
Franchising covers the business of restaurant, hotel, travel agency, wholesale trade, retail trade, etc.
i. Joint venture: Joint venture is a business jointly owned by two or more firms located in two different countries.
ii. Wholly owned Subsidiary: A wholly-owned subsidiary is subsidiary company which is owned by a parent company or holding company. In other
words, a wholly-owned subsidiary is a subsidiary company in whose equity capital, 100% investment is made by the parent or holding company.
Procedure for conducting international trade
The procedure for conducting international trade can be studied with respect to export procedure and import procedure.
Export procedure
A number of steps are required to be taken to complete an export transaction. These steps are explained below:
Step 1 Receipt of Enquiry and Sending Quotations:
The prospective buyer of a product sends an enquiry to different exporters requesting them to send information regarding price, quality
and terms and conditions for export of goods. The exporter sends a reply to the enquiry in the form of a quotation, referred to as proforma invoice.
Step 2 Receipt of Order or Indent:
In case the prospective buyer (i.e., importing firm) finds the export price and other terms and conditions acceptable, he places an order for the
goods to be despatched. This order (also known as indent) contains a description of the goods ordered, prices to be paid, delivery terms, packing
and marking details and delivery instructions.
Step 3 Assessing Importer's Creditworthiness:
And Securing a Guarantee for Payments After receipt of the indent, the exporter makes necessary enquiry about the creditworthiness of the importer.
The purpose underlying the enquiry is to assess the risk of non-payment by the importer once the goods reach the import destination. To minimise
such risk, most of the exporters demand a letter of credit from the importer.
Step 4 Obtaining Export License:
After becoming assured about payments, the exporting firm initiates the steps relating to compliance of export regulations and take following steps to obtain license.
a. Open a bank account in any bank authorized by the Reserve Bank of India (RBI) and get an account number.
b. Then obtain Import Export Code (IEC) Number from the Directorate General Foreign Trade (DGFT) or Regional Import Export Licensing Authority.
c. After this, register with an appropriate export promotion council in order to safeguard against risk of non-payment.
Step 5 Obtaining Pre-shipment Finance:
Once a confirmed order and a letter of credit have been received, the exporter approaches his banker for obtaining pre-shipment finance
to undertake export production.
Step 6 Production or Procurement of Goods:
Having obtained the pre-shipment finance from the bank, the exporter proceeds to get the goods ready as per the specifications of the importer.
Step 7 Pre-shipment Inspection:
The Government of India has initiated many steps to ensure that only good quality products are exported from the country. The government
has passed Export Quality Control and Inspection Act, 1963 for this purpose and has authorised some agencies to act as inspection agencies.
The exporter is required to get the goods inspected before shipment.
Step 8 Excise Clearance:
As per the Central Excise Tariff Act, excise duty is payable on the materials used in manufacturing goods. The exporter, therefore, has to
apply to the concerned Excise Commissioner in the region with an invoice. If the Excise Commissioner is satisfied, he may issue the excise
clearance. Also, in many cases the government exempts payment of excise duty or later on refunds it, if the goods so manufactured are meant
for exports.
Step 9 Obtaining Certificate of Origin:
Some importing countries provide tariff concessions or other exemptions to the goods coming from a particular country. For availing such
benefits, the importer may ask the exporter to send a certificate of origin.
Step 10 Reservation of Shipping Space:
The exporting firm applies to the shipping company for provision of shipping space. It has to specify the type of goods to be exported,
probable date of shipment and the port of destination. On acceptance of application for shipping, the shipping company issues a shipping order.
Import procedure:
Following steps are required to be followed to import goods om a foreign country
Step 1 Trade Enquiry:
The first thing that the importing firm has to do is to gather information about the countries and firms which export the given product.
The importer can gather such information from the trade directories and/or trade associations and organizations. After identification,
the importing firm approaches the export firms for collecting information about their export prices and terms of exports. After receiving
a trade enquiry, the exporter prepares a quotation and sends it to the importer.
