International Business International Business MgtMgt

Rajesh. VRajesh. V

Lecturer in the Dept of MgtLecturer in the Dept of Mgt

INTRODUCTIONINTRODUCTION

Meaning:- Meaning:- International business is a International business is a

combination of all commercial combination of all commercial transactions either private or transactions either private or government between two or more government between two or more countriescountries

DefinitionDefinition

International business is a movement International business is a movement of goods and service across the of goods and service across the borders of different countries.borders of different countries.

According to Tepstra and sarathi According to Tepstra and sarathi international marketing is finding out international marketing is finding out what customers wants around the what customers wants around the world and then satisfying their wants world and then satisfying their wants better than competitors both better than competitors both domestic and international domestic and international

INTERNATIONAL BUSINESS INTERNATIONAL BUSINESS vs. INTERNATIONAL TRADEvs. INTERNATIONAL TRADE

International Trade deals with only International Trade deals with only Trades Trades

i.e., only goodsi.e., only goods

International Business deals with International Business deals with both goods as well as servicesboth goods as well as services

FormsForms

International Trade: -International Trade: -

ExportExport ImportImport Entrepot Entrepot

FormsForms

International Business:-International Business:- Importing and exporting services Importing and exporting services Tourism and DevelopmentTourism and Development Licensing Licensing Franchising Franchising Management ContractManagement Contract Foreign exchange dealingsForeign exchange dealings Direct and portfolio managementDirect and portfolio management

Need for the International Need for the International Business:Business:

To increase the profitTo increase the profit To globalize the productTo globalize the product To capture the international marketTo capture the international market To develop the business at To develop the business at

international level international level

Contd…Contd…

To utilize the global opportunitiesTo utilize the global opportunities To competitive globallyTo competitive globally To compensate the loss in one To compensate the loss in one

country with the profit of another country with the profit of another countrycountry

To beat the competition (Following To beat the competition (Following the competitor policy)the competitor policy)

Contd…Contd…

To raise national income and To raise national income and standard of livingstandard of living

To utilize the global resourceTo utilize the global resource To market the specializationTo market the specialization To reduce the difference in To reduce the difference in

economic growth rateeconomic growth rate

Contd…Contd…

To share the benefit of low cost of To share the benefit of low cost of productionproduction

To enjoy the fruits of development To enjoy the fruits of development of science and technology.of science and technology.

To attain the company objectiveTo attain the company objective To expand salesTo expand sales To diversify To diversify

Merits:Merits:

Leads to specialization Leads to specialization Enables to obtain all type of goods Enables to obtain all type of goods Provides benefits of large – scale Provides benefits of large – scale

productionproduction Stabilize prices Stabilize prices Increases qualityIncreases quality

Contd…Contd…

Results in optimum use of resources Results in optimum use of resources Exchange of know – how and Exchange of know – how and

establishment of new industries establishment of new industries Increases employment opportunities Increases employment opportunities Development of communication and Development of communication and

transport facilitiestransport facilities Facilities better international Facilities better international

understandingunderstanding

Demerits:Demerits:

Complicated procedures Complicated procedures Economic dependenceEconomic dependence Adverse effect on home industries Adverse effect on home industries Import of harmful goodsImport of harmful goods Shortage of goods in home countryShortage of goods in home country Political dependencePolitical dependence Exhaust of natural resourcesExhaust of natural resources

International trade International trade theoriestheories

MercantilismMercantilism Absolute AdvantageAbsolute Advantage Comparative AdvantageComparative Advantage Factors Endowment TheoryFactors Endowment Theory Opportunity Cost TheoryOpportunity Cost Theory Competitive advantage theoryCompetitive advantage theory

MercantilismMercantilism

Mercantilism is the oldest trade Mercantilism is the oldest trade philosophy.philosophy.

According Mercantilism, economic According Mercantilism, economic activity was a ‘zero sum game’ (gain activity was a ‘zero sum game’ (gain for one person and loss to another for one person and loss to another person) person)

State intervention in import or State intervention in import or export. export.

Absolute AdvantageAbsolute Advantage

A country has an absolute advantage A country has an absolute advantage over it trading partners if it is able to over it trading partners if it is able to produce more of a good or service produce more of a good or service with the same amount of a good or with the same amount of a good or service with fewer resources. service with fewer resources. (Specialization)(Specialization)

Comparative AdvantageComparative Advantage

A country has a comparative A country has a comparative advantage in the production of a advantage in the production of a goods or services that it produces at goods or services that it produces at a lower opportunity cost than its a lower opportunity cost than its trading partners. trading partners.

It suggests that a country should It suggests that a country should export goods in the country in which export goods in the country in which its its relativerelative cost advantage and not cost advantage and not absoluteabsolute cost advantage cost advantage

Contd…Contd…

Example for absolute and relative Example for absolute and relative advantage advantage

Say, if US can produce shirts as Say, if US can produce shirts as well as automobiles while comparing with well as automobiles while comparing with other state (Mexico) shirts is two times other state (Mexico) shirts is two times and automobiles by three times then US and automobiles by three times then US has an absolute cost advantage towards has an absolute cost advantage towards the both the goods but relative cost the both the goods but relative cost advantage with automobiles. advantage with automobiles.

Factors Endowment Factors Endowment TheoryTheory

It’s a Combination of Comparative It’s a Combination of Comparative and Absolutely advantage theory and Absolutely advantage theory

The theory states that countries like The theory states that countries like china with big labour force will focus china with big labour force will focus on labour intensive goods, and on labour intensive goods, and Sweden with more capital will focus Sweden with more capital will focus on producing goods that are capital on producing goods that are capital intensive. intensive.

Opportunity Cost TheoryOpportunity Cost Theory

The opportunity cost of anything is The opportunity cost of anything is the of alternatives which have to be the of alternatives which have to be foregone in order to obtain that foregone in order to obtain that particular thing.particular thing.

According to opportunity cost theory According to opportunity cost theory the basis of international trade is the the basis of international trade is the differences between nations in the differences between nations in the opportunity cost of production of opportunity cost of production of commodities. commodities.

Competitive advantage Competitive advantage theorytheory

According to this theory, a degree to According to this theory, a degree to which a nation is likely to achieve which a nation is likely to achieve international success in a certain international success in a certain industry is a function of combined, industry is a function of combined, demand condition related and demand condition related and supporting industry and domestic supporting industry and domestic rivalry.rivalry.

