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Nature of International Business Environmental
International business houses need accurate information to make appropriate
decisions. Europe was the most opportunistic market for leather goods, particularly
shoes. Based on the accurate date. The Bata shoe company make an appropriate
decision to enter various European countries.
International business houses need to have not only accurate but also timely
information. For e.g. Coca-Cola could enter the European market based on timely
information, whereas Pepsi entered later.
The size of international business should be large in order to have an impact the
foreign economies.
However, the projection are that in the next decade, the developing countries will
increase their share in the world income and trade.
General Agreement on Tariffs and Trade (GATs)
GATT which originated in 1947 transformed into WTO with effect from January
1st, 1995
OBJECTIVES :
The primary objective of GATT was to expand international trade by liberalising
trade so as to bring about an all-round economic prosperity. The preamble to the
GATT mentioned the follow :
1.Rising the standard of living.
2.Ensuring full employment and a large and steadily growing volume of real income
and effective demand.
3.Developing full use of the resources of the world.
4.Expansion of production and international trade.
PRINCIPLES :
For the realisation of its objectives, GATT adopted the following principles.
Non-Discrimination :
Non-discrimination requires that no member country shall discriminate between
themselves in the conduct of international trade.
Prohibition of QRs. (Quantitative Restrictions) :
GATT rules prohibits QRs and limit restrictions on trade to the less rigid tariffs.
Consultation :
To resolve disagreements through consultation.
General Agreement on Trade in Services (GATs)
The General Agreement on Trade in Services (GATS) was introduced in 1995 under
WTO to promote further liberalisation and globalisation of services
GATS defined services as occuring through for possible mode of supply :
Mode I :
Cross-border supply, that is, supply of a service from one country to another
country ; such as, provision of diagnosis via telecommunication.
Mode II :
Consumption, that is, the supply of a service in one country to the service
consumer of any other member country ; such as, through movement of patients.
Mode III :
Commercial presence, that is, supply of services by a service supplier of one
country through commercial presence in another country ; for example,
establishment of or investment in hospitals.
Mode IV :
Movement of natural persons, that is, temporary cross-border movement of
service providers ; for example, doctors, chartered accountants, and legal-and
managerial functionaries.
¬ey Rules :
(Most Favoured Nations) MFN Treatment :
MFN treatment means treating trading partners equally.
National Treatment :
National Treatment, Equal Treatment of National Treatment for foreigners and
nationals.
Transparency :
Transparency means the governments must setup enquiry points within their
bureaucracies.
Regulations : Objective and Reasonable :
Governments should regulate services reasonably, objectively and impartially.
OBJECTIVES :
The main objectives of IMF are as follows:
1.Promote international monetary cooperation.
2.Facilitate the expansion and balanced growth of international trade.
3.Promote exchange stability and maintain orderly exchange arrangements among
members.
4.Assist in establishing a multilateral system of payments in respect of current
transactions among member countries, and also assist in eliminating foreign
exchange restrictions that hamper the growth of world trade.
5.Make available to members the general resources on a temporary basis to enable
them to correct BoP problems without resorting to measures that would harm
national- or international prosperity.
6.Shorten the duration and lessen the degree of disequilibrium in the international
BoP of members.
ORGANIATIONS :
The IMF¶s organisations consiss of :
1.Board of Governors, 2. Executive Board 3. Managing Director
4. Staff of Internationals Civils Servants 5. Development Committee
Borrowings, Financing Facilities, and Policies :
BORROWINGS :
A member can generally borrow up to 380 percent of its quota.
Contingent Credit Lines (CCL) access is in the range of 300-580 percent of quota.
Financing Facilities and Policies Landing facilities consist of EFF, SRF and CFF.
Emerging assistant through EFM. Technical Assistant. IMF Resources
Subscriptions by members.
Areas of Negotiations
Broadly speaking, WTO has been set up to continue negotiations and bring agreements in the
following areas:
1. Basic telecommunications.
2. Maritime transport.
3. Movement of natural persons.
4. Financial services.
5. General Agreement on Trade and Services (GATS)
6. A reaffirmation of the rule of the law in trade and economic relations.
7. A reversal of long- standing protectionist practices in agriculture, textiles and clothing.
8. An extension of multilateral rules to services and intellectual property rights.
WTO and India :
India became a founder member of WTO by ratifying the WTO agreement on
December 30, 1994.