Step 2 Procurement of Import License:
There are certain goods that can be imported freely, while others need licensing. The importer needs to consult the Export Import
(EXIM) policy in force to know whether the goods that he/she wants to import are subject to import licensing or not.
Step 3 Obtaining Foreign Exchange:
In India, all foreign exchange transactions are regulate by the Exchange Control Department of the Reserve Bank of India (RBI). As per
the rules in force, every importer is required to secure the sanction of foreign exchange. . For obtaining such a sanction, the imported has
to make an application to a bank authorized by RBI to issue foreign exchange. The application is made in a prescribed form alongwith the
import license as per the provisions of Exchange Control Act. Aften proper scrutiny of the application, the bank sanctions the necessary
foreign exchange for the import transaction.
Step 4 Placing Order or Indent:
After obtaining the import license, the importer places ani import order or indent with the exporter for supply of the specified products.
Step 5 Obtaining Letter of Credit:
If the payment terms between the importer and the overseas supplier is accepted by both parties, then the importer should obtain the
letter of credit from its bank and forward it to the overseas supplier.
Step 6 Arranging for Finance:
The importer should make arrangements in advance to pay to the exporter on arrival of goods at the port. Advanced planning for
financing imports is necessary so as to avoid huge demurrages (i.e., penalties) on the imported goods, lying uncleared at the port for
want of payments.
Step 7 Receipt of Shipment Advice:
After loading the goods on the vessel, the overseas supplier dispatches the shipment advice to the importer. A shipment advice contains
information about the shipment of goods.
Step 8 Retirement of Import Documents:
Having shipped the goods, the overseas supplier prepares a set of necessary documents as per the terms of contract and letter of credit and
hands it over to his or her banker for their onward transmission and negotiation to the importer in the manner as specified in the letter of
credit. The set of documents normally contains bill of exchange, commercial invoice, bill of lading/airway bill, packing list, certificate of
origin, marine insurance policy, etc.
Step 9 Arrival of Goods:
Goods are shipped by the overseas supplier as per the contract. The person in charge of the carrier (ship or airway) informs the officer in
charge at the dock or the airport about the arrival of goods in the importing country. He provides the document called import general
manifest. Import general manifest is a document that contains the details of the imported goods. It is a document on the basis of which
unloading of cargo takes place.
Step 10 Customs Clearance and Release of Goods:
All the goods imported into India have to pass through customs clearance after they cross the Indian borders. Firstly, the firm has to
obtain a delivery order, pay dock dues and obtain port trust due to receipt. The firm is then required to fill 'bill of entry for assessment
of customs duty. After payment of customs duty the bill has to be presented to dock superintendent for examination. Upon his satisfaction,
the bill will be presented to the port authority who will issue release order of the goods after receiving necessary charges.
Documents Used in the Course of International Trade
1. Proforma Invoice: A proforma invoice is a document that contains details as to the quality, grade, design, size, weight and price of
the export product and the terms and conditions on which their export will take place.
2. Import Order or Indent: It is a document in which the importer orders for supply of requisite goods to the supplier. The order contains
information such as quantity and quality of goods price of goods, method of forwarding the goods, nature of packing, mode of payment, etc.
3. Export Invoice: It is a seller bill information about goods like quantity, number of packages, name of ship, terms of delivery, payments, etc.
4. Packing List: This document provides complete details regarding the goods exported and the form in which they are being sent.
5. Certificate of Origin: It specifies the country in which the goods are being manufactured. This certificate enables the importer to claim
tariff concessions or other exemptions. It is also used in the case when there is a ban on imports of some goods from certain countries.
6. Certificate of Inspection: For ensuring quality, the government has made inspection of certain goods compulsory by some authorized
agency like Export Inspection Council of India (EICI). After inspecting the goods, the agency issues a Certificate of Inspection that the
consignment has been inspected as required under the Export (Quality Control and Inspection) Act, 1963. Note Documents mentioned
in points to (w) above relate to goods exported.