Exports Promotion Councils Exports Promotion Councils of Indiaof India

Agricultural and Processed Food Products Agricultural and Processed Food Products Export Development Authority (APEDA)Export Development Authority (APEDA)

Apparel Export Promotion Council Apparel Export Promotion Council Chemical Pharmaceuticals & Cosmetics Chemical Pharmaceuticals & Cosmetics

Export Promotion Council (CPCEPC)Export Promotion Council (CPCEPC) Carpet Export Promotion Council (CEPC)Carpet Export Promotion Council (CEPC) Cashew Export Promotion Council of India Cashew Export Promotion Council of India

Contd…Contd…

Chemical and Allied Products Export Chemical and Allied Products Export Promotion CouncilPromotion Council

Cotton Textile Export Promotion Cotton Textile Export Promotion CouncilCouncil

Coffee BoardCoffee Board Coir BoardCoir Board Electronic & Computer Software Electronic & Computer Software

Export Promotional Council Export Promotional Council

Contd…Contd…

Engineering Export Promotion CouncilEngineering Export Promotion Council Federation of India Export Federation of India Export

OrganizationsOrganizations Gems & Jewellery Export Promotional Gems & Jewellery Export Promotional

CouncilCouncil Export Promotion Council for Export Promotion Council for

HandicraftsHandicrafts Handloom Export Promotion councilHandloom Export Promotion council

Contd…Contd…

Handicrafts & Handloom Export Handicrafts & Handloom Export CorporationCorporation

Office of the Development Office of the Development Commissioner for HandloomsCommissioner for Handlooms

Development Commissioner for Iron Development Commissioner for Iron SteelSteel

Indian Silk Export Promotion CouncilIndian Silk Export Promotion Council Indian Trade Promotion Organization Indian Trade Promotion Organization

Contd…Contd…

Council for Leather ExportCouncil for Leather Export Marine Products Exports Marine Products Exports

Development Authority Development Authority National Agricultural Cooperative National Agricultural Cooperative

Federation of India LtdFederation of India Ltd Overseas Construction Council of Overseas Construction Council of

IndiaIndia Power loom Development and Export Power loom Development and Export

Promotion CouncilPromotion Council

Cont…Cont…

Plastic and Linoleum Export Plastic and Linoleum Export Promotion CouncilPromotion Council

Rubber Board Rubber Board Shellac Export Promotion CouncilShellac Export Promotion Council Sports Goods Export Promotion Sports Goods Export Promotion

CouncilCouncil Spices BoardSpices Board

Contd…Contd…

Central Silk BoardCentral Silk Board Synthetic & Rayon Textile Export Synthetic & Rayon Textile Export

Promotion CouncilPromotion Council Tea BoardTea Board Tobacco BoardTobacco Board Wool & Woolens Export Promotional Wool & Woolens Export Promotional

Council Council

Export ProceduresExport Procedures

Receiving enquiries Receiving enquiries Receipt of order or indentReceipt of order or indent Obtaining letter of creditObtaining letter of credit Obtaining Export License ( DGFT)Obtaining Export License ( DGFT) Compliance of foreign exchange Compliance of foreign exchange

regulationsregulations

Contd…Contd…

Obtaining shipping orderObtaining shipping order Packing , marking and forwarding Packing , marking and forwarding Preparation of Invoice and consular Preparation of Invoice and consular

invoiceinvoice Obtaining customs clearanceObtaining customs clearance Paying dock duesPaying dock dues

Contd…Contd…

Verification of goods to be shipped Verification of goods to be shipped Mate’s receiptMate’s receipt Obtaining bill of ladingObtaining bill of lading Effecting insuranceEffecting insurance Obtaining certificate of originObtaining certificate of origin Receiving paymentsReceiving payments Obtaining various exporting incentives Obtaining various exporting incentives

Intermediaries in Exporting Intermediaries in Exporting goods and services: goods and services:

Clearing and forwarding agent Clearing and forwarding agent Commission agentCommission agent Export and Trading housesExport and Trading houses

FOREX ManagementFOREX Management Concept of Forex MgtConcept of Forex Mgt Scope & significance of Forex MgtScope & significance of Forex Mgt Role of Forex ManagerRole of Forex Manager Foreign Exchange MarketForeign Exchange Market Determinants of Foreign Exchange MarketsDeterminants of Foreign Exchange Markets Exchange Rate Quotes – Direct and Exchange Rate Quotes – Direct and

Indirect quotationsIndirect quotations Risks in ForexRisks in Forex Managing the Forex rate RisksManaging the Forex rate Risks Forex in IndiaForex in India

Concept of Forex MgtConcept of Forex Mgt

Forex is the largest financial market Forex is the largest financial market in the worldin the world

It is estimated $1.5 trillion in It is estimated $1.5 trillion in currencies traded dailycurrencies traded daily

Forex provides income to millions of Forex provides income to millions of traders and large banks worldwidetraders and large banks worldwide

Currencies are traded directly Currencies are traded directly through networks of banks and no through networks of banks and no way related to stock exchangeway related to stock exchange

Forex ManagementForex Management

DefinitionDefinition

The term Forex Mgt has been The term Forex Mgt has been defined as “the science of defined as “the science of management of generation, use and management of generation, use and storage of foreign currencies in the storage of foreign currencies in the process of exchange of one currency process of exchange of one currency into another called Forex”.into another called Forex”.

Foreign Exchange Foreign Exchange MarketMarket

The Forex market is the mechanism by The Forex market is the mechanism by which currencies are valued relative to which currencies are valued relative to one another, and exchanged.one another, and exchanged.

An individual institution buys one An individual institution buys one currency and sells another in a currency and sells another in a simultaneous transactionsimultaneous transaction

Currency trading always occurs in Currency trading always occurs in pairs where one currency is sold for pairs where one currency is sold for another and is represented as:another and is represented as:

EUR/USD or CHF/YEN`EUR/USD or CHF/YEN`

Contd…Contd… The forex market is an informal The forex market is an informal

arrangement of the larger commercial arrangement of the larger commercial banks and a number of foreign exchange banks and a number of foreign exchange brokers. brokers.

The banks and brokers are linked by The banks and brokers are linked by telephone, telex, computers and a satellite telephone, telex, computers and a satellite communications network called the SWIFTcommunications network called the SWIFT

Society for Worldwide International Society for Worldwide International Financial TelecommunicationsFinancial Telecommunications

Which links effectively the bankers and Which links effectively the bankers and brokers to do trade dailybrokers to do trade daily

Scope of ForexScope of Forex A student going tourA student going tour An employee goes for employmentAn employee goes for employment An Indian industrialists import raw An Indian industrialists import raw

material material An Indian industrialists exports finished An Indian industrialists exports finished

goodsgoods World bank disburses aid to an Indian state World bank disburses aid to an Indian state

for infrastructure development projectfor infrastructure development project Thus, Forex is the exchanges between Thus, Forex is the exchanges between

currencies of different countries for the currencies of different countries for the exchange of goods as well as servicesexchange of goods as well as services

Role Forex ManagerRole Forex Manager

Awareness of historical development Awareness of historical development of world tradeof world trade

Ability to forecast future trendsAbility to forecast future trends Comparative analysis skillsComparative analysis skills In – depth knowledge of Forex In – depth knowledge of Forex

marketmarket Knowledge of interest ratesKnowledge of interest rates Willingness to undertake risksWillingness to undertake risks Hedging strategiesHedging strategies

How trading worksHow trading works

Transactions are done through three Transactions are done through three methodsmethods

(i) Spot(i) Spot

(ii) Futures(ii) Futures

(iii) Options(iii) Options

SPOT : A spot contract is a transaction SPOT : A spot contract is a transaction at the current market rate with a at the current market rate with a settlement that takes place within two settlement that takes place within two business days. business days.

