Regulations of International Trade

8/3/2019 Regulations of International Trade

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Regulations Of International Trade

Traditionally trade was regulated through bilateral treaties between twonations. For centuries under the belief in mercantilism most nations hadhigh tariffs and many restrictions on international trade.

controversial multilateral treaties like the General Agreement on Tariffs andTrade (GATT) and World Trade Organization have attempted to promote freetrade while creating a globally regulated trade structure. These tradeagreements have often resulted in discontent and protest with claims ofunfair trade that is not beneficial to developing countries.

Free trade is usually most strongly supported by the most economicallypowerful nations, though they often engage in selective protectionism forthose industries which are strategically important such as the protectivetariffs applied to agriculture.

General Agreement on Tariffs and Trade (GATT)

The General Agreement on Tariffs and Trade (typicallyabbreviated GATT) was negotiated during the UN Conference on Trade andEmployment and was the outcome of the failure of negotiating governmentsto create the International Trade Organization (ITO). GATT was signed in1947 and lasted until 1993, when it was replaced by the World TradeOrganization in 1995. The original GATT text (GATT 1947) is still in effectunder the WTO framework, subject to the modifications of GATT 1994.As trade has become more and more important to nations' economic

wellbeing, countries have attempted to manage it to achieve greater wealthand stability. International organizations have been formed to facilitatecooperation on trade issues. The General Agreement on Tariffs and Trade(GATT) is essentially a treaty among many different nations to help manageglobal trade. Over 80 percent of world trade occurs between GATTsignatories. The basic principles of the treaty are that:

national origin of an import should not be a factor in considering tradebarriers; tariffs and not quotas should be used to protect domestic industries; countries should consult on trade matters; and

GATT meetings should provide a forum to discuss trade issues and a legalinstrument to codifyagreements.

Representatives from the countries that have signed the treaty meetperiodically at what are called "rounds" of GATT talks, to negotiate tradeagreements and settle disputes. Since World War II, the GATT has played amajor role in the reduction of obstacles to international trade.


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GATT held a total of 8 rounds,

GATT and WTO trade rounds

Name StartDuratio

nCountr

iesSubjectscovered Achievements

Geneva

April 19477

months23 Tariffs

Signing of GATT, 45,000tariff concessionsaffecting $10 billion oftrade

Annecy

April 19495

months13 Tariffs

Countries exchangedsome 5,000 tariffconcessions

Torquay September1950 8months 38 Tariffs

Countries exchanged

some 8,700 tariffconcessions, cutting the1948 tariff levels by 25%

Geneva II

January1956

5months

26Tariffs,admission ofJapan

$2.5 billion in tariffreductions

DillonSeptember

196011

months26 Tariffs

Tariff concessions worth$4.9 billion of world trade

Kennedy

May 196437

months62

Tariffs, Anti-dumping

Tariff concessions worth$40 billion of world trade

TokyoSeptember

197374

months102

Tariffs, non-tariff measures,"framework"agreements

Tariff reductions worthmore than $300 billiondollars achieved

Uruguay September1986 87months 123

Tariffs, non-tariff measures,rules, services,intellectualproperty,

disputesettlement,textiles,agriculture,creation ofWTO, etc

The round led to thecreation of WTO, andextended the range oftrade negotiations,leading to majorreductions in tariffs

(about 40%) andagricultural subsidies, anagreement to allow fullaccess for textiles andclothing from developingcountries, and anextension of intellectualproperty rights.
http://en.wikipedia.org/wiki/Dumping_(pricing_policy)http://en.wikipedia.org/wiki/Dumping_(pricing_policy)http://en.wikipedia.org/wiki/Uruguay_roundhttp://en.wikipedia.org/wiki/Uruguay_roundhttp://en.wikipedia.org/wiki/Uruguay_roundhttp://en.wikipedia.org/wiki/Uruguay_roundhttp://en.wikipedia.org/wiki/Dumping_(pricing_policy)http://en.wikipedia.org/wiki/Dumping_(pricing_policy)


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DohaNovember

2001? 141

Tariffs, non-tariff measures,agriculture,labor standards,environment,

competition,investment,transparency,patents etc

The round is not yetconcluded.

TRIPS AgreementThe TRIPS Agreement, which came into effect on 1 January 1995, is to datethe most comprehensive multilateral agreement on intellectual property.Theareas of intellectual property that it covers are: copyright and relatedrights (i.e. the rights of performers, producers of sound recordings and

broadcasting organizations); trademarks including service marks;geographical including appellations of origin; industrialdesigns;patents including the protection of new varieties of plants;the layout-designs of integrated circuits; and undisclosedinformation including trade secrets and test data.

The three main features of the Agreement are: Standards.

In respect of each of the main areas of intellectual property covered by theTRIPS Agreement, the Agreement sets out the minimum standards ofprotection to be provided by each Member. Each of the main elements ofprotection is defined, namely the subject-matter to be protected, the rightsto be conferred and permissible exceptions to those rights, and the minimumduration of protection.