7. Mate's Receipt: This receipt is issued by the captain or mate of the ship to the exporter after the goods are loaded on board of the ship.
Such receipts contain name of the vessel, description of packages, marks, conditions of the cargo, etc.
8. Shipping Bill: With the help of this document, permission is granted for the export of goods by the custom office. It contains details
regarding the goods being exported, name of the vessel, exporters name and address, country of final destination, etc.
9. Bill of Lading: It acts as an evidence regarding the acceptance of shipping company to carry the goods to the port of destination. It is
also referred to as document of title to the goods and is freely transferable by endorsement and delivery.
10. Airway Bill: It is a document issued by the airline company on receiving the goods on board, its aircraft and at the same time giving
its acceptance to carry them to the port of destination.
11. Marine Insurance Policy: It is a document containing contract between the exporter and the insurance company to indemnify against loss.
12. Cart Ticket: It is also known as cart chit or gate pass. It is prepared by the exporter and contains details regarding export cargo like number
of packages, shipping bill number, port of destination, etc.
13. Letter of Credit: It is a guaranteed letter issued by the importer bank stating that it will honor the export bills to the bank of the exporter
up to a certain amount.
Foreign Trade Promotion Measure and Schemes
1. Duty Drawback Scheme: Merchandise that is to be export is not conditional for payment of different excise, levy charges and customs
duties. On showing verification of export of these products to the concerning authority such charge returns. Such refunds are ‘Duty Drawbacks.’
2. Export Manufacturing under the Bond Scheme: Under this freeway, organizations can manufacture merchandise without giving excise duty
and different charges. The organizations can benefit this facility after giving an endeavor (i.e. bond) that they are producing commodities for
the export goal.
3. Exemption from Payment of Sales Taxes: Merchandise manufactured for the sole reason of exporting is not conditional upon payment of
sales tax. Money received from exporting operations has been absolved from giving of Income-tax for a long time now. This exemption is
only available to 100% Export oriented units and units set up in Export Processing Zones / special economic zones.
4. Advance License Scheme: In this government policy which permits the supplier duty-free supply of local and also in addition imported
resources required for the manufacturing of export merchandise. The firms exporting irregularly can likewise acquire these licenses against
particular export orders.
5. Export Processing Zones:They are industrial domains, which shape enclaves from the Domestic Tariff Areas. These are generally located
close to seaports or air terminals. They intend to provide an internationally competitive duty-free environment for export production at
low cost. There are different measures, for example, availability of export fund, export promotion, capital merchandise scheme is in use for
foreign trade promotion.
6. Organizational Support: The government has set up from time-to-time various institutions in order to facilitate the process of foreign trade.
Following are few of them.
7. Department of Commerce: Department of Commerce in the Ministry of Commerce, Government of India is the most authoritative body
responsible for the country’s international trade and all jurisdiction linked with it. This might be in the shape of expanding business relations
with other nations, state trading, export promotional measures and the development, and regulation of certain export-oriented industries and
commodities.
The Department of Commerce formulates policies in the sphere of foreign trade. It also frames the import and export policy of the country in general.
8. Export Promotion Councils: Export Promotion Councils are non-profit institutions register under the Companies Act or the Societies
Registration Act. The fundamental objective of the export promotion councils is to market and produce the nation’s exports of particular products
falling under their jurisdiction. Currently, there are 21 EPC’s dealing with different commodities.
Indian Institute of Foreign Trade (IIFT)
Indian Institute of Foreign Trade is an establishment by the Government of India as an autonomous body in 1963. IIFT is registered under
the Societies Registration Act with the prime objective of professionalizing the country’s foreign trade management.
It gives training in international business, conducts research in areas of international business, and analyzing and disseminating inform
ation relating to international trade and investments scenario.
State Trading Organization
State Trading Organization (STC) was established in May 1956. The main purpose of STC is to promote trade, primarily export trade among
different trading partners of the globe. A huge number of local firms in India find it very difficult to compete in the global market.