Forex rateForex rate

When INR vs. US$ assume the rate When INR vs. US$ assume the rate is 48.40 per US$. That mean we has is 48.40 per US$. That mean we has to pay Rs.48.40 to acquire 1 US$.to pay Rs.48.40 to acquire 1 US$.

Assume if exchange rate becomes Assume if exchange rate becomes 48.90 we say the value of Indian 48.90 we say the value of Indian Rupees has depreciated against Rupees has depreciated against US$.US$.

Reverse is true. Reverse is true.

Factors which determine Factors which determine the FX ratethe FX rate

Fundamental factorsFundamental factors Political and psychological factorsPolitical and psychological factors Technical factorsTechnical factors SpeculationSpeculation OthersOthers

Fundamental factorsFundamental factors

Economic policiesEconomic policies Fiscal policies Fiscal policies Bop – position Bop – position If Bop is F then the currency is If Bop is F then the currency is

seems strongerseems stronger And vice - versaAnd vice - versa

Technical Factors Technical Factors

Capital movementsCapital movements Relative inflation ratesRelative inflation rates Exchange rate policy and Exchange rate policy and

interventionintervention Interest ratesInterest rates

Technical terms Technical terms

Bid price Bid price Ask priceAsk price Mid priceMid price A Bid price is the rate at which the dealer A Bid price is the rate at which the dealer

is ready to buy the foreign currency in is ready to buy the foreign currency in exchange of domestic currency exchange of domestic currency

A Ask price is the rate at which the dealer A Ask price is the rate at which the dealer is ready to sell their currencies towards is ready to sell their currencies towards any foreign currencies.any foreign currencies.

Mid price is an average of ask and bidMid price is an average of ask and bid

Ask – bid spreadAsk – bid spread

The difference between the ask and bid The difference between the ask and bid price is known as “ask – bid spread”price is known as “ask – bid spread”

It is calculated as followsIt is calculated as follows %spread =Ask price – Bid price/Ask %spread =Ask price – Bid price/Ask

priceX100priceX100 For example, if the ask price of $/Pound For example, if the ask price of $/Pound

is $1.6646 and the bid price is $1.6629, is $1.6646 and the bid price is $1.6629, then the % spread may be = .1%then the % spread may be = .1%

FOREIGN EXCHANGEFOREIGN EXCHANGE

According to FERA - 1973 ( foreign According to FERA - 1973 ( foreign exchange regulation ACT) “FX is a exchange regulation ACT) “FX is a foreign currency & includes all foreign currency & includes all deposits, credits & balance payable deposits, credits & balance payable and any drafts, letters of and any drafts, letters of credits ,bills of exchange, expressed credits ,bills of exchange, expressed or drawn in India currency but or drawn in India currency but payable in foreign currency payable in foreign currency

Functions of FX Functions of FX

Transfer of purchasing power Transfer of purchasing power Provision of credit Provision of credit Provision of hedging Provision of hedging

Transfer of purchasing Transfer of purchasing power power

Transfer of purchasing power from Transfer of purchasing power from one country of anotherone country of another

Transfer of purchasing power from Transfer of purchasing power from one currency to another one currency to another

Provision of creditProvision of credit

Pre- shipment credit & post Pre- shipment credit & post shipment credit of exporters shipment credit of exporters

Credit facilities for importers Credit facilities for importers

Provision of hedging Provision of hedging

Hedging refers to covering of export Hedging refers to covering of export racks & it provides a mechanism to racks & it provides a mechanism to exporters & importers to guard exporters & importers to guard themselves against losses arising themselves against losses arising from fluctuation exchange rates from fluctuation exchange rates

Determinants of FXDeterminants of FX

PPP theory PPP theory Demand & supply theory / BOP theory Demand & supply theory / BOP theory

PPP theoryPPP theory ER = Er / Pd = PfER = Er / Pd = Pf

Where ER equilibrium exchange rate Where ER equilibrium exchange rate Er exchange rate in reference period Er exchange rate in reference period Pd domestic price index Pd domestic price index Pf foreign country price index Pf foreign country price index The PPP theory states that when the exchange rates The PPP theory states that when the exchange rates

are free to fluctuate the rate of exchange b/w two are free to fluctuate the rate of exchange b/w two currencies in the long run will be determined by currencies in the long run will be determined by there respective purchasing power there respective purchasing power

ACC – to PPP theory the exchange rate b/w one ACC – to PPP theory the exchange rate b/w one currency with another is in equilibrium when their currency with another is in equilibrium when their domestic purchasing power a that rater of exchange domestic purchasing power a that rater of exchange are equivalent.are equivalent.

BOP theoryBOP theory

Starters that under free market Starters that under free market conditions the foreign exchange rate conditions the foreign exchange rate is determine by the condition of is determine by the condition of demand & supply in the foreign demand & supply in the foreign exchange market exchange market

Exchange risks; is the probability Exchange risks; is the probability that a company will be unable to that a company will be unable to adjust to presses & costs to offset adjust to presses & costs to offset changes in the exchange rate. changes in the exchange rate.

Foreign Exchange RiskForeign Exchange Risk

Economic ExposureEconomic Exposure Accounting ExposureAccounting Exposure Transaction ExposureTransaction Exposure Real operating ExposureReal operating Exposure

Economic exposureEconomic exposure

It focuses on the import of an It focuses on the import of an exchange rate changer on the future exchange rate changer on the future cash flows cash flows

E.g.: is based on the extent to which E.g.: is based on the extent to which the value of the firm will change the value of the firm will change when value changes. when value changes.