Enforcement.The second main set of provisions deals with domestic procedures andremedies for the enforcement of intellectual property rights. The Agreementlays down certain general principles applicable to all IPR enforcementprocedures. In addition, it contains provisions on civil and administrativeprocedures and remedies, provisional measures, special requirementsrelated to border measures and criminal procedures, which specify, in acertain amount of detail, the procedures and remedies that must beavailable so that right holders can effectively enforce their rights.

Dispute settlement.The Agreement makes disputes between WTO Members about the respect ofthe TRIPS obligations subject to the WTO's dispute settlement procedures.

World Trade Organization - WTO
http://en.wikipedia.org/wiki/Doha_roundhttp://www.wto.org/english/tratop_e/trips_e/intel2_e.htm#industrialdesignshttp://www.wto.org/english/tratop_e/trips_e/intel2_e.htm#industrialdesignshttp://www.wto.org/english/tratop_e/trips_e/intel2_e.htm#patentshttp://en.wikipedia.org/wiki/Doha_roundhttp://www.wto.org/english/tratop_e/trips_e/intel2_e.htm#industrialdesignshttp://www.wto.org/english/tratop_e/trips_e/intel2_e.htm#industrialdesignshttp://www.wto.org/english/tratop_e/trips_e/intel2_e.htm#patents


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The World Trade Organization (WTO) deals with the global rules of tradebetween nations. Its main function is to ensure that trade flows as smoothly,predictably and freely as possible.The WTO was born out of negotiations, and everything the WTO does is theresult of negotiations. The bulk of the WTOs current work comes from the

198694 negotiations called the Uruguay Round and earlier negotiationsunder the General Agreement on Tariffs and Trade (GATT). The WTO iscurrently the host to new negotiations, under the Doha DevelopmentAgenda launched in 2001.Where countries have faced trade barriers and wanted them lowered, thenegotiations have helped to open markets for trade. But the WTO is not justabout opening markets, and in some circumstances its rules supportmaintaining trade barriers for example, to protect consumers or preventthe spread of disease.

Functions of WTO

Trade negotiationsThe WTO agreements cover goods, services and intellectual property. Theyspell out the principles of liberalization, and the permitted exceptions. Theyinclude individual countries commitments to lower customs tariffs and othertrade barriers, and to open and keep open services markets. They setprocedures for settling disputes. These agreements are not static; they arerenegotiated from time to time and new agreements can be added to thepackage. Many are now being negotiated under the Doha DevelopmentAgenda, launched by WTO trade ministers in Doha, Qatar, in November2001.

Implementation and monitoringWTO agreements require governments to make their trade policiestransparent by notifying the WTO about laws in force and measures adopted.Various WTO councils and committees seek to ensure that theserequirements are being followed and that WTO agreements are beingproperly implemented. All WTO members must undergo periodic scrutiny oftheir trade policies and practices, each review containing reports by thecountry concerned and the WTO Secretariat.Dispute settlementThe WTOs procedure for resolving trade quarrels under the DisputeSettlement Understanding is vital for enforcing the rules and therefore for

ensuring that trade flows smoothly. Countries bring disputes to the WTO ifthey think their rights under the agreements are being infringed. Judgementsby specially appointed independent experts are based on interpretations ofthe agreements and individual countries commitments.Building trade capacityWTO agreements contain special provision for developing countries,including longer time periods to implement agreements and commitments,measures to increase their trading opportunities, and support to help them


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build their trade capacity, to handle disputes and to implement technicalstandards. The WTO organizes hundreds of technical cooperation missions todeveloping countries annually. It also holds numerous courses each year inGeneva for government officials. Aid for Trade aims to help developingcountries develop the skills and infrastructure needed to expand their trade.

OutreachThe WTO maintains regular dialogue with non-governmental organizations,parliamentarians, other international organizations, the media and thegeneral public on various aspects of the WTO and the ongoing Dohanegotiations, with the aim of enhancing cooperation and increasingawareness of WTO activities.

NEED OF WTO

The WTO agreements are lengthy and complex because they are legal textscovering a wide range of activities. But a number of simple, fundamentalprinciples run throughout all of these documents. These principles are thefoundation of the multilateral trading system.

