Tag: Trade

Australia – United Kingdom Trade Deal : Free Trade Agreement

Article

February 19, 2022
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6 min
2 years
1,015 word

Tagged Agreement, Australia, Trade, United Kingdom

Australia – United Kingdom Trade Deal : Free Trade Agreement

The UK has secured a trade deal with Australia eliminating tariffs on all UK goods and boosting jobs and businesses across the country.

Keywords- Australia, UK , Trade

Author: Riya Kashyap

Introduction

The UK has secured a trade deal with Australia eliminating tariffs on all UK goods and boosting jobs and businesses across the country. PM Boris Johnson & Australian PM Scott Morrison agreed to the main elements of the deal after a discussion of 5 years. The leaders reaffirmed the enduring partnership between the UK and Australia during their discussion. They agreed to work closely together on defence, technology collaboration and tackling climate change including through a future Clean Tech Partnership.

The new Free Trade Agreement (hereinafter referred as FTA) means iconic British products. Like: cars, Scotch whisky, biscuits and ceramics will be cheaper to sell into Australia. Boosting UK industries that employ 3.5 million people across the country. The UK-Australia trade relationship was worth £13.9 billion last year and is set to grow under the deal. Creating opportunities for businesses and producers in every part of the UK. British farmers will be protected by a cap on tariff-free imports for 15 years, using tariff rate quotas & other safeguards. The tariff rate quotas & other safeguards, protects the British farmers through a cap on tariff-free imports for 15 years. Under the agreement, Britishers under the age of 35 will be able to travel and work in Australia more freely. Which would open exciting opportunities for young people.

The new FTA opens fantastic opportunities for British businesses and consumers, as well as young people. Who wish to work and live on the other side of the world. The free trade deal will eliminate tariffs on Australian favourites like Jacob’s Creek and Hardy’s wines, swimwear and confectionery. Boosting choice for British consumers and saving households up to £34 million a year.

Benefits to UK

It will provide benefits across the whole of the United Kingdom, including:

Scotland exported £126m of beverages to Australia in 2020; this deal will help distillers by removing tariffs of up to 5% on Scotch Whisky.
Wale has exported more than 450 businesses Australia last year. Which will benefit the life science companies as well as chemical manufacturers in particular.
90% of all exports from Northern Ireland to Australia are machinery and manufacturing goods – used extensively in Australia’s mining, quarrying and recycling sectors. The tariffs will be removed and procedures of custom will be simplified under the new FTA.
Car manufacturers in the Midlands and north of England will see tariffs of up to 5% cut, boosting demand for their exports.

An FTA with Australia is also a gateway into the fast-growing Indo-Pacific region covering £9 trillion of GDP & 11 Pacific nations from Australia to Mexico. The deal’s ambitious commitments on market access for services professionals, cutting-edge digital provisions and reduced barriers to investment will benefit the UK’s service sector. The UK exported £5.4 billion worth of services, including £1.4bn of insurance and pension services & £780m of financial services, to Australia in 2020. Red tape and bureaucracy will be torn down for more than 13,000 small and medium-sized businesses across the UK; who already export goods to Australia, with quicker export times.

UK- Australia Agreement

This Agreement is as significant for its historic symbolism as it is for its direct trade benefits, as it marks the first Agreement to have been negotiated from scratch in the post-Brexit era for the British Government and further deepens the bilateral relationship between the two nations. The UK has entered into many other Free Trade Agreements since leaving the EU legal framework, but all of them until now have been continuity agreements, mirroring to a very large extent the corresponding EU agreement with that country from which the UK had previously benefited as an EU Member State. This Australian agreement, by contrast, has no EU parallel and therefore represents a tangible post-Brexit milestone for the “global Britain ” concept.

In the coming days and months, the details of the Agreement in Principle will become clearer. It is expected that the actual Agreement in Principle document will be in excess of 1200 pages, so there is clearly much detail to come. This is an important step in clearing the way for a smooth accession by UK to Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). It is one of the largest economic zones in the world, which the UK has formally requested to join and of which Australia is a key member.