Accounting exposureAccounting exposure

It arises from the need for purpose It arises from the need for purpose of importing & consolidation to of importing & consolidation to convert the financial statements of convert the financial statements of the foreign operations from the local the foreign operations from the local currencies involved in the home currencies involved in the home currencies currencies

Transaction exposureTransaction exposure

It deals with various types of It deals with various types of transactions transactions

E.g. Borrowing & lending in foreign E.g. Borrowing & lending in foreign currencies currencies

Local purchasing Local purchasing Sales activities of foreign Sales activities of foreign

subsidiaries subsidiaries

Real operating exposureReal operating exposure

Currency fluctuation cans attar a Currency fluctuation cans attar a company’s future revenue of cost company’s future revenue of cost

INTERNATIONAL BUSINESS ENVIRONMENT

GlobalizationGlobalization Globalization (or globalization) in its literal sense is Globalization (or globalization) in its literal sense is

the process of transformation of local or regional the process of transformation of local or regional phenomena into global ones. It can be described as a phenomena into global ones. It can be described as a process of blending or homogenization by which the process of blending or homogenization by which the people of the world are unified into a single society and people of the world are unified into a single society and function together. This process is a combination of function together. This process is a combination of economic, technological, socio-cultural and political economic, technological, socio-cultural and political forces. Globalization is often used to refer to economic forces. Globalization is often used to refer to economic globalization, that is, integration of national economies globalization, that is, integration of national economies into the international economy through trade, foreign into the international economy through trade, foreign direct investment, capital flows, migration, and the direct investment, capital flows, migration, and the spread of technology.spread of technology.

Effects of globalizationEffects of globalization

Industrial Industrial Political Political Informational Informational Language Language Cultural Cultural Ecological Ecological Social Social Technical Technical Legal/Ethical Legal/Ethical

TRADE BLOCKSTRADE BLOCKS

A trade block is a large Free Trade Area A trade block is a large Free Trade Area [FTA] formed by one or more nations by [FTA] formed by one or more nations by arrangement of tax, tariff and trade arrangement of tax, tariff and trade agreements. Typically trade pacts that agreements. Typically trade pacts that define such a bloc specify formal define such a bloc specify formal adjudication bodies, e.g., North American adjudication bodies, e.g., North American Free Trade Agreement (NAFTA) trade Free Trade Agreement (NAFTA) trade panels. This may include even a more panels. This may include even a more democratic and participative system, as the democratic and participative system, as the European Union (EU) and its parliament.European Union (EU) and its parliament.

Regional Trade BlocksRegional Trade Blocks

ASEANASEANAFTAAFTAACIAACIAASAMASAM

Contd…Contd…

EEAEEAEFTAEFTAEUEU

Contd…Contd…

SAARCSAARCSAPTASAPTANAFTANAFTA

ASSOCIATION OF SOUTHEAST ASSOCIATION OF SOUTHEAST ASIAN NATIONSASIAN NATIONS

(ASEAN)(ASEAN)ASEAN:-ASEAN:-• Geo-political and economic organization of Geo-political and economic organization of

10 countries located in Southeast Asia 10 countries located in Southeast Asia • Its aims include the acceleration of Its aims include the acceleration of

economic growth, social progress, cultural economic growth, social progress, cultural development among its members development among its members

• to promote regional peace and stability of to promote regional peace and stability of the region, and to provide opportunities the region, and to provide opportunities for member countries to discuss for member countries to discuss differences peacefully. differences peacefully.

Fundamental PrinciplesFundamental Principles

Mutual respect for the independence, Mutual respect for the independence, sovereignty and national identify of all sovereignty and national identify of all nations;nations;

The right of every state to lead its national The right of every state to lead its national existence free from external interference, existence free from external interference, coercion;coercion;

Non- interference in the internal affairs of one Non- interference in the internal affairs of one another;another;

Settlement of disputes by peaceful manner;Settlement of disputes by peaceful manner; Renunciation of the threat or use of force; andRenunciation of the threat or use of force; and Effective cooperation among themselves.Effective cooperation among themselves.

Contd…Contd…

ASEAN has emphasized regional ASEAN has emphasized regional cooperation in the “three pillars” of cooperation in the “three pillars” of security, socio-cultural and economic security, socio-cultural and economic integration.integration.

The regional grouping has made the The regional grouping has made the most progress in economic most progress in economic integration; aiming to create an integration; aiming to create an ASEAN Economic Community (AEC) ASEAN Economic Community (AEC) by 2015.by 2015.

Member NationsMember Nations

Indonesia, Malaysia, Philippines, Indonesia, Malaysia, Philippines, Singapore & Thailand – Basic Singapore & Thailand – Basic MembersMembers

Brunei Darussalam, Vietnam, Laos, Brunei Darussalam, Vietnam, Laos, Myanmar & Cambodia – Other Myanmar & Cambodia – Other MembersMembers

ASEAN Free Trade AreaASEAN Free Trade Area (AFTA)(AFTA)

The The ASEAN Free Trade AreaASEAN Free Trade Area (AFTA) is (AFTA) is an agreement by the member an agreement by the member nations of ASEAN concerning local nations of ASEAN concerning local manufacturing in all ASEAN manufacturing in all ASEAN countries.countries.

To increase the ASEAN region’s To increase the ASEAN region’s competitive advantage as a single competitive advantage as a single production unit, including elimination production unit, including elimination of tariff and non – tariff barriers of tariff and non – tariff barriers among the members. among the members.

ASEAN Comprehensive ASEAN Comprehensive Investment Area (ACIA)Investment Area (ACIA)

To encourage the free flow of investment within To encourage the free flow of investment within ASEANASEAN :- ( Principles of ACIA) :- ( Principles of ACIA)

All industries are to be opened up for investment, All industries are to be opened up for investment, with exclusions to be phased out according to with exclusions to be phased out according to schedules schedules

National treatment is granted immediately to National treatment is granted immediately to ASEAN investors with few exclusions ASEAN investors with few exclusions

Elimination of investment impediments Elimination of investment impediments Streamlining of investment process and Streamlining of investment process and

procedures procedures Enhancing transparency Enhancing transparency Undertaking investment facilitation measures Undertaking investment facilitation measures

ASEAN Single Aviation MarketASEAN Single Aviation Market((ASAM)ASAM)

• Its proposed by the ASEAN Air Transport Its proposed by the ASEAN Air Transport Working Group, supported by the ASEAN Working Group, supported by the ASEAN Senior Transport Officials Meeting, and Senior Transport Officials Meeting, and endorsed by the ASEAN Transport Ministersendorsed by the ASEAN Transport Ministers

• Purpose is to Purpose is to fully liberalize air travel fully liberalize air travel between its member states,between its member states,

• Allowing ASEAN to directly benefit from the Allowing ASEAN to directly benefit from the growth in air travel around the world, and growth in air travel around the world, and also freeing up tourism, trade, investment also freeing up tourism, trade, investment and services flows between member statesand services flows between member states

European NationsEuropean Nations

EUROPEAN ECONOMIC AREAEUROPEAN ECONOMIC AREA

The European Economic Area (EEA) The European Economic Area (EEA) came into being on 1 January 1994 came into being on 1 January 1994 following an agreement between following an agreement between member states ofmember states of

European Community.European Community.