Non-discriminationA country should not discriminate between its trading partners and it shouldnot discriminate between its own and foreign products, services or nationals.More openLowering trade barriers is one of the most obvious ways of encouragingtrade; these barriers include customs duties (or tariffs) and measures such

as import bans or quotas that restrict quantities selectively.Predictable and transparentForeign companies, investors and governments should be confident thattrade barriers should not be raised arbitrarily. With stability andpredictability, investment is encouraged, jobs are created and consumerscan fully enjoy the benefits of competition choice and lower prices.More competitiveDiscouraging unfair practices, such as export subsidies and dumpingproducts at below cost to gain market share; the issues are complex, and therules try to establish what is fair or unfair, and how governments canrespond, in particular by charging additional import duties calculated to

compensate for damage caused by unfair trade.More beneficial for less developed countriesGiving them more time to adjust, greater flexibility and special privileges;over three-quarters of WTO members are developing countries and countriesin transition to market economies. The WTO agreements give them transitionperiods to adjust to the more unfamiliar and, perhaps, difficult WTOprovisions.Protect the environment


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The WTOs agreements permit members to take measures to protect notonly the environment but also public health, animal health and plant health.However, these measures must be applied in the same way to both nationaland foreign businesses. In other words, members must not useenvironmental protection measures as a means of disguising protectionist

policies.

Liberalization

The economic liberalisation in India refers to ongoing economicreforms in India that started on 24 July 1991. After Independence in 1947,India adhered to socialist policies. In the 1980s, Prime Minister RajivGandhi initiated some reforms. In 1991, after India faced balance crisis, ithad to sell 67 tons of gold to Union Bank of Switzerland and Bank ofEngland as part of a bailout deal with the International Monetary Fund (IMF).

In addition, IMF required India to undertake a series of structural economicreforms. As a result of this requirement, the government of P. V. NarasimhaRao and his finance minister Manmohan Singh (the present Prime Minister ofIndia) started breakthrough reforms, although they did not implement manyof the reforms IMF wanted. The new neo-liberal policies included opening forinternational trade and investment, deregulation, initiation of privatization,tax reforms, and inflation-controlling measures. The overall direction ofliberalisation has since remained the same, irrespective of the ruling party,although no party has yet tried to take on powerful lobbies such as the tradeunions and farmers, or contentious issues such as reforming labour laws andreducing agricultural subsidies. The main objective of the government was to

transform the economic system from socialism to capitalism so as to achievehigh economic growth and industrialize the nation for the well-being of Indiancitizens.Today India is mainly characterized as a market economy.As of 2009, about 300 million peopleequivalent to the entire population ofthe United Stateshave escaped extreme poverty. The fruits of liberalisationreached their peak in 2007, when India recorded its highest GDP growth rateof 9%. With this, India became the second fastest growing major economy inthe world, next only to China. An Organisation for Economic Co-operationand Development (OECD) report states that the average growth rate 7.5%will double the average income in a decade, and more reforms would speedup the pace.

Indian government coalitions have been advised to continue liberalisation.India grows at slower pace than China, which has been liberalising itseconomy since 1978.McKinsey states that removing main obstacles "wouldfree Indias economy to grow as fast as Chinas, at 10 percent a year".For 2010, India was ranked 124th among 179 countries in Index of EconomicFreedom World Rankings, which is an improvement from the preceding year.


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The assassination of Prime Minister Indira Gandhi in 1984, and later of herson Rajiv Gandhi in 1991, crushed international investor confidence on theeconomy that was eventually pushed to the brink by the early 1990s.As of 1991, India still had a fixed exchange rate system, where the rupeewas pegged to the value of a basket of currencies of major trading partners.

India started having balance of payments problems since 1985, and by theend of 1990, it was in a serious economic crisis. The government was closeto default, its central bank had refused new credit and foreign exchangereserveshad reduced to the point that India could barely finance threeweeks worth of imports. Most of the economic reforms were forced uponIndia as a part of the IMF bailout.A Balance of Payments crisis in 1991 pushed the country to near bankruptcy.

In return for an IMF bailout, gold was transferred to London as collateral, the

rupee devalued and economic reforms were forced upon India. That low

point was the catalyst required to transform the economy through badly

needed reforms to unshackle the economy. Controls started to be

dismantled, tariffs, duties and taxes progressively lowered, state monopolies

broken, the economy was opened to trade and investment, private sector

enterprise and competition were encouraged and globalisation was slowly

embraced. The reforms process continues today and is accepted by all

political parties, but the speed is often held hostage by coalition politics and

vested interests.

Annual growth in GDP per capita has accelerated from just 1 per cent inthe three decades after Independence to 7 per cent currently, a rate ofgrowth that will double average income in a decade. [...] In service sectors

where government regulation has been eased significantly or is lessburdensomesuch as communications, insurance, asset management andinformation technologyoutput has grown rapidly, with exportsof information technology enabled services particularly strong. In thoseinfrastructure sectors which have been opened to competition, suchas telecoms and civil aviation, the private sector has proven to be extremelyeffective and growth has been phenomenal.

Globalization and Liberalization

Globalization and liberation are directly linked with each other. The firstwake of globalization started in India when the economic liberalizationpolicies were undertaken in the 1990s by Dr Manmohan Singh, the thenFinance Minister of the country. Since then, the economy of India hasimproved to a great extent and has significantly led to the rise in thestandard of living of the citizens.