The Agreement is due to come into effect in 2022. Dentons Trade & Regulatory partners in the UK and Australia have prepared a summary of what we have learned until now. The Agreement key benefits is to Australia and British businesses and consumers.

Impact of the Agreement

FTA paves way for UK’s potential accession to CPTPP, part of a broader geopolitical move by UK to focus on Asia-Pacific region. The CPTPP is a ‘deep’ trade agreement that is more about the governance arrangements for transnational trade in the region. It is a preferential trade agreement that distinguishes rules for those who are and are not members of the CPTPP. It is an important step towards rules-based regulatory control of global value chains, the importance of which continues to grow. Without the provisions of this FTA, however; levelling the playing field as between the UK and existing members of the CPTPP. The UK’s entry into the CPTPP would be much more difficult.

The FTA is the right deal for Australia and the UK; with greater access to a range of high-quality products made in both countries. It also provides greater access for businesses and workers; all of which will drive economic growth and job creation in both countries. Australian producers and farmers will receive a significant boost by getting greater access to the UK market. Australian consumers will benefit from cheaper products. With all tariffs eliminated within five years, and tariffs on cars, whisky, and the UK’s other main exports eliminated immediately.

The two countries will now finalise the text and carry out the domestic processes. Which requires enabling signature and the subsequent entry into force of the FT. This FTA is therefore significant as recognising global nature of trade and the rules that apply to that global trade.

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Position of India in International Trade

Article

February 9, 2022
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6 min
2 years
1,070 word

Tagged economy, India, International, Trade

Position of India in International Trade

International trade plays a vital role in the Indian economy. As the country needs to import diverse products, international trade is……

Keywords- International, Trade, India

Author: Riya Kashyap

International trade plays a vital role in the Indian economy. As the country needs to import diverse products, international trade is extremely important to the country. India exports a vast number of products and also imports an equal number of other products. Although India has steadily opened up its economy, its tariffs continue to be high when compared with other countries, and its investment norms are still restrictive. This leads some to see India as a ‘rapid globalizer’ while others still see it as a ‘highly protectionist’ economy. Nonetheless, in recent years, the government’s stand on trade and investment policy has displayed a marked shift from protecting producers to benefiting consumers. India is now aggressively pushing for a more liberal global trade regime, especially in services.

Global Trade was growing at 5.7 percent in 2017. However, in 2019-20, it is estimated to grow only at 1.0 percent.

Top Export Items

Petroleum products, precious stones, drug formulations & biologicals, gold and other precious metals are the top export commodities. India’s merchandise exports are less than its merchandise imports. Still, India’s merchandise trade balance has improved from 2009-14 to 2014-19. Although most of the improvement in the latter period was on account of more than 50% decline in crude prices in 2016-17.

Top Import Items

Crude petroleum, gold, petroleum products, coal, coke & briquettes constitute top import items. India’s service exports are more than its service imports. This means that India has a net service surplus. However, India’s net services surplus has been steadily declining in relation to GDP.

Export of Services

The composition of service exports has remained largely unchanged over the years. Software services constitute the bulk of it at around 40-45 percent; followed by business services at about 18-20 percent; travel at 11-14 per cent and transportation at 9-11 per cent. Over the years, service imports in relation to GDP have been steadily rising putting pressure on Bop to worsen. However, the increase in service imports to GDP ratio is inevitable given a rising level of FDI and a gradual upscaling of the Make in India program. Business Services, Travel, and Transportation are the three top service imports.

As per the WTO data released in April 2019, for the year 2018, India’s share in global exports for merchandise was 1.7 % and in global imports was 2.6 %. For the year 2018 for the service sector, India’s share in global exports was 3.5 % and imports were 3.2 %.