European Free Trade European Free Trade AssociationAssociation ( (EFTAEFTA))

EFTA is a European EFTA is a European trade bloctrade bloc which was which was established on 3 May 1960 as an alternative established on 3 May 1960 as an alternative for European states who were either unable for European states who were either unable to, or not to, join the then-European to, or not to, join the then-European Economic Community.Economic Community.

This Convention provides for the This Convention provides for the liberalisation of trade among the member liberalisation of trade among the member states. Three of the EFTA countries are part states. Three of the EFTA countries are part of the European Union Internal Market of the European Union Internal Market through the Agreement on a through the Agreement on a European Economic AreaEuropean Economic Area (EEA) (EEA)

European UnionEuropean Union ( (EUEU))

EU is a political and economic union EU is a political and economic union of 27 of 27 member statesmember states, located , located primarily in Europe.primarily in Europe.

It It has developed a single market has developed a single market through a standardised system of through a standardised system of laws which apply in all member laws which apply in all member states, guaranteeing the freedom of states, guaranteeing the freedom of movement of people, goods, services movement of people, goods, services and capital.and capital.

Contd..Contd..

It maintains a common trade policy, It maintains a common trade policy, agricultural and fisheries policies, agricultural and fisheries policies, and a regional development policyand a regional development policy

Fifteen member states have adopted Fifteen member states have adopted a common currency, the euro.a common currency, the euro.

It has developed a role in foreign It has developed a role in foreign policy, representing its members in policy, representing its members in the World Trade Organisationthe World Trade Organisation

SOUTH ASIAN ASSOCIATION FOR REGIONAL COOPERATION (SAARC)

• SAARC is an economic and political organization of eight countries in Southern Asia.

• In terms of population, its sphere of influence is the largest of any regional organization

Contd…

• India, Pakistan, Bangladesh, Sri Lanka, Nepal, Maldives, Bhutan.

• Afghanistan became its eighth member.

Objectives: -

• To promote the welfare of the peoples of South Asia and to improve their quality of life;

• To accelerate economic growth, social progress and cultural development in the region;

• To provide all individuals the opportunity to live in dignity and to realize their full potentials;

Contd…

• To promote and strengthen collective self –reliance among the countries of South – Asia;

• To contribute to mutual trust, understanding and appreciation of one another’s problems;

• To promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields;

Contd…

• To strengthen cooperation with other developing nations

• To strengthen cooperation among themselves in international forums on matters of common interests and

• To cooperate with international and regional organizations with similar aims and purposes.

The SAARC Preferential Trading Arrangement (SAPTA)

• SAPTA, came into being on 1 January 2006 and will be operational following the ratification of the agreement by the seven governments

• SAPTA requires the developing countries in South Asia, that is, India, Pakistan and Sri Lanka, to bring their duties down to 20 percent in the first phase of the two year period ending in 2007.

Contd…

• In the final five year phase ending 2012, the 20 percent duty will be reduced to zero in a series of annual cuts. The least developed nations in South Asia consisting of Nepal, Bhutan, Bangladesh and Maldives

SAARC – Regional council

• SAARC Audio – Visual Exchange [SAVE]• SAARC Documentation Centre [SDC]• SAARC for Promotion of Organized Tourism

[SPOT]• SAARC Chairs, Fellowship and Scholarship

Scheme [SCFSS]• SAARC Visa Exemption Scheme [SVES]• Non – Governmental Organizations [NGO]

SAARC – Regional Institutions

• SAARC Agricultural Information Centre [SAIC]

• SAARC Tuberculosis Centre [STC]• SAARC Meteorological Research

Centre [SMRC]

Regional Agreement

• SAARC Food Security Reserve [SFSR]

• SAARC Regional Convention on Suppression of Terrorism [SRST]

• SAARC Preferential Trading Agreement [SAPTA]

Co- operation with International and Regional Organizations

• UNCTAD• ESCAP• UNICEF• APT• UNDP• UNDCP• ITU

UNCTAD

• SAARC – UNCTAD 1993 Trade Analysis and Information System [TRAINS]

• The global aim of TRAINS is to increase transparency in international trading conditions and thus facilitate trade.

NAFTA

• North American Free Trade Agreement (NAFTA) trade panels. This may include even a more democratic and participative system

• Particularly since the demise of most of the world's empires, a number of international— generally regionally based—economic blocs have been developed to promote trade between member states.

International Trade & International Trade & TreatiesTreaties

WORLD TRADE ORGANISATION WTOWORLD TRADE ORGANISATION WTO Principles of WTOPrinciples of WTO * Trade without discrimination* Trade without discrimination * Freer [Free trade]* Freer [Free trade] * Predictable* Predictable * More competitive* More competitive * More beneficial for less developed * More beneficial for less developed

countriescountries

Trade without discriminationTrade without discrimination

MFN MFN • Treating virtually everyone equally Treating virtually everyone equally • Each member treats all other Each member treats all other

members equally “Most Favored members equally “Most Favored Nations” Nations”

• However MFN is not always MFN but However MFN is not always MFN but there are some exemptionsthere are some exemptions

Most Favored NationMost Favored Nation

Treating other people equally under Treating other people equally under the WTO Agreements, countries the WTO Agreements, countries cannot normally discriminate cannot normally discriminate between their trading partners. between their trading partners.

Once you Grant some special favour Once you Grant some special favour and you have to do same for other and you have to do same for other nation nation

Some exceptions are allowed Some exceptions are allowed

National Treatment National Treatment

Treating the imported goods equally Treating the imported goods equally towards the domestic goods.towards the domestic goods.

Treating foreigners and locals equallyTreating foreigners and locals equally The same should be apply to foreign The same should be apply to foreign

and domestic services and to and domestic services and to foreign , local trademarks, copyrights foreign , local trademarks, copyrights and patents. and patents.

Free tradeFree trade

Trade tariff which include custom dutiesTrade tariff which include custom duties Non tariff Measures such as import bans Non tariff Measures such as import bans

or restrictive quotasor restrictive quotas The WTO agreements allow countries to The WTO agreements allow countries to

introduce gradually, through introduce gradually, through “progressive liberalization”.“progressive liberalization”.

Developing countries are usually given Developing countries are usually given longer time to fulfill their obligations longer time to fulfill their obligations

PREDICTABILITYPREDICTABILITY

Sometimes, promising not to raise a Sometimes, promising not to raise a trade barriers can be as important as trade barriers can be as important as lowering one, because the promise lowering one, because the promise gives business a clearer view of their gives business a clearer view of their future opportunities.future opportunities.

