im-commodityagreements.pptx

8/14/2019 im-commodityagreements.pptx

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General agreement on tariffs and trade(GATT)andWorld trade organization (WTO) have attemptedto create a globally regulated trade structure.

The trade agreements have often resulted in

protest and discontent with claims of unfair tradethat is not mutually beneficial.

The regulation of international trade is donethrough WTO at the global level

And through several other regional arrangementssuch as NAFTA SAARC MERCOSUR etc


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Increasing flows of trade and investment areintegrating the global economy.

Trade and investment agreements arecreating a global legal system.

Governments seek to capture trade andinvestment flows and the economic benefitsof participating in globalization by becoming

members of trade agreements


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The goal of business strategy is to allow thefirm to achieve its goals in an unpredictableenvironment.

Trade agreements reduce uncertainty andenhance predictability of the lawsgovernments impose on foreign firms.

The reduction of barriers to international

business expand the firms strategic options.


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Bilateral agreements are between two nations at atime.

They are fairly easy to negotiate and give thosetwo nations favored trading status between each

other. A bilateral trade laws/regulations usually include

a broad range of provisions regulating theconditions of trade between the contractingparties

These include stipulations governing customsduties and other levies on imports and exportsand other legal regulations.


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Bilateral agreement is defined as An economic contract between two nation

states

These are used to improve economic tradeimbalances between nations

Taxes, tariffs and quotas are often liftedreduced or restricted on specific goods and

services to realign trade deficits and restoreeconomic stability between the parties


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1. Non convertible currencies: currencies that cannot befreely exchanged against each other(like Uzbekistan,Ukraine, Moldova)

2. Centrally controlled economies: economies with no orvery few official free market exchanges where a

central planning bureaucracy determines and controlsall official flows of goods and capital(as in Korea,Cuba)

3. Lack of hard currency: a national currency that is notaccepted as a unit of payment by international

suppliers (e.g. bilateral agreement signed between thegovernments of Iran and Ukraine in which Iranian oil &gas have been exchanged for metal scrap, weaponsetc.


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1. Commercial relationships between countries2. Reducing constraints

3. Reinforcing countrys trade

4. Economic development


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It involves 2 or 3 countries who wish toregulate trade between the nations withoutdiscrimination

They are usually intended to lower trade

barriers between participating countries And as a consequence increase the degree of

economic integration between theparticipants.

Multilateral trade negotiations between GATTand member nations that are aimed atreducing tariff and non tariff trade barriers


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With the increased influence globalization,the actions of one nations more than ever.

Multilateral agreements have become anincreasingly important means for nations toresolve important issues in a way thatestablishes common ground and resolvesactual and potential points of difference.


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Multilateral agreements to deter militaryescalation: e.g. Antarctica treaty specified anagreement among several nations to prohibit allmilitary activity and nuclear testing as well topromote scientific cooperation.

Multilateral agreements for economic purposes:e.g. multilateral agreement that promotes theeconomic interests of the member parties is theEuropean union. Eu have allowed for the

development of single currency Euro, also thecommon Euro passport for citizens of membernations.


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Multilateral agreements for environmentalpurposes: e.g. Kyoto protocol designed topromote the environmental interests of theparties in agreement(carbon dioxide

emissions)

Multilateral agreements for humanitarianpurposes: e.g. united nations millenniumdeclaration which states a general agreementamong the countries signed it to upholdhuman dignity and equality


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Introduction:Commodity agreements are arrangements betweenproducing and consuming countries to stabilise

markets and raise average prices. Such

agreements are common in many markets,including the market for coffee, tea, and sugar.

Meaning:

International Commodity Agreements which areinter- governmental arrangements concerning the

production of & trade in, certain primary products

with a view to stabilizing their prices.


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The basic objective is to stimulating a dynamic & steady

growth & ensuring reasonable predictability in the realexport earnings of the developing countries so as toprovide:

Expanding the resources for economic & social

development. Consider the interest of the consumers in importing

countries

Considering the remunerative & equitable & stable pricesfor primary commodities.