Pre liberalization period and globalization


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From independence till the later part of the 1980s, India economic approachwas mainly based on government control and a centrally operated market.The country did not have a proper consumer oriented market and foreigninvestments were also not coming in. This did not do anything good to the

economic condition of the country and as such the standard of living did notgo up.

In the 1980s, stress has given on globalization and liberalization of themarket by the Congress government under Rajiv Gandhi. In his governmenttenure, plenty of restrictions were abolished on a number of sectors and theregulations on pricing were also put off. Effort was also put to increase thecondition of the GDP of the country and to increase exports.

Even if the economic liberalization policies were undertaken, it did not findmuch support and the country remained in its backward economic state. The

imports started exceeding the exports and the India suffered huge balanceof payment problems. The IMF asked the country for the bailout loan. The fallof the Soviet Union, a main overseas business market of India, alsoaggravated the problem. The country at this stage was in need of animmediate economic reform.

Liberalization in the 1990sIt was in the 1990s that the first initiation towards globalization andeconomic liberalization was undertaken by Dr Manmohan Singh, who was theFinance Minister of India under the Congress government headed by P.V.Narasimha Rao. This is perhaps the milestone in the economic growth if India

and it aimed towards welcoming globalization. Since, the liberalization plan,the economic condition gradually started improving and today India is one ofthe fastest growing economies in the world with an average yearly growthrate of around 6-7%.

Impact of globalization and liberalizationGlobalization and liberalization has greatly influenced the Indian economyand made it a huge consumer market. Today, most of the economic changesin the country are based on the demand supply cycle and other economic

factors. Today, India is the worlds 12th largest economy in terms of marketexchange rate and 4th largest in terms of the Purchasing Power Parity.According to a report by the World Bank, the Indian market is expected togrow at around 8% in the year 2010.

Globalization and liberalization has also made a positive impact on variousimportant economic segments. Today, the service sectors, industrial sectorsand the agriculture sector have really grown to a great extent. Around 54%


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of the annual Gross Domestic Product (GDP) of India comes from the serviceindustry while the industrial and agriculture sector contributes around 29%and 17% respectively. With the improvement of the market, more and morenew sectors are coming up and reaping profits such as IT services, chemical,textiles, cement industry and so on. With the increase in the supply level, the

rate of employment is also increasing considerably.

There has been an improvement in the manufacturing sector as well whichgrew from 8.98% in 2005 to around 12%. The communication segment hasgrown up to around 16.64%. The condition is expected to improve furtherwith more demand and increase in customer base. The yearly growth of theindustrial sector has been around 6.8 % which will rise more in the future.India is one of the well known industrial markets in the Asia-Pacific region.

Globalization and foreign investmentOne of the main aspects of globalization is foreign investment. India today

has emerged as one of the perfect markets for foreign investors due to itsvast market base. More and more foreign companies are investing in theIndian market to get more returns. The foreign institutional investments (FII)amounts to around US$ 10 billion in FY 2008-09, while the rate of Foreigndirect investments (FDI) has grown around 85.1% in 2009 to US$ 46.5 billionfrom US$ 25.1 billion (2008).

World Bank

The World Bankis an international financial institution that provides loans

to developing countries for capital programmes.

The World Bank's official goal is the reduction of poverty. By law, all of itsdecisions must be guided by a commitment to promote foreign investment,international trade and facilitate capital investment.

The World Bank differs from the World Bank Group, in that the World Bankcomprises only two institutions: the International Bank forReconstruction and Development (IBRD) and the InternationalDevelopment Association (IDA), whereas the latter incorporates thesetwo in addition to three more: International Finance Corporation (IFC),

Multilateral Investment Guarantee Agency (MIGA), and InternationalCentre for Settlement of Investment Disputes (ICSID).

Poverty reduction strategies

For the poorest developing countries in the world, the bank's assistanceplans are based on poverty reduction strategies; by combining a cross-section of local groups with an extensive analysis of the country's financial


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and economic situation the World Bank develops a strategy pertaininguniquely to the country in question. The government then identifies thecountry's priorities and targets for the reduction of poverty, and the WorldBank aligns its aid efforts correspondingly.

Forty-five countries pledged US$25.1 billion in "aid for the world's poorestcountries", aid that goes to the World Bank International DevelopmentAssociation (IDA) which distributes the loans to eighty poorer countries.While wealthier nations sometimes fund their own aid projects, includingthose for diseases, and although IDA is the recipient of criticism, Robert B.Zoellick, the president of the World Bank, said when the loans wereannounced on December 15, 2007, that IDA money "is the core funding thatthe poorest developing countries rely on"

Clean Technology Fund management

The World Bank has been assigned temporary management responsibility ofthe Clean Technology Fund (CTF), focused on making renewable energy cost-competitive with coal-fired power as quickly as possible, but this may notcontinue after UN's Copenhagen climate change conference in December,2009, because of the Bank's continued investment in coal-fired power plants

Clean Air Initiative

Clean Air Initiative (CAI) is a World Bank initiative to advance innovativeways to improve air quality in cities through partnerships in selected regionsof the world by sharing knowledge and experiences. It includes electric

vehicles.