With stability and predictability, With stability and predictability, investment is encouraged, jobs are investment is encouraged, jobs are created and consumers can fully created and consumers can fully enjoy the benefits of competition.enjoy the benefits of competition.

GATT Vs WTOGATT Vs WTO

GATT was adhoc GATT was adhoc and provisionaland provisional

GATT had GATT had contracting partiescontracting parties

GATT dealt with GATT dealt with goodsgoods

GATT had poor GATT had poor dispute settlement dispute settlement systemsystem

WTO is an WTO is an agreement and agreement and permanentpermanent

WTO has membersWTO has members WTO covers goods WTO covers goods

as well as servicesas well as services WTO has separate WTO has separate

dispute system dispute system which works which works efficientlyefficiently

WTO - AgreementsWTO - Agreements

For GoodsFor Goods

- Agriculture- Agriculture- Health regulationsHealth regulations- Textiles and clothingTextiles and clothing- Products standardsProducts standards- Investment measuresInvestment measures- Anti – dumping measuresAnti – dumping measures

Contd…Contd…

- Customs valuation methodsCustoms valuation methods- Pre – shipment inspectionPre – shipment inspection- Rules of originRules of origin- Import licensingImport licensing- Subsides and counter measuresSubsides and counter measures- safeguardssafeguards

For Services For Services

- Movement of natural persons Movement of natural persons - Air transportAir transport- Financial servicesFinancial services- Shipping servicesShipping services- TelecommunicationsTelecommunications

WIPO WIPO

World Intellectual Property World Intellectual Property OrganizationOrganization

WIPO is an international organization WIPO is an international organization dedicated to helping ensure that the dedicated to helping ensure that the rights of creators and owners of rights of creators and owners of intellectual property are protected intellectual property are protected worldwide and that inventors and worldwide and that inventors and authors are, thus recognized and authors are, thus recognized and rewarded for their ingenuity. rewarded for their ingenuity.

WTO – Ministerial WTO – Ministerial ConferenceConference

First MC @ SingaporeFirst MC @ Singapore Second MC @ GenevaSecond MC @ Geneva Third MC @ SeattleThird MC @ Seattle Fourth MC @ DohaFourth MC @ Doha Fifth MC @ CancunFifth MC @ Cancun Sixth MC @ Hong KongSixth MC @ Hong Kong Seventh MC @JonesburgSeventh MC @Jonesburg

Dumping Dumping

The concept of dumpingThe concept of dumping Types of dumpingTypes of dumping Anti – dumping & countervailing dutiesAnti – dumping & countervailing duties Anti – dumping & Indian lawsAnti – dumping & Indian laws Margin of dumpingMargin of dumping Dumping investigation ProcessDumping investigation Process Agreement on SCMAgreement on SCM Domestic supportDomestic support

The concept of DumpingThe concept of Dumping

The term “Dumping” refers to export The term “Dumping” refers to export the products / goods at less than the the products / goods at less than the cost price. cost price.

Dumping is done due to increase in the Dumping is done due to increase in the production of the goods production of the goods

Excess production than the Excess production than the requirementrequirement

Wrong estimation of salesWrong estimation of sales Advance and updating technology Advance and updating technology

Types of dumpingTypes of dumping

Price discrimination Price discrimination

(charging the prices differently)(charging the prices differently) Predatory pricing Predatory pricing

(Selling price lesser than the cost (Selling price lesser than the cost price)price)

Intermittent dumping Intermittent dumping

(Oversupply of perishable goods)(Oversupply of perishable goods)

Anti – dumping & Anti – dumping & countervailing dutiescountervailing duties

CVD - CounterVailing Duties CVD - CounterVailing Duties The term CVD refers to the additional The term CVD refers to the additional

duties levied on the import of special duties levied on the import of special goods.goods.

Example : - Generally the Custom duties Example : - Generally the Custom duties levied on import and export goods and levied on import and export goods and Central Excise duties levied on the Central Excise duties levied on the manufacturing excisable goods.manufacturing excisable goods.

Incase, if import the excisable goods Incase, if import the excisable goods where instead of charging separate where instead of charging separate different duties the CVD are levied which different duties the CVD are levied which countervail both Excise as well as Custom. countervail both Excise as well as Custom.

Contd..Contd..

As same like to prevent the dumping the As same like to prevent the dumping the goods the dumping goods the tax will be goods the dumping goods the tax will be levied which is called Anti – dumping & levied which is called Anti – dumping & countervailing dutiescountervailing duties

The agreement says that before levying The agreement says that before levying CVD that the country should do proper CVD that the country should do proper investigation on whether dumping has investigation on whether dumping has happened and should prove it has happened and should prove it has materially injuries held for domestic materially injuries held for domestic industriesindustries

Anti – dumping & Indian lawsAnti – dumping & Indian laws

Indian laws were amended w.e.f Indian laws were amended w.e.f Dumping occurs when the export price of the Dumping occurs when the export price of the

goods imported into India is less than Normal goods imported into India is less than Normal Value of “like articles” sold in the domestic Value of “like articles” sold in the domestic market of the exporter. Importers at cheap market of the exporter. Importers at cheap or low prices do not per se indicate dumping. or low prices do not per se indicate dumping.

The prices at which like articles are sold in The prices at which like articles are sold in the domestic market of the exporter is the domestic market of the exporter is referred to as the “Normal Value” of those referred to as the “Normal Value” of those articles.articles.

Normal ValueNormal Value

The Normal Value is the comparable The Normal Value is the comparable price at which the goods under price at which the goods under complaint are sold, in the ordinary complaint are sold, in the ordinary course of trade, in the domestic course of trade, in the domestic market of the exporting country or market of the exporting country or territory. territory.

Margin of DumpingMargin of Dumping

Margin of Dumping refers the Margin of Dumping refers the difference between the Normal Value difference between the Normal Value of the like article and the Export of the like article and the Export price of the product price of the product

Dumping Investing ProcessDumping Investing Process

A dumping investigation can normally be A dumping investigation can normally be initiated only upon receipt of a written initiated only upon receipt of a written application by or on behalf of the application by or on behalf of the “Domestic Industry”. “Domestic Industry”.

To be a valid application, the following two To be a valid application, the following two condition should be satisfiedcondition should be satisfied

The Domestic producers expressly The Domestic producers expressly supporting the application must account supporting the application must account for not less than 25% of the total for not less than 25% of the total production of the like article by the production of the like article by the domestic industry India; domestic industry India;

Contd…Contd…

The Domestic producers expressly The Domestic producers expressly supporting the application must supporting the application must account for not less than 50% of the account for not less than 50% of the total production of the like article by total production of the like article by those expressly supporting and those those expressly supporting and those opposing the application. opposing the application.