Considering the import purchasing power

Increased imports & consumption & also coordination ofproduction & marketing policies


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1 Quota agreements: In international trade, a government-imposed limit on the quantity of goods and services thatmay be exported or imported over a specified period oftime. Limits on the amount of a goods produced, imported,exported or offered for sale.

International quota agreements seek to prevent a fall in

commodity prices by regulating prices.

This agreement undertake to restrict the export orproduction by a certain percentage of the basic quotadecided by the Central Committee or Council.

This type of agreement mostly in the case of thecommodities like coffee, tea & sugar

This agreement avoids accumulation of stocks require nofinancing & do not call for continuous operatingdecisions.


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2. Buffer Stock Agreements:

A practice in which a large investor, especially a

government, buys large quantities of commoditiesduring periods of high supplyand stores them so they

do not tradeor circulate. The investor then sells them

when supply is low. This is done to stabilize theprice.

It is to stabilizing the prices by maintaining the demand& supply balance.

It is more useful for the commodities like tea, sugar

rubber, copper.

This arrangements only for those products which can

be stored at relatively low cost without the danger of

deterioration & this is one of the limitation of this

agreement.
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3.Bilateral or Multilateral Contracts:

Bilateral agreements may be formed as business orpersonal agreements between individuals or companies.They may also be formed between sovereign countriesin the form of trade agreements or agreements in otherareas. In either case, a bilateral agreement is a bindingcontract between the two parties that have agreed to

mutually acceptable terms. International sale & purchase contracts may also be

entered into by two or more major exporters &importers.

Bilateral contract to purchase & sell certain quantitiesof a commodity at agreed prices.

In this agreement, an upper price & a lower price arespecified.


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If the market price, throughout the period of the

agreement, remains within these specified limits the

agreement becomes inoperative.

If the market price rises above the upper limit specified,

the exporter country is obliged to sell to the importing

country a certain specified quantity of the upper price

fixed by the agreement. On the other hand, if the market price falls below the

lower limit specified, the importer is obliged to

purchase the contracted quantity at the specified lower

price.


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regulation of export Increased import purchasing power

Assurance of suppliers

Management of surplus Price stabilisation


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Uncertainty over future price trends Absence of appropriate market

Need to build in enough flexibility

Lack of transparency Currency issues

Regulation of export quotas


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Gsp is a US trade programme designed topromote economic growth in the developingworld

By providing preferential duty free entry forupto 4800 products from 129 designatedbeneficiary countries and territories.

Gsp was instituted on 1 Jan 1976 by the trade

act of 1974.


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Gsp exempts wto member countries frommost favored nation mfn principle for thepurpose of lowering tariffs for developingcountries

Mfn requires wto member countries to treatimports coming from all other wto membercountries equally i.e by imposing equal tariffson them.

Chapter No 2 Page No 132


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Chapter No.2 Page No.132

Cont.,

-----IT IS A SCHEME DESIGNED BY THE UNCTAD TO ENCOURAGEEXPORTS OF DEVELOPING COUNTRIES TO DEVELOPEDCOUNTRIES. UNDER THIS SCHEME, DEVELOPED COUNTRIESGRANT DUTY CONCESSION ON IMPORTS OF SPECIFIEDMANUFACTURERS AND SEMI- MANUFACTURERS FROMDEVELOPING COUNTRIES.a number of countriessuch as, Usa, Japan, Norway, new Zealand, Finland,Sweden, Hungary, Switzerland, Australia etc, haveintroduced the gsp.

----- the gsp facility is available only to developingcountries, it is subjected to certain stringentlimitations.


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Under Gsp, the import of hand tools fromIndia to US will not be subject to custom dutywhereas imports of hand tools from Japan willb charged custom duty at rate of 15%

Hence under this system developingcountries have been allowed to compete on apreferential basis.


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Increases export earnings Promotes industrialization

Accelerates rate of economic growth


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Elimination of tariffs Lower costs of imports

Expand international reach

Special treatment for LDC (least developedcountries)

im-commodityagreements.pptx

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