Steps to Boost Exports

The government of India is proactively taking several steps to boost exports, which inter-alia includes the following:

The merger of Council of Trade and Development and Board of Trade provides a common platform for addressing stakeholder concerns:
- This common platform, comprising of representatives from industry, export promotion councils, Government of India and state governments and representatives from the banking and finance sector is playing a critical role in addressing export-related concerns, with a focus on addressing these on a priority basis.
Infusion of funds for Export Support:
- A capital of Rs. 389 crores have been infused into Export Credit Guarantee Corporation (ECGC) on 21st June 2019. A Grant-in-aid (corpus) of Rs. 300 crores have been contributed to National Export Insurance Account (NEIA) trust on 21st June 2019, thereby enhancing its risk-taking capacity to support project exports in challenging markets.
Agriculture Export Policy:
- A new Agriculture Export Policy (AEP) was approved in December 2018. To increase agriculture exports from the present US$ 30 Billion to US$ 60+ Billion by 2022. The outlay of Rs. 206 Crores for 2019-20 has been approved for its implementation.
Boost to Gem and Jewellery exporters:
- Resolution of various issues which inter alia includes removal of the requirement of paying IGST on re-import of goods. Which were exported earlier for exhibition purpose/consignment basis. Allowing partial discharge of bonds executed by nominated agencies/banks for the import of gold to be supplied to jewellery exporters, thereby enabling nominated agencies/banks to release bank guarantees of jewellery exporters who have fulfilled their export obligation.
Promoting Ease of Doing Business:
1. Common Digital Platform for Issuance of electronic Certificates of Origin (Coo) for the exporters was launched on 16.09.2019 to improve ease of doing business for exporters.
2. Special Economic Zone (Amendment) Bill, 2019
  - SEZ (Amendment) Bill 2019 became the first legislation of the newly formed Government to be passed by the Parliament. It will enable any entity to set up a unit in SEZs, including Trusts. This would help boost investments and create new export and job opportunities.
  - Better facilities for employees: SEZ units are allowed to create facilities/amenities like crèche, gymnasium, cafeteria, etc. for their exclusive use as a measure towards ease of doing business.

In June 2021, the merchandise exports increased to US$ 32.50 billion, registering an increase of ~ 48.34 % YoY and indicating a broad recovery in the trade driven by a strong performance of small businesses. With the upcoming trade policy 2021-26, the government plans to increase merchandise exports with emphasis on the higher share of MSME. Foreign trade policy 2021-26 is expected to focus on MSMEs and new export potential.

In March 2021, the central government announced plans to establish a new mechanism to increase import screening in order to protect domestic manufacturers. Details of the new screening process would be available in the foreign trade policy 2021-26, which is expected to commence next month. The available data would help domestic manufacturers analyse the market potential of such goods. The foreign trade policy 2021-26 is also expected to boost MSMEs and e-commerce exports. It will also identify new sectors to boost domestic export. On December 2, 2020, a meeting of the Board of Trade (BOT) was held under the chairmanship of Mr. Piyush Goyal. The focus of the meeting was on the new Foreign Trade Policy (2021-26). Outlining policies and steps to drive domestic production and exports.

Government reforms and inherent economic strengths have contributed to its standing as one of the most sought-after destinations for foreign investments in the world. Also, technological, and infrastructural development being carried out across the country augurs well for the trade and economic sector in the years to come. The Government of India has been working on striking important deals with the Governments of Japan, Australia, and China. To increase contribution towards the economic development of the country and growth in the global market.

India has the potential to increase its goods and services exports to Australia to:-

US$ 15 billion by 2025 and US$ 35 billion by 2035.

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World Trade Organization (WTO): International Trade | Tariffs

Article

January 16, 2022
/ Leave a Comment on World Trade Organization (WTO): International Trade | Tariffs

6 min
2 years
1,053 word

Tagged economy, Goods and Services, International, International Trade, Trade

World Trade Organization (WTO): International Trade | Tariffs

International Trade refers to the exchange of goods and services between countries. It allows countries to expand their markets and access goods and services that otherwise may not have been available domestically. As a result of international trade, the market is more competitive. This ultimately results in more competitive pricing and brings a cheaper product home to the consumer.

The World Trade Organization (WTO) is an international institution that oversees the international trade rules among nations.

Author: Riya Kashyap

International trade is the key to the rise of the global economy. In the global economy, supply and demand and thus prices both impact and are impacted by global events. The importance of international trade was recognized early on by political economists such as Adam Smith and David Ricardo.

For Example- Political change in Asia, which could result in an increase in the cost of labour. This could increase the manufacturing costs for an American sneaker company that is based in Malaysia. Which leads to increase in the price charged for a pair of sneakers that an American consumer might purchase at their local mall.