In the meantime, the present trade routes are not suitable for the promotion of exports and bringing about diversification of trade with countries
other than European countries.
Indian Institute of Packaging (IIP)
The Indian Institute of Packaging is an establishment as a national institute mutually run by the Ministry of Commerce, Government of India,
and the Indian Packaging industry and allied interests in 1966. Its base and prime laboratory are located at Mumbai and three regional
laboratories are situated at Kolkata, Delhi and Chennai. It is a training-cum-research institute pertaining to packaging and testing.
International Trade Institutions and Trade Agreements
Business activities are conducted on a global level and even between nations. There is an emergence of global markets. To keep the trade fair
and manage trade-related issues on a global level, various International Institutions and Trade Agreements were established.
International Trade Associations:
The nations were influenced financially because of World War 1 and World War2. The reconstruction couldn’t happen as there was an
interruption in the financial system furthermore there was a shortage of resources. At this crossroads, the prominent economist J. M.
Keynes with Bretton Woods establish an association with 44 countries to meet this and to reestablish commonship on the planet.
This gathering brought forth the International Monetary Fund (IMF) International bank Of Reconstruction and Development (IBRD)
and the International Trade Organization (ITO). These three associations were considered as three columns for the improvement of the
global economy.
WorldBank
The International Bank of Reconstruction and Development (IBRD) is usually known as the World Bank. The fundamental point of
IBRD is to remake the war influenced the economies of Europe and help the improvement of underdeveloped economies of the world.
The World Bank after 1950 focused more on financially unstable nations and invested heavily into social segments like health and
education of such immature nations.
Currently, the World Bank includes five universal bodies responsible for offering fund to various countries. These bodies and its partners
are headquartered in Washington DC taking into account diverse financial requirements and necessities.
As specified before, the World Bank has been allocated the undertaking of financial development and expanding the extent of the
international business. Amid its underlying years of foundation, it gave more significance on creating facilitates like transportation, health,
energy and others.
This has profited the underdeveloped nations too, without doubt, however, because of poor regulatory structure, the absence of institutional
system and absence of accessibility of skilled labour in these nations has prompted disappointment.
World Bank and its Affiliates Institutions:
• International Bank for Reconstruction and Development (IBRD) 1945.
• International Financial Corporation (IFC) 1956.
• Multilateral Investment Guarantee Agency (MIGA) 1988.
• International Development Association (IDA) 1960.
• International Centre for Settlement of Investment Disputes (ICSID) 1966.
The World Bank is no longer limited to simply offering money related help for infrastructure development, agriculture, industry, health and
sanitation. It is somewhat significantly engaged with regions like reducing rural poverty, increasing income of the rural poor, offering
specialized help, and beginning research schemes.
International Development Association (IDA)
International Development Association (IDA) was set up in 1960 as a partner of the World Bank. IDA was set up essentially to offer fund
to the less developed countries on a soft loan basis. It is because of its intention of providing soft loans that it is called the Soft Loan Window
of the IBRD.
The objectives of IDA are as follows:
• To help the underdeveloped countries by giving loans in simple terms.
• Help at the end of poverty in the poorest nations
• Give macroeconomics services such as, for example, those relating to health, nutrition, education, human resource advancement and
control of the population.
• To offer loans at marked down interests in order to energize economic development, the increment in manufacturing limit and good
expectations for standard of living in the underdeveloped nations.
International Finance Corporation (IFC)
Established in July 1956, IFC was aimed to assist in terms of finance to the private sector of developing nations. IFC is also an associate
of the World Bank, but it has its own separate legal entity, functions and funds. All the members of the World Bank are entitled to become
members of IFC.
Multinational Investment Guarantee Agency (MIGA)
Established in April 1988, The Multinational Investment Guarantee Agency’s aim was to support the task of the World Bank and IFC. Some
objectives of the MIGA are
Advance the stream of direct foreign investment into less developed member countries.