The critics believe that the new policies have developed a dependency syndrome
on the international market and the Indian economy¶s fortunes have been geared
to it.
International Finance Corporation (IFC)
IFC was established in 1956.
MISSION :
Its mission was contributed for reducing poverty and improving living standards to the WB
groups and over all purpose.
OBJECTIVES :
The objectives of IFC are to assist the economic development of LDCs by promoting growth in
the private sector of their economies and help to mobilise domestic and foreign capital for this
purpose.
MAIN FEATURES OF ASSISTANCE :
The main features of IFC¶s assistance are as follows :
1.The IFC makes its investments in partnership with private investors from the capital-
exporting country or from the country in which the enterprise is located, or both.
2.It is envisaged that the Corporation's investments will never be more than half of the capital
requirements of the enterprise.
3.The minimum investment the IFC will make in an enterprise is fixed at $10,000 or its
equivalent, but no upper limit is fixed.
4.The enterprises eligible for loans from the Corporation should be predominantly industrial
and contribute to the economic development of the country.
5.The rate of interest in each case would be a matter of negotiation depending on the risks and
other investments.
6.The IFC will not seek or accept a government guarantee for the repayment of any of its
investment, nor will it seek formal government approval of any proposed financing, except
when such approval is required by law in any country.
IFC and India :
The IFC has identified five priority areas in India for its activities, which are capital
market development, FDI, access to foreign markets, equity investments and
infrastructure.
Asian Development Bank (ADB)
A.D.B was set up in December 1966 under the auspices of the United Nations -
Economic Commission for Asia and Far East (ECAFE) to foster the economic
development of Asian countries. Its headquarters are in Manila.
The funds of the ADB are contributed by developed countries such as Japan, the
United States, Canada, West Germany, Australia, and others.
The main objectives of the ADB are:
1.To promote investment in the ESCAP (Economic and social Commission for Asia
and the Pacific) region of public- and private capital for development; and
2.To utilise the available resources for financing development, giving priority to
those regional, sub-regional, as well as national projects and programmes which
contribute more effectively to the harmonious economic growth of the region as a
whole.
At the 23rd Annual Meeting of the Board of Governors of the ADB, the President
pointed out that the Bank's most appropriate response to Asian- and Pacific
development in the future lies in following three board directions:
1.Greater priority must be placed on alleviating poverty and protecting the
environment;
2.The Bank must strengthen its assistance to the private sector to improve
productivity and efficiency; and
3.The Bank must work with its developing members to create a policy framework
that makes the most efficient use of human- and capital resources.
United Nations Conference on Trade and
Development (UNCTAD)
UNCTAD was established in 1964 as a permanent organ of the UN General Assembly.
FUNCTIONS :
The principal functions of UNCTAD are as follows :
1.To promote international trade with a view to accelerate economic development.
2.To formulate principles of and policies on international trade and related problems of
economic development.
3.To negotiate multinational trade agreements.
4.To make proposals for putting its principles and policies into effects.
BASIC PRINCIPLES :
UNCTAD's action programme and priorities have been laid down in various
recommendations adopted by the first conference in 1964. These recommendations are
based on the following basic principles:
1.Every country has the sovereign right to freely dispose of its natural resources in the
interest of the economic development and well-being of its own people and to freely trade
with other countries;
2.Economic relations among countries, including trade relations, shall be based on
respect for the principles of sovereign equality of states, self-determination of people, and
noninterference in the internal affairs of other countries; and
3.There shall be no discrimination on the basis of differences in socio-economic systems,
and the adoption of various trading methods and trading policies shall be consistent with
this principle.
United Nations Industrial Development
Organization (UNIDO)
UNIDO was established in January 1967 with an objective to promote
industrialization in developing countries. The major activities of UNIDO are direct
technical assistance to industries research and co-ordination.