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WTO

` GATT to WTO in 1995 is a significant event in the field ofglobal trade.

` World trade is governed by the rules and regulations

framed by WTO.

` The Dunkel Proposals encompass 28 different areas of

International trade.

` WTO is based in Geneva, Switerland

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WTO

` WTO has 147 countries as its members.

` Objectives of WTO

` Free trade without discrimination

` Growth of Less Developed Countries (LCD)

` Protection and preservation of environment

` Optimum utilization of worlds resources

` WTO adopts the principle ofSustainable Development

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WTO and Trade Liberalisation

` WTO is for free trade

` However it has failed to achieve the objective of free

trade

` Developed and developing countries have failed to

introduce a time bound programme for the removal of

tariffs.

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Latest developments at WTO

` WTO is dominated by rich and developed countries ofEurope.

` Developing countries will have to stand together to

protect their interest.

` There have been a lot ofImplementation Related

Concerns - Not fulfilled their obligations towards

developing countries

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Latest developments at WTO

` DOHA Round (2001) US and EU made attempts tobulldoze the developing countries.

` India and other developing nations opposed the new

negotiations

` Indias main objective was to get the implementation

issues addressed first.

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Latest developments at WTO

` Cancum Round (2003)

` The developing countries pressed for reduction and

phasing out of agricultural subsidies provided to farmers

of developed countries.

` Hong Kong Declaration (2005)

`

It is no longer possible for the developed countries topush their agendas down the developing countries

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MNCs

` The term MNCs is American origin.

` Maximum number of MNCs have their origin in USA.

` Coca-Cola operates in 130 countries

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Definition ofMNC

` Corporations which have their home in one country butoperate and live under the laws and customs of other

countries (host countries)

` A company that attempts to carry out its activities on an

international scale as though there are no boundaries on

the basis ofcommon strategy directed from a corporate

centre,

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Characteristics ofMNCs

` Large size

` Different types

` Public utility companies

` Manufacturing companies

` Services Institutions

` MNCs providing turnkey projects

` MNCs providing licensing facilities

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Characteristics ofMNCs

` Multifarious activities

` Multinational management

` Owners and top management do not come from one

country.

` Invest funds in poor/ developing countries

` Dominate global economy

` Globalisation and MNCs are the same side of a coin

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Role ofMNCs in International Trade

` Advantages of MNCs

` Contribute to the growth of developing countries

` They increase government revenues

` MNCs provide better products at low cost

` Disadvantages of MNCs

` They exploit local labour and resources by paying lower

prices.` MNCs involvement results in the lack of development of

local R&D.

`

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Foreign Direct Investment (FDI)

` Foreign Direct Investment (FDI) is defined as a form ofinvestment made in order to gain unwavering and long-

lasting interest in enterprises that are operated outside of

the economy of the shareholder/ depositor.

` In FDI, there is a parent enterprise and a foreign

associate, which unites to form a Multinational

Corporation (MNC).

` In an FDI, the investment must give the parent enterprise

power and control over its foreign affiliate.

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Foreign Direct Investment in India

` Foreign Direct Investmentin Indiais notallowedunderthe following industrial sectors:

` Arms and ammunition

` Atomic Energy

` Coal and lignite

` Rail Transport

` Mining of metals like iron, manganese, chrome, gypsum,

sulfur, gold, diamonds, copper, zinc

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Foreign Direct Investment in India

` Foreign direct investment is allowed in all the sectors, includingservice sector.

` For a few sectors FDIs are not permitted beyond the ceiling.

` FDIs for all items / activities can be brought in through the

automatic route under the powers delegated to the RBI.

` For other items / activities through government approval, it isaccorded on the recommendation of the Foreign Investment

Promotion Board (FIPB)