United Nations Development Business

Based on an agreement between the United Nations and the World Bank in1981, Development Business became the official source for World BankProcurement Notices, Contract Awards, and Project Approvals. In 1998, theagreement was re-negotiated, and included in this agreement was a jointventure to create an electronic version of the publication via the World WideWeb. Today, Development Business is the primary publication for all majormultilateral development banks, United Nations agencies, and several

national governments, many of whom have made the publication of theirtenders and contracts in Development Business a mandatory requirement.Currently, the subscription to "online version only" is not free, but costs US$550.

The World Bank or the World Bank Group is also a sitting observer in theUnited Nations Development Group
http://en.wikipedia.org/wiki/World_Bank_Grouphttp://en.wikipedia.org/wiki/World_Bank_Group


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International monetary fund

The International Monetary Fund (IMF) is an organization of 187 countries,

working to foster global monetary cooperation, secure financial stability,

facilitate international trade, promote high employment and sustainable

economic growth, and reduce poverty around the world.

An international organization created for the purpose of:

1. Promoting global monetary and exchange stability.

2. Facilitating the expansion and balanced growth of international trade.

3. Assisting in the establishment of a multilateral system of payments forcurrent transactions.

The IMF plays three major roles in the global monetary system. The Fundsurveys and monitors economic and financial developments, lends funds tocountries with balance-of-payment difficulties, and provides technicalassistance and training for countries requesting it

Functions

The IMF pursues the various facets of its mandate in a number of ways.These are summarized below, and described more detail in later chapters.Surveillance over Members Economic PoliciesIn becoming members of the IMF, countries agree to pursue economicpolicies that are consistent with the objectives of the IMF. The Articles ofAgreement confer on the IMF the legal authority to oversee compliance bymembers with this obligation, making the IMF the only organization that hasa mandate to examine on a regular basis the economic circumstances ofvirtually every country in the world.

The appraisal of a countrys economic and structural policies andperformance from an international standpoint. It is a regulatory orjurisdictional function, which historically has been focused on theassessment of the exchange arrangements, the exchange rates and balanceof payments.

Financing Temporary Balance of Payments Needs


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The Articles of Agreement enable the IMF to lend to member countries thathave a balance of payments need to provide temporary respite and enablecountries to put in place orderly corrective measures and avoid a disorderlyadjustment of the external imbalance. Such lending is usually undertaken inthe context of an economic adjustment program implemented by the

borrowing country to correct the balance of payments difficulties, which alsosafeguards IMF resources. In addition to providing direct financing to itsmember countries, the IMF plays an important catalytic role in helpingmember countries to mobilize external financing for their balance ofpayments needs.

Combating Poverty in Low-Income CountriesThe IMF provides concessional loans to low-income member countries to helpsupport these countriesefforts to eradicate poverty. In this venture, the IMF works closely with theWorld Bank and other

development partners. In this area the IMF also plays a critical catalytic roleto mobilize external financingand donor support for the countries balance of payments and developmentneeds. The IMF alsoparticipates in two international initiatives to provide debt relief: the HeavilyIndebted Poor Countries(HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI).

Mobilizing External Financing

IMF endorsement of a countrys policies serves as an important catalyst formobilizing resources frombilateral and multilateral lenders and donors. They rely on an IMFendorsement of a countrys economicpolicies or might even require a formal IMFsupported economic programbefore committing ordisbursing their own resources to that country or granting debt relief. IMFpolicy assessments andrecommendations also provide important signals to investors and financialmarkets regarding a countryseconomic future, and impact on investor and market confidence in the

economy.Strengthening the International Monetary SystemThe IMF is the central institution in the international monetary system. Itserves as a forum forconsultation and collaboration by members on international monetary andfinancial matters, andworks with other multilateral institutions to devise international rules thatwould facilitate the prevention


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and orderly resolution of international economic problems.

Increasing the Global Supply of International ReservesThe IMF is authorized to issue an international reserve asset called theSpecial Drawing Right (SDR)

if there is a global need to supplement existing reserve assets. Theseallocated SDRs are part of thenet international reserves of members and can be exchanged for convertiblecurrencies. They are not aclaim on the IMF. The SDR is also the IMFs unit of account for all financialtransactions with members.

Building Capacity through Technical Assistance and TrainingTechnical assistance and training are provided in the core areas of IMFexpertise to help member countriesdesign economic policies and improve economic management capabilities,

which in turn can helpreduce the risk of policy failures and the countries resilience to shocks, andfacilitating program designand implementation. These activities are particularly important in developingcountries, where resourcesare scarce and institutions often weak.

