The Impact Of Global Trade On Economic Growth
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Published: Thu, 27 Apr 2017
The Global free trade- better known as Globalization, are the export oriented trade policies, specially framed to encourage the export oriented manufacturing trade and commerce; which are framed to counter trade the imports of capital goods and intermediaries. One frame of such counter trade is initially to go for import substitution products manufacturing and exports of manufactured goods mainly sourced due to the major disparity in the wage levels in the different worlds of developed and developing countries, plus the exports of the services in the techno-commercial Information Technology
Conceptualization and implementation of such export oriented industrialization and trade policies play a very important role in the economic analysis of the particular country at that particular period. The quantitative and qualitative evaluations of such export oriented industrialisation growth and expansion results, are always country specific and the concurrent industrialization promotional strategies and policies are framed, assessed, compared, and implemented as per the country’s specific requirements during that period. Hence promoting export oriented industrialization and trade policies are always a part of the economic analysis for the particular country.
Manufacturing Industrialization Boom in Developing Countries: As can be seen from the figures of table 01, it has been observed that in the last two decades few far east South Asian countries: mainly China, Singapore, Hong Kong, South Korea, Indonesia, Malaysia, Taiwan, Thailand etc; have outperformed in the economic growth scale of the developed countries and have placed themselves into semi-industrialized nations category.
Since the introduction of globalization theory in 1960, there has been a phased industrial transition in production and manufacturing stages in the developing nations; which has seen the overall growth of their economy. The up gradation of export oriented manufacturing sectors and promotion of export oriented industrialization has been the major focus with in the country and the concept which has been supported and promoted by the developed nations.
Phase of transition of export oriented production and manufacturing has first catered to domestic needs, then competed with the import substitution products, followed by then up-gradation of their technological and expertise in production to compete international standards and globally, within own country and abroad too.
These strategies strengthened the fundamentals for a rapid transformation in exports. These strategies had been constantly supported by government Protection Strategy of ‘Restrictive Market’ had supported the domestic market activities, which resulted in a fruitful Value Addition to the GDP growth.
Export Promotional Packages: hypothetically, the financial economic cycle in a larger context require foreign exchange at every step; and therefore the means of income of foreign exchange has been a catalytic stimulant for the formulation and implementation of export promotional strategies, policies and packages; to support and boost export oriented industrialization, is hypothetically correct. Also there exists a very close relation between the two.
Influences of the Trade Policies: Every developing country is influenced by their endogenous and exogenous variables, during the construction of their international trade and commerce policies and strategies. Domestic price structure, existing wage structure, productivity of the export and non-export oriented sectors, capital stock and labour market, are few of the endogenous variables; while the money supply, government financial deficit, trade surplus and export subsidy are exogenous variables.
The export subsidies are extended by the government for various reasons, like to reduce the distortion effects of investment during the phase of foreign exchange shortages, helps to reduce the constrains on capital investments, extend better capital goods quota allocation, to make the export pricing structures competitive in the international markets, etc. Quota allocation enhances productivity, which lowers domestic pricing structures and increases their employment capabilities- thereby lowering domestic nominal wager rates. It allows expansion for export oriented manufacturing units; to support productivity of the non- exporting firms by All these cumulative effects restructure the new equilibrium of the economic structure and levels; with a greater productivity and employments in both export and non-export oriented sectors.
Hence summarising; Export promotion restructures employment opportunities, productivity levels and lowers the domestic pricing levels; which are necessary for any developing countries.
Export subsidies under a Floating Exchange Rate Regime
Floating Exchange Rate policy is an endogenous variable, and country’s trade policies are framed under floating exchange rates mainly to balance the balance of payment in international trade and monitor the demand of foreign exchange reserves. Policies formed under fixed exchange rate or under floating exchange rates are categorically different, under all similar conditions.
Devaluation of Domestic Currency: reconstructing (devaluation or inflation) of the domestic currency is mainly due to exogenous factor influences. It is mainly done to support international market pricing structures, control the trade balance of the country and there by monitor the economic growth of the country. Reconstruction of domestic currency is a continuously monitored and a short time policy to support the growth GDP of the country.
Group Dynamics- Indian Economy Overview
Issues and Priorities for India
Indian economic reform policies have been on a constant move upwards and have gathered momentum after India adopted trade liberalization policies and opened up the vast restricted virgin market to the international trade market. It had to undergo several challenges with regards to formulation, implementation and regulation of policies and strategies reforms. Indian trade policies since then have been quiet vibrant
Economic policies had undergone vast changes, mainly in the tax structural reforms, since liberalization policies were adopted by India three decades ago.
Restrictive trade policies were abolished and international trade procedures simplified, making it cost effective for business houses. Such trade attitudes and practices have attracted the foreign investors goodwill and could reap the fruits of substantial FDI and FII in India.
With the growing trade scenario Indian government policy decision for the development of the vital infra-structures in India were with two contentious motives. To first serve the domestic market better and then with the conjugal support of the free international trade policies, enjoying non-restrictive trading atmosphere; attracted the goodwill of several FDI and FII investments on regular basis. Thus saw a huge foreign investment boom in India- with substantial investment inflows particularly because of low investment cost and high returns.
Infrastructural support has boosted the growth of agricultural sectors and domestic market in India. Insufficient infrastructure facilities had been a deterrent factor in the India’s economic growth pace; and with the adoption of infrastructure development priority policy, saw India’s economic growth by many times- initially supported its own industry base, subsequently foreign trade and investments confidence.