Give protection cover to fund supplier against political risks.
Guarantee extension of current investment, privatization and economic reconstruction.
Provide assurance against noncommercial perils, for example, dangers engaged in currency transfer, war and domestic clashes, and
infringement of agreement.
Trade Agreements
Let us take a look at some of the important trade agreements that are a part of the World Bank.
1. Agreement Forming Part of GATT: The recent General Agreement on Tariffs and Trade (GATT) after as significant alteration in
1994 is especially part of the WTO assertions. GATT likewise incorporates certain particular agreement developed to manage
particular non-tariff hindrances. It is one of the important trade agreements of the WTO.
2. Agreement on Textile and Clothing (ATC): Trade agreements were developed under WTO to phase out the quota restrictions as
imposed by the developed nations on the supply of textiles and clothing form the developing countries. The developed countries
were imposing different kinds of quota hindrances under the Multi-Fiber Arrangement (MFA) that itself was a major departure
from the GATT’s basic principle of free trade in goods.
3. Agreement On Agriculture (AOA): It is an agreement to make sure free and fair trade in agriculture. Although original GATT rules
were applicable to trade in agriculture, these suffered from certain loopholes such as an exemption to member countries to use
some non-tariff measures such as customs tariffs, import quotas and subsidies to protect interests of the farmers in the home country.
AOA is a significant step towards a systematic and fair trade in agricultural products.
4. General Agreement on Trade Services (GATS): Services mean acts or performances that are essentially intangible and cannot be
as such touched or smelt as goods. GATS is regarded as a landmark achievement of the Uruguay Round as it extends the multilateral
rules and disciplines to services. It is because of GATS that the basic rules governing ‘trade in goods’ have become applicable to ‘trade
in services.
5. Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS): The WTO’s agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS) was negotiated in 1986-1994. It was the Uruguay Round of GATT negotiations where for the first
time the rules relating to intellectual property rights were discussed and introduced as part of the multilateral trading system. Intellectual
property means information with commercial values.
World trade organization (W.T.O)
WTO is one of the youngest global international organization that deals with the rules and regulations of trade between different nations.
It operates with the purpose of liberalizing trade and flow of goods and services in the international market. It provides a framework for
negotiating and formalizing trade agreements. At present, 159 countries are the members ofWTO.
Objectives of WTO:
WTO has some basic objectives which are enu- merated below:
i. Raising standards of living and incomes.
ii. Ensuring full employment.
iii. Expanding production and trade.
iv. Optimal use of the resources with the idea of sustainable development.
WTO also has some major objectives apart from the above mentioned basic objectives. These are:
i. To ensure reduction of tariffs and other trade barriers imposed by different countries.
ii. To engage in activities that improve the standards of living, create employment, increase income and effective demand, facilitate production, etc.
iii. To promote an integrated, viable, durable trading system and ensure international peace.
iv. To settle disputes among member nations.
v. To ensure a smooth process for international trade by framing common rules and regulations.
vi. To accelerate economic growth of developing countries.
Advantages of WTO to India:
WTO offers a range of benefits to India:
i. Boost Exports India's exports have boosted due to reduction of tariffs on the product of export interest to India.
ii. Policy Assistance As a member of the WTO, India can get assistance from the International Trade Center in formulating and
implementing export promotion programmers.
iii. Trade Links India has the advantage of having trade links with all others member countries.
iv. Settlement of Disputes WTO provides a forum for trade negotiations and settlement of disputes among member countries. India
can approach WTO in case it wants to settle certain disputes with trading countries.
v. Special Concessions There are several concessions and exemptions for developing countries like India.
Disadvantages of WTO to India:
i. Focuses on Developed Nations WTO focuses more on the interests of developed countries.
ii. Price Rise WTO agreements are likely to cause a hike in the prices of drugs and agricultural inputs.
iii. Not Really Free Trade World trade has not really opened up. Developed countries are imposing more restrictions on trade than
underdeveloped countries.