Dissemination of Information and ResearchThe IMF is a premier source for economic analysis of its member countrieseconomic policies andstatistical information. Information is disseminated through its numerous

economic reports and researchstudies on member countries, as well as specialized statistical publications.The IMF also conductsresearch in areas relevant to its mandate and operations, mainly to improveits economic analysisand its advice to member countries. The results of this research aredisseminated through books, IMFand academic journals and working papers, occasional papers, and theinternet.

Special Drawing Rights (SDRs)Special Drawing Rights (SDRs) are supplementary foreign exchange

reserve assets defined and maintained by the International Monetary

Fund (IMF). Not a currency, SDRs instead represent a claim to currency held

by IMF member countries for which they may be exchanged. As they can

only be exchanged for Euros, Japanese yen, UK pounds, or US dollars, SDRs


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may actually represent a potential claim on IMF member countries' non-gold

foreign exchange reserve assets, which are usually held in those currencies.

While they may appear to have a far more important part to play, or,

perhaps, an important future role, being the unit of account for the IMF has

long been the main function of the SDR.

Created in 1969 to supplement a shortfall of preferred foreign exchange

reserve assets, namely gold and the US dollar, the SDR's value is defined by

a weighted currency basket of four major currencies: the Euro, the US dollar,

the British pound, and the Japanese yen. SDRs are denoted with the ISO

4217 currency code XDR

EXIM BANK

Exim Bank plays four-pronged role with regard to India's foreign trade: those

of a coordintator, a source of finance, consultant and promoter. Export-

Import Bank of India is the premier export finance institution of the country,

set up in 1982 under the Export-Import Bank of India Act 1981. Government


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of India launched the institution with a mandate, not just to enhance exports

from India, but to integrate the countrys foreign trade and investment with

the overall economic growth. Since its inception, Exim Bank of India has

been both a catalyst and a key player in the promotion of cross border trade

and investment. Commencing operations as a purveyor of export credit, like

other Export Credit Agencies in the world, Exim Bank of India has, over the

period, evolved into an institution that plays a major role in partnering Indian

industries, particularly the Small and Medium Enterprises, in their

globalisation efforts, through a wide range of products and services offered

at all stages of the business cycle, starting from import of technology and

export product development to export production, export marketing, pre-

shipment and post-shipment and overseas investment.

Functions Of EXIM Bank

Export Credits

Exim Bank offers the following Export Credit facilities, which can be availed

of by Indian companies, commercial banks and overseas entities.

For Indian Companies executing contracts overseas

Pre-shipment credit

Exim Bank's Pre-shipment Credit facility, in Indian Rupees and foreign

currency, provides access to finance at the manufacturing stage - enabling

exporters to purchase raw materials and other inputs.

Supplier's Credit

This facility enables Indian exporters to extend term credit to importers

(overseas) of eligible goods at the post-shipment stage.

For Project Exporters

Indian project exporters incur Rupee expenditure while executing overseas

project export contracts i.e. costs of mobilisation/acquisition of materials,

personnel and equipment etc. Exim Bank's facility helps them meet these

expenses.


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For Exporters of Consultancy and Technological Services

Exim Bank offers a special credit facility to Indian exporters of consultancy

and technology services, so that they can, in turn, extend term credit to

overseas importers.

Guarantee Facilities

Indian companies can avail of these to furnish requisite guarantees to

facilitate execution of export contracts and import transactions.

Finance for Export Oriented Units

Term Finance (For Exporting Companies)

Project Finance Equipment Finance Import of Technology & Related Services Domestic Acquisitions of businesses/companies/brands Export Product Development/ Research & Development General Corporate Finance

Working Capital Finance (For Exporting Companies)

Fundedo Working Capital Term Loans [< 2 years]o Long Term Working Capital [upto 5 years]o Export Bills Discountingo Export Packing Credito Cash Flow financing

Non-Fundedo Letter of Credit Limitso Guarantee Limits

Working Capital Finance (For Non- Exporting Companies)

Bulk Import of Raw Material

Term Finance (For Non- Exporting Companies)

Import of Equipment


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Export Finance

Pre-shipment Credit Post Shipment Credit Buyers' Credit Suppliers' Credit [including deferred payment credit] Bills Discounting Export Receivables Financing Warehousing Finance Export Lines of Credit (Non-recourse finance)

Equity Participation (In Indian Exporting Companies)

To part finance project expenditure(Project, inter alia, includes newproject/ expansion/ acquisition of business/company/ brands/research& development)

Note:-

a. Exim Financing is available in Indian Rupees and in Foreign Currency

b. Term finance, except for long term working capital, is available for periods

up to 10 years [in select cases 15 year finance can also be made available]

c. Interest: Fixed & Floating options [Benchmarks for floating rates - LIBOR/G-

Sec/MIBOR]d. Repayments: Amortizing/ Ballooning/ Bullet [As per cash flows]