Foreign Direct Investment in the form of FDI and FII; quickly attracted technological investments, and developed human capital broad base in India. These supports helped international trade integration and long term trade relation dependability; which ultimately boosted the overall productivity.
Sectors of Indian Economy under Government focus for export promotion programmes.
During such positive growth trend, Indian Government policies have always focused on three main aspects, mainly enhancing its foreign currency reserves, for the healthy sustenance of all cornered economic growth, by regularly supporting and promoting its international trade and commercial economy. The three main aspects were: Industry, Services and Agriculture.
Indian EXIM policies
Indian EXIM policies for foreign trade are the policies providing guidelines and regulating all the Import and Export activities and have been instrumental in promoting and to optimise India’s foreign trade internationally and helping Indian economic growth by substantial generation of foreign exchange.
Main Laws Governing the Indian Import Sector
All the activities of foreign trade in all aspects of commercial trade and commerce are regulated by the Indian Import laws; under the provisions of the Foreign Trade (Development and Regulations) Act. 1992.
Different rates are applicable to different categories of duties for the Import-Exports, Custom, Central Excise and other applicable mandatory duties are revised every year in the General Budget of India.
The import of goods in India is strictly regulated by the domestic laws, rules, regulations and domestic socio-economic demands of the land at that particular period norms are applicable for the safety of the environment and the growth of the socio-economic standards.
The Customs Act of India, Foreign Trade (Exemption from Application of Rules in Certain Cases) Order 1993 and Notifications under Foreign Trade (Development & Regulation) Act 1992; regulate and act as the guidelines for all applicable taxes, levies and tariffs on the import of products.
All the fees and report submission are also as per the guidelines laid down for that activity.
Regulations and Procedures
Freely Importable Goods are category of goods that invites least restriction or levies and can be easily imported. Under this category import of few restricted capital goods and items can be made without Import license.
Contrary to Freely Importable Goods are the Negative Items or Restricted Import Items, which are restricted and barred from imports under the EXIM laws of foreign trade. These restricted categories of Negative items are barred mainly for the reasons of safety-security to the land, ecology or the society. This law was introduced by the Government of India in the year 1993 and have since then been amended as required from time to time – best in the interest of India. Certain categories of electronic goods, consumer goods, precious and semi precious stones; have also been included in the same list of Negative items.
Another category is the Canalised Items category. These items are items which are of very high value or may be required in huge bulk requirements, and are also regulated by the Government of India. Procurement of such items are routed by the government through specific Public Sector Agencies, under special provisions and hence such items as are imported thorough a restricted channel are known as Canalized Items. Such item list are generally for the utility and consumption of the general public. For example: Petroleum and allied products are imported by Indian Oil Corporation. But of recent (last one decade) the imports of petroleum have also been delisted from Canalized item, but are restricted to private sector giant conglomerates. Similarly imports of chemical fertilizers and mineral ores are canalized through Minerals and Metal trading Corporation of India.
Other miscellaneous items and gifts are imported and traded by State Trading Corporation, under Customs Clearance Permit (CCP).
Every Indian international trader is provided a Unique Identification Code known as Import – Export Code (IEC) (unless exempted under special category) for their foreign trade.
The list are exhaustive and well formulated and are mandatory requirements, regulated by the Directorate General of Foreign Trade (DGFT).
Indian government policy & strategy highlights to promote foreign trade
Few export promotions policies and strategies which are of recent are applied by the Government of India, to promote foreign trade are briefly highlighted below:
Foreign trade processing regulations are made more efficient and effective.
Introduction of EXIM Bank credits and credit insurance programs, to safeguard traders interest and economy
Export promotion policies are framed based on the research findings on the existing international trade trends and policies, like:
Promotion and direction to brand
Arrangement of foreign exchange
Growth in foreign exchange reserve and overall economic growth.
Help to arrange foreign exchange rate on behalf of exporters
Extending financial incentives for cost competitiveness support to international trade and business
Finance protection structural supports are provide by EXIM Bank credits, trade insurance, etc
Exports promotions related to brand, research and development knowledge and technology are extensively supported by the government.
Lessons for future projects- Recommendations
There is an urgent need to steer the Indian foreign trade policies and strategy implementation by reducing trade barriers and investment restrictions, subsidies and protective covers, more effectively.
Make the trade and commerce government controlled activities and licences more transparent, simplified, efficient and more effective.
Make the regulatory norms more vibrant and sensitive to international trends.
In a phased manner withdraw subsidies or protective covers, instead implement and regulate export promotion strategies and policies to promote long term economic growth.
Aggressively promote international bilateral trade and economic agreements.
Strengthen political and economic bilateral relations between trading partners and for increase of two-way manufacturing and services trade.
Make continuous efforts through multilateral to overcome competitions and protectionist policies, those represses trade and commerce efficiency.
Attract more trade and foreign investments with attractive long term benefits and with more avenues.
Enhance trade capacity building with infrastructural supports.
Phased withdrawal and elimination of practices of regression and retaliation.
Summary and Conclusion:
After the conceptualization of the Global Trade in 1960, majority of the countries from Latin America and Asian countries, especially South-East and Far East Asian countries were introduced to the concept of International bilateral trade and co-operation developing concept. This concept was readily understood and accepted by all such countries and in a phased manner made effective transition of their domestic industrialization to the export oriented industrialization; and that boosted their economy to a status of Developing Nation. Initially the performance of the developing nations were negligible compared to the Developed Nations; but of recent (past two decades) few South-East and East Asian nations have superseded the developing nation in their GDP growth rate and countries like India and China have marched ahead to become the next super powers
The concept of global trade is a boon to the overall economic growth of any country.
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