Application to Designated Authority Application to Designated Authority in India is DGAD by the Domestic in India is DGAD by the Domestic affected industryaffected industry

After the receipt of application After the receipt of application

Preliminary ApplicationPreliminary Application InitiationInitiation Access to informationAccess to information Preliminary FindingsPreliminary Findings

Control over the IBControl over the IB

Management control can be defined as a Management control can be defined as a systematic effort by business management systematic effort by business management to compare performance to predetermined to compare performance to predetermined standards, plans, or objectives in order to standards, plans, or objectives in order to determine whether performance is in line determine whether performance is in line with these standards and presumably in with these standards and presumably in order to take any remedial action required order to take any remedial action required to see that human and other corporate to see that human and other corporate resources are being used in the most resources are being used in the most effective and efficient way possible in effective and efficient way possible in achieving corporate objectivesachieving corporate objectives

Characteristics of Characteristics of ControlControl

Control is a continuous process Control is a continuous process Control is a management process Control is a management process Control is embedded in each level of Control is embedded in each level of

organizational hierarchy organizational hierarchy Control is forward looking Control is forward looking Control is closely linked with planning Control is closely linked with planning Controlling is tool for achieving Controlling is tool for achieving

organizational activities organizational activities

Management Control Management Control Systems (MCS)Systems (MCS)

MCSMCS is a system which gathers and is a system which gathers and uses information to evaluate the uses information to evaluate the performance of different performance of different organizational resources like human, organizational resources like human, physical, financial and also the physical, financial and also the organization as a whole considering organization as a whole considering the organizational strategies.the organizational strategies.

Techniques in MCSTechniques in MCS

Balanced ScorecardBalanced Scorecard Total Quality ManagementTotal Quality Management Kaizen ( Continuous Improvement)Kaizen ( Continuous Improvement) Target CostingTarget Costing BenchmarkingBenchmarking JITJIT Budgeting Budgeting Capital BudgetingCapital Budgeting

Balanced ScorecardBalanced Scorecard

The balanced scorecard advocates a The balanced scorecard advocates a top-down approach to business top-down approach to business performance management, starting performance management, starting with business strategic intent with business strategic intent expressed through the organization expressed through the organization down to operationally relevant down to operationally relevant targets. targets.

Contd…Contd…

The Balanced Scorecard is an The Balanced Scorecard is an important tool of strategic important tool of strategic management system. It uses management system. It uses performance measurements within a performance measurements within a framework of strategic hypotheses framework of strategic hypotheses that enable to learn what works best that enable to learn what works best in an organization. in an organization.

Total Quality Total Quality ManagementManagement

TQM is a method of analyzing the TQM is a method of analyzing the required minimum standard in required minimum standard in almost all the departments.almost all the departments.

TQM process begins with fixing the TQM process begins with fixing the minimum standard.minimum standard.

TQM helps to identify the place TQM helps to identify the place where the control is required.where the control is required.

Performance Performance MeasurementsMeasurements

EPSEPS ROIROI ROEROE MVAMVA Stakeholders ValueStakeholders Value Internal Control SystemInternal Control System

EVALUATIONEVALUATION

EvaluationEvaluation is systematic determination is systematic determination of merit, worth, and significance of of merit, worth, and significance of something or someone using criteria something or someone using criteria against a set of standards. Evaluation against a set of standards. Evaluation often is used to characterize and often is used to characterize and appraise subjects of interest in a wide appraise subjects of interest in a wide range of human enterprises, including range of human enterprises, including the arts, criminal justice, foundations and the arts, criminal justice, foundations and non-profit organizations, government, non-profit organizations, government, health care, and other human services.health care, and other human services.

Types of EvaluationTypes of Evaluation

Process evaluationsProcess evaluations Outcome evaluationsOutcome evaluations Impact evaluationsImpact evaluations Evaluation for Project ManagementEvaluation for Project Management Evaluation for staying on track Evaluation for staying on track Evaluation for Project EfficiencyEvaluation for Project Efficiency Evaluation for Project AccountabilityEvaluation for Project Accountability Evaluation for Program Development & Evaluation for Program Development &

DisseminationDissemination

Process EvaluationsProcess Evaluations

Process Evaluations describe and Process Evaluations describe and assess program materials and assess program materials and activities.activities.

Examination of materials is likely to Examination of materials is likely to occur while programs are being occur while programs are being developed, as a check on the developed, as a check on the appropriateness of the approach and appropriateness of the approach and procedures that will be used in the procedures that will be used in the program.program.

Outcome EvaluationsOutcome Evaluations

Outcome Evaluations study the Outcome Evaluations study the immediate or direct effects of the immediate or direct effects of the program on participants. program on participants.

The scope of an outcome evaluation The scope of an outcome evaluation can extend beyond knowledge or can extend beyond knowledge or attitudes, however, to examine the attitudes, however, to examine the immediate behavioral effects of immediate behavioral effects of programs. programs.

Impact EvaluationsImpact Evaluations

Impact Evaluations look beyond the Impact Evaluations look beyond the immediate results of policies, immediate results of policies, instruction, or services to identify instruction, or services to identify longer-term as well as unintended longer-term as well as unintended program effects. It may also examine program effects. It may also examine what happens when several what happens when several programs operate in unison.programs operate in unison.

Evaluation for Project Evaluation for Project Management Management

Administrators are often most Administrators are often most interested in keeping track of interested in keeping track of program activities and documenting program activities and documenting the nature and extent of service the nature and extent of service delivery.delivery.

An evaluation for project An evaluation for project management monitors the routines management monitors the routines of program operations.of program operations.

Evaluation for Staying on Evaluation for Staying on Track Track

Evaluation can help to ensure that Evaluation can help to ensure that project activities continue to reflect project activities continue to reflect project plans and goals. project plans and goals.

This type of evaluation can help to This type of evaluation can help to strengthen service delivery and to strengthen service delivery and to maintain the connection between maintain the connection between program goals, objectives, and program goals, objectives, and services.services.

Evaluation for Project Evaluation for Project Efficiency Efficiency

Evaluation can help to streamline Evaluation can help to streamline service delivery or to enhance service delivery or to enhance coordination among various program coordination among various program components, lowering the cost of components, lowering the cost of service.service.

Increased efficiency can enable a Increased efficiency can enable a program to serve more people, offer program to serve more people, offer more services, or target services to more services, or target services to those whose needs are greatest.those whose needs are greatest.

Evaluation for Project Evaluation for Project Accountability Accountability

The users of the evaluation results The users of the evaluation results likely will come from outside of program likely will come from outside of program operations: parent groups, funding operations: parent groups, funding agencies, elected officials, or other agencies, elected officials, or other policymakers.policymakers.