Overseas Investment Finance

Finance for Indian Company's equity participation in the overseas JointVenture (JV)/ Wholly Owned Subsidiary (WOS)

Direct Finance (Term & Working Capital) to the overseas JV / WOS

Finance (for equity/debt component) for acquisition of overseasbusinesses / companies including leveraged buy-outs includingstructured financing options

Direct Equity by Exim Bank in the overseas JV/ WOS of an IndianCompany


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Lines of Credit

CONFIRMATION OF LETTERS OF CREDIT (L/C) BY EXIM BANK

The program envisages confirmation of Letters of credit (L/Cs), Standby

letters of credit, demand guarantees, promissory notes or bills of exchangedenominated in Dollars, Euro, Yen or in other freely available convertible

currencies acceptable to IFC, received by Indian exporters from pre-

approved banks in the countries of IFC's operation, i.e. Central Asia, Central

and Eastern Europe, Latin America & the Caribbean, Middle East & North

Africa as also other regions of Asia and Africa. IFC will provide guarantee

facility to Exim Bank to cover such L/C confirmation and confirmation of

other trade instruments

Procedural flow chart

1. Exim Banksigns agreement with Borrower and announces wheneffective.

2. Exporter checks procedures and Service fee with Exim Bankandnegotiates contract withImporter.

3. Importer consults borrower and signs contract with exporter.4. Borrower approves contract.5. Exim Bankapproves contract and advises borrower and

also exporter and commercial bank.6. Exporter ships goods.


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7. Commercial banknegotiates shipping documents andpays exporter.

8. Exim Bankreimburses Commercial bankon receipt of claim by debitto borrower.

9. Borrower repays Exim Bankon due date.

Eligible Goods

Capital goods, plant and machinery, industrial manufactures, consumerdurables and any other items eligible for being exported under the 'EximPolicy' of the Government of India.

General

Exporters are advised to check with Exim Bank before finalizing thecontracts with the buyers, details of service fee and other charges, ifany, payable by the exporters on the contracts to be covered underthe relative LOC.

SME & Agri Finance

Small and Medium Enterprises (SME) Finance

The importance of SME sector is well-recognizedworld over owing to its significant contribution inachieving various socio-economic objectives, such asemployment generation, contribution to nationaloutput and exports, fostering new entrepreneurshipand to provide depth to the industrial base of theeconomy. India has a vibrant SME sector that plays an important role insustaining economic growth, increasing trade, generating employment andcreating new entrepreneurship in India.

Indian SMEs require business advisory services to enhance their international

competitiveness in a highly competitive globalising world. The SMEs find theservices of reputed national and international consultants as not costeffective and often, not adequately focused. Recognising this knowledgegap, Exim Bank of India has been endeavouring to provide a suite of servicesto its SME clients. These include providing business leads, handholdingduring the process of winning an export contract and thus assisting thegeneration of export business on success fee basis, countries/ sectorinformation dissemination, capacity building in niche areas such as quality,


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safety, export marketing, etc. and financial advisory services such as loansyndication, etc.

DEBT RESTRUCTURING SCHEME FOR SMALL AND MEDIUMENTERPRISES(SMEs)

Publications

Export Performance of Small and Medium Enterprises inIndia Research Brief

Occasional Paper : Institutional Support to SMEs A Study of Trade andInvestment Potential

Occational Paper : Institutional Support Systems for SMEs in India andInternational Experiences

AGRI FINANCE

The globalization and post-WTO scenario offers considerable scope for

exports of Indian agricultural products. Exim Bank has a dedicated Agri

Business Group to cater to the financing needs of export oriented companies

dealing in agricultural products.

Financial assistance is provided by way of term loans, pre-shipment/post-

shipment credit, overseas buyers' credit, bulk import finance, guarantees

etc. Term loans with varying maturities are provided for setting up

processing facilities, expansion, modernization, purchase of equipment,

import of equipment/technology, financing overseas joint ventures and

acquisitions etc.

The Bank has strong linkages with other stakeholders in agri sector such as

Ministry of Food Processing Industries, GoI, NABARD, APEDA, Small Farmers'

Agri-Business Consortium (SFAC), National Horticultural Board etc. Apart

from financing, the Bank also provides a range of advisory services to agri

exporters.

The Bank also publishes a number of Occasional Papers, Working Papers on

export potential of various sub-sectors in agriculture and a bi-monthly

publication in different languages on global scenario in agri-business and

opportunities therein.

Film Finance
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he Bank has till date sanctioned loans more than Rs 33.15 crores for filmproduction. The first three films financed by Exim Bank have beencommercially successful across India and overseas markets.

