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  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradeInternational BusinessRakesh Mohan Joshi Professor & Chairperson, IIFT New Delhi 1

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradePOLICY FRAMEWORK FOR INTERNATIONAL TRADE Chapter 9

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradeLearning Objectives

    To explain the significance of foreign trade policy in international businessTo elucidate trade policy options for developing countriesTo discuss instruments of trade policyTo provide an overview of Indias foreign trade policyTo explicate policy measures for trade promotionTo explain policy initiatives and incentives by state governmentsTo examine Indias trade promotion measures in context of the WTO

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradeSignificance of Foreign Trade Policy

    International business operations at firm level are considerably influenced by various policy measures employed to regulate trade, both by home and host countries. Exportability and importability of a firms goods are often determined by trade policies of the countries involved. Price-competitiveness of traded goods is affected by import and export tariffs.

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradePolicy incentives help exporters increase their profitability through foreign sales The host countrys trade and FDI policies often influence entry decisions in international markets.

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International Trade

    Strategic Options for Trade Policy

    Inward looking strategy (import substitution): Laying emphasis is laid on extensive use of trade barriers to protect domestic industries from import competition. Domestic production is encouraged so as to achieve self-sufficiency and imports are discouraged.

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradeOutward looking strategy (export-led growth):Linking the domestic economy to the world economy and promoting economic growth through exports. The strategy involves incentives to promote exports rather than restrictions to imports.

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradeDemand vs. Supply Side Policy Measures Demand side initiatives: Export promotion include programs to alert companies to the opportunities present in international markets and to strengthen the commitment and skills of those already involved. Supply side initiatives: Initiatives for creating and expanding export production, developing transportation networks, port facilities, tax and investment systems.

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradeInstruments of Trade Policy

    Various methods employed to regulate trade which include tariffs, non-tariff measures, and financial controls.

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradeTariffs

    Official constraints on import of certain goods and services levied in the form of customs duties or tax on products moving across borders.

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradeClassification of Tariff InstrumentsOn the basis of direction of trade: import vs. exports tariffsOn the basis of purpose: protective vs. revenue tariffsOn the basis of time length : tariff surcharge vs. countervailing dutyOn the basis of tariff rates : specific, ad-valorem, and combinedOn the basis of production and distribution points:Single stage sales tax:Value added tax (VAT)Cascade taxExcise taxTurnover tax

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradeNon-Tariff Measures

    Contrary to tariffs, which are straightforward, non-tariff measures are non-transparent and obstruct trade on discriminatory basis.

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradeMajor Non-tariff Policy InstrumentsGovernment participation in tradeCustoms and entry procedureQuotas Absolute quota Tariff quotas Voluntary quotasOther trade restrictions

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradeIndias Foreign Trade PolicyIndias foreign trade policy is formulated and implemented mainly by the Ministry of Commerce and Industry, but also in consultation with other concerned ministries, such as Finance, Agriculture, and Textiles, and the RBI. DGFT under the Department of Commerce is responsible for the execution of the Foreign Trade Policy.

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International Trade Indias Foreign Trade PolicyIt is published in four volumes: Foreign Trade PolicyHandbook of Procedures Volume IHandbook of Procedures Volume II (Schedule of DEPB Rates)ITC (HS) Classification of Export and Import Items

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradeExport Prohibitions and Restrictions

    Under the foreign trade policy, export prohibitions are maintained for environmental, food security, marketing, pricing and domestic supply reasons, and to comply with international treaties. Restrictions on exports on account of security concern through multilateral agreements are contained in the SCOMET list.

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradeSchemes for Duty-free and Concessional Imports

    In order to reduce or remove the anti-export bias inherent in the system of indirect taxation and to encourage exports, several schemes allows importers to benefit from tariff exemptions, especially on inputs.

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradeEPCG Scheme

    The scheme aims to reduce the incidence of high capital cost on export prices so as to make exports competitive in the international markets by way of reduced import duty on capital goods.

    It enables import of capital goods at concessional rate of duty subject to an appropriate export obligation accepted by the exporter.

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradeDuty Exemption Schemes

    Such schemes enables duty-free import of inputs required for export production. Advance Authorisation: It allows duty-free import of physical inputs incorporated in exports products after making normal allowance in wastage. In addition, consumables, such as fuel, oil, energy, catalysts, etc., are also allowed under the scheme. Advance authorization can be issued for:Physical exports (including exports to SEZs) Intermediate supplies, andDeemed exports

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy Framework for International TradeInput Output and Value Addition Norms

    The Standard Input Output Norms (SION) published in volume II of the Handbook of Procedures are used for determination of proportion of various inputs which are physically used and consumed for export production and the packaging material.

    Copyright @ Oxford University Press International Business R. M. Joshi

  • Copyright @ Oxford University Press International Business R. M. JoshiChapter 9: Policy