Following are the basic concepts to have a deeper understanding of International Trade:

Imports & Exports

A product that is sold to the global market is called export, and a product that is bought from the global market is an import. Imports and exports are accounted for in the current account section in a country’s balance of payments. Imports lead to an outflow of funds from the country since import transactions involve payments to sellers residing in other countries. Exports lead to an inflow of funds to the seller’s country since export transactions involve selling domestic goods and services to foreign buyers.

Comparative Advantage

Comparative advantage is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners.
The theory of comparative advantage introduces opportunity cost as a factor for analysis in choosing between different options for production.
Comparative advantage suggests that countries will engage in trade with one another, exporting the goods that they have a relative advantage in.

Absolute Advantage

It is when a producer can produce a good or service in greater quantity for the same cost, or the same quantity at a lower cost, than other producers.
Absolute advantage can be the basis for large gains from trade between producers of different goods with different absolute advantages.
By specialization, division of labour, and trade, producers with different absolute advantages can always gain more than producing in isolation.
Absolute advantage is related to comparative advantage, which can open up even more widespread opportunities for the division of labour and gains from trade.

Tariff

Tariff are duties on imports imposed by governments to raise revenue, protect domestic industries, or exert political leverage over another country.
Tariffs often result in unwanted side effects, such as higher consumer prices.
Tariffs have a long and contentious history and the debate over whether they represent good or bad policy rages on to this day.

There are several types of tariffs and barriers that a government can employ:

Specific tariffs
Ad valorem tariffs
Licenses
Import quotas
Voluntary export restraints
Local content requirements

Free Trade

Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free-market idea applied to international trade

Free trade agreements reduce or eliminate barriers to trade across international borders.
Free trade is the opposite of trade protectionism.
In the U.S. and the E.U., free trade agreements do not come without regulations and oversight.

Protectionism

Protectionism refers to government policies that restrict international trade to help domestic industries. The protectionist policies are usually implemented to improve economic activity within a domestic economy but can also be implemented for safety or quality concerns.

Protectionist policies place specific restrictions on international trade for the benefit of a domestic economy.
The policies typically seek to improve economic activity but may also be the result of safety or quality concerns.
The value of protectionism is a subject of debate among economists and policymakers.
Tariffs, import quotas, product standards, and subsidies are some of the primary policy tools a government can use in enacting protectionist policies.

WORLD TRADE ORGANIZATION (WTO)

Created in 1995, the World Trade Organization (WTO) is an international institution that oversees the global trade rules among nations. It superseded the 1947 General Agreement on Tariffs and Trade (GATT) created in the wake of World War II.

The WTO is based on agreements signed by the majority of the world’s trading nations. The main function of the organization is to help producers of goods and services, as well as exporters and importers, protect and manage their businesses. As of 2021, it has 164 member countries, with Liberia and Afghanistan the most recent members, joined in July 2016.

The World Trade Organization (WTO) oversees global trade rules among nations.
The WTO has fuelled globalization, with both positive and negative effects.
The main focus of the WTO is to provide open lines of communication concerning trade among its members.

The WTO is essentially an alternative dispute or mediation entity that upholds the international rules of trade among nations. The organization provides a platform that allows member governments to negotiate and resolve trade issues with other members. The WTO’s main focus is to provide open lines of communication concerning trade among its members. For example, the WTO has lowered trade barriers and increased trade among member countries. On the other hand, it has also maintained trade barriers when it makes sense to do so in the global context. Therefore, the WTO attempts to provide negotiation mediation that benefits the global economy.

Trade War

A trade war occurs when one country retaliates against another by raising import tariffs or placing other restrictions on the other country’s imports.
Trade wars are a side effect of protectionist policies and are controversial.
Advocates say trade wars protect national interests and provide advantages to domestic businesses.
Critics of trade wars claim they ultimately hurt local companies, consumers, and the economy.

Balance Of Trade

Balance of trade (BOT) is the difference between the value of a country’s imports and exports for a given period and is the largest component of a country’s balance of payments (BOP).

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