Nature of Finance

Cashflow financing for film production Cashflow financing for film distribution/exhibition in overseas markets Term loans for fixed assets finance Term financing for export market development

Films financed by Exim Bank

Released

Honeymoon Travels Pvt. Ltd. Kabul Express Dhoom -2 Don - The Chase Begins Again Fanaa Bunty Aur Babli Salaam Namaste Veer Zaara The Rising Dhoom

Hum Tum Cheeni Kum

Rural Initiatives

Exim Bank believes that there is a strong linkage between export

development and poverty reduction. For a country like India, with a large

(70%) rural population, creation of export capability in rural grassroot

enterprise is a must. Globalisation will be successful and acceptable only if

benefits reach the rural population. Rural enterprises suffer from various

handicaps including image, quality, capacity, packaging, delivery, etc. NGOs

and SHGs are the front for rural enterprises. Through proper guidance and

support, rural grassroot enterprises can access the global market and realize

better prices for their products thereby contributing to poverty reduction.

Exim Bank's experience in working with NGOs/SHGs and rural enterprises is

encouraging. Exim Bank, leveraging its presence in both India as well as


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overseas, is facilitating linkage between rural grassroot enterprises and

corporates and with overseas buyers and agencies with the objective of

bringing the benefits of globalisation to the rural population.

Export Services

MULTILATERAL AGENCIES FUNDED PROJECTS OVERSEAS (MFPO)

Information and support services to Indian companies to help improve theirprospects for securing business in multilateral agencies funded projects.

Dissemination of business opportunities in funded projects Providing detailed information on projects of interest Information on Procurement Guidelines, Policies, Practices of

Multilateral Agencies Assistance for Registration with Multilateral Agencies

Advising Indian companies on preparation of Expression of Interest,Capability Profile

Bid Intervention

PROMOTING INDIAN CONSULTANCY

Tie-up with

International Finance Corporation, Washington D.C. Eastern & Southern African Trade & Development Bank (PTA Bank) African Management Services Company (AMSCO), Netherlands

Examples

Gems & Jewellery Study - Zambia Financial Training Mission - Kenya Cement Project - Cameroon Software - Madagascar Wool Knitting - Vietnam Textile - Nigeria Refrigeration - Ghana

Financial Training - Poland

EXIM BANK AS A CONSULTANT

Feasibility study for establishment of an export credit and guaranteefacility for Gulf Cooperation Council countries.


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Regional cooperation in export finance and export credit guaranteesfor ESCAP.

Study on promotion of international competitiveness and exports ofmanufactured goods for ESCAP.

Setting up the Afrexim Bank

Designing of Export Financing Programmes - Turkey Setting up an Exim Bank in Malaysia Designing of Export Marketing Seminars for SMEs in Vietnam Export Development Project: Ukraine Enterprise Support Fund: Armenia Establishing an Export Credit Guarantee Company in Zimbabwe Advisory services to Industrial Development Corporation of South

Africa for international finance products Study on Projecting Mauritius as an Investment Hub for Indian Firms Blue Print for setting up of an Exim Bank in Zimbabwe

Export Marketing Services

The Bank provides assistance to Indian companies, to enable them establishtheir products in overseas markets through its Export Marketing Services,starting from identification of prospective business partners to facilitatingplacement of final orders.

The Export Marketing service leverages the Banks high internationalstanding, in-depth knowledge and understanding of the internationalmarkets and well established institutional linkages, coupled with its physicalpresence, to support Indian companies in their overseas marketing efforts on

a success fee basis.

Service offered across sectors

Marine Products Textiles - yarns, fabrics, apparels. Food Processing - Ready to Serve, spices and condiments Office Stationery Ayurveda medicines/cosmetics. Others

KNOWLEDGE BUILDING

EXIMIUS CENTRES FOR LEARNING - AHMEDABAD, BANGALORE ANDPUNE

To organise seminars and workshops in areas such as internationaltrade & investment, export marketing, quality, packaging, business


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opportunities in multilateral agencies funded projects, sector andcountry specific programmes

Guest faculty from network partners such as IFC, World Bank, EBRD,UNIDO, Asian Development Bank, African Development Bank, CBI, theNetherland

ECGC

Export Credit Guarantee Corporation of India Limited, was

established in the year 1957 by the Government of India to

strengthen the export promotion drive by covering the risk of

exporting on credit.

Being essentially an export promotion organization, it functionsunder the administrative control of the Ministry of Commerce &

Industry, Department of Commerce, Government of India. It is

managed by a Board of Directors comprising representatives of the

Government, Reserve Bank of India, banking, insurance and

exporting community.

ECGC is the fifth largest credit insurer of the world in terms of coverage of

national exports. The present paid-up capital of the company is Rs.800

crores and authorized capital Rs.1000 crores.

ECGC Functions

Offers insurance protection to exporters against payment risks

Provides guidance in export-related activities

Makes available information on different countries with its own credit ratings

Makes it easy to obtain export finance from banks/financial institutions


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Assists exporters in recovering bad debts

Provides information on credit-worthiness of overseas buyers

Documents

Regulations of International Trade