Yet even sophisticated evaluations must Yet even sophisticated evaluations must present results in ways that are present results in ways that are understandable to lay audiences, understandable to lay audiences, because outside officials are not likely to because outside officials are not likely to be evaluation specialists.be evaluation specialists.

Evaluation for Program Evaluation for Program Development and Development and Dissemination Dissemination

Evaluating new approaches is very Evaluating new approaches is very important to program development important to program development in any field.in any field.

Developers of new programs need to Developers of new programs need to conduct methodical evaluations of conduct methodical evaluations of their efforts before making claims to their efforts before making claims to potential users.potential users.

CONFLICT IN INTERNATIONAL BUSINESS & CONFLICT IN INTERNATIONAL BUSINESS & NEGOTIATIONSNEGOTIATIONS

Conflict: - Conflict: -

In political terms, "conflict" can refer In political terms, "conflict" can refer to wars, revolutions or other to wars, revolutions or other struggles, which may involve the use struggles, which may involve the use of force as in the term armed conflict..of force as in the term armed conflict..

Contd…Contd…

A clash of interests, values, actions or A clash of interests, values, actions or directions often sparks a conflict. directions often sparks a conflict. Conflicts refer to the existence of that Conflicts refer to the existence of that clash. clash.

Types and modesTypes and modes

Community conflict Community conflict Diplomatic conflict Diplomatic conflict Economic conflict Economic conflict Emotional conflictEmotional conflict Environmental resources conflict Environmental resources conflict Group conflict Group conflict

Contd…Contd…

Ideological conflict Ideological conflict International conflict International conflict Interpersonal conflict Interpersonal conflict Intersocietal conflict Intersocietal conflict Intrastate conflictIntrastate conflict Intrapersonal conflictIntrapersonal conflict

Contd..Contd..

Organization conflict Organization conflict Intra-societal conflict Intra-societal conflict Military ConflictMilitary Conflict Religious-based conflict Religious-based conflict Work place conflict Work place conflict Data conflict Data conflict

Factors causes for Factors causes for conflictconflict

Structural FactorsStructural Factors::

• Authority RelationshipsAuthority Relationships

• Common resourcesCommon resources

• InterdependendceInterdependendce

• Jurisdictional Jurisdictional

• SpecialisationSpecialisation

Contd..Contd..

Personal Factors:Personal Factors: • Communication barriersCommunication barriers• Conflict management stylesConflict management styles• Cultures differenceCultures difference• EmotionsEmotions• PerceptionPerception• PersonalitiesPersonalities• Skills and abilitiesSkills and abilities• Values and ethicsValues and ethics

Conflict ResolutionConflict Resolution

The term "conflict resolution" is The term "conflict resolution" is sometimes used interchangeably sometimes used interchangeably with the term dispute resolution or with the term dispute resolution or alternative dispute resolution. alternative dispute resolution. Processes of conflict resolution Processes of conflict resolution generally include negotiation, generally include negotiation, mediation and diplomacy.mediation and diplomacy.

Five ways of addressing conflictsFive ways of addressing conflicts

• Accommodation (Accommodation (surrender one's own needs surrender one's own needs and wishes to accommodate the other party)and wishes to accommodate the other party)

• Avoidance (Avoidance (avoid or postpone conflict by avoid or postpone conflict by ignoring it, changing the subject, etc)ignoring it, changing the subject, etc)

• Collaboration (Collaboration (work together to find a work together to find a mutually beneficial solution)mutually beneficial solution)

• Compromise (Compromise (find a middle ground in which find a middle ground in which each party is partially satisfied)each party is partially satisfied)

• Competition (Competition (assert one's viewpoint at the assert one's viewpoint at the potential expense of anotherpotential expense of another ) )

NegotiationNegotiation

Negotiations generally go through a Negotiations generally go through a series of stages: each group decides series of stages: each group decides on its position; determines its on its position; determines its alternatives and its agenda.alternatives and its agenda.

Once together with the other party, Once together with the other party, they share their positions, consider they share their positions, consider options, exchange concessions, options, exchange concessions, perhaps reach an accord, and perhaps reach an accord, and implement it.implement it.

WWTO- Dispute Settlement TO- Dispute Settlement BodyBody

The Dispute Settlement Body (DSB) The Dispute Settlement Body (DSB) of the World Trade Organization of the World Trade Organization (WTO) makes decisions on trade (WTO) makes decisions on trade disputes between governments that disputes between governments that are adjudicated by the Organization. are adjudicated by the Organization.

Who can participate?Who can participate?

Only WTO members can take Only WTO members can take participate in dispute settlement .participate in dispute settlement .

The WTO DS mechanism for three The WTO DS mechanism for three main ways of resolving disputes.main ways of resolving disputes.

(i) bilateral consultations(i) bilateral consultations

(ii) good offices, conciliation and (ii) good offices, conciliation and mediation mediation

(iii) Adjudication including arbitration(iii) Adjudication including arbitration

Dispute Settlement Procedure Dispute Settlement Procedure (DSP) (DSP)

DSB has sole authority to establish “panels” of DSB has sole authority to establish “panels” of experts to consider the case, and to accept or experts to consider the case, and to accept or reject the case.reject the case.

First stage: Consultation, Mediation etc.,[60days]First stage: Consultation, Mediation etc.,[60days] Before taking any other actions the countries in Before taking any other actions the countries in

dispute have to talk to each other to see if they dispute have to talk to each other to see if they can settle their differences by themselves.can settle their differences by themselves.

Second stage : Second stage : DSB will be responsible to set Panel to DSB will be responsible to set Panel to

discuss about the disputes. This can be done discuss about the disputes. This can be done between 45 days.between 45 days.

Contd..Contd..

Third stage: Final panel report to partiesThird stage: Final panel report to parties Here the Panel after discussion with both Here the Panel after discussion with both

the parties it will submit its report with in 6 the parties it will submit its report with in 6 months.months.

Fourth stageFourth stage• Here the panel will be provide the report Here the panel will be provide the report

to the WTO members.to the WTO members.• This is done with in the 3 weeks from the This is done with in the 3 weeks from the

date of the report submitted to the date of the report submitted to the concern partiesconcern parties

Contd….Contd….

Fifth stage:Fifth stage:

DSB adopts the panel report and DSB adopts the panel report and according to it the decision will be taken according to it the decision will be taken

This all done with in 1 year This all done with in 1 year And if anyone of the parties is not satisfied And if anyone of the parties is not satisfied

then they can appeal to DSB . Then the then they can appeal to DSB . Then the DSB will be looking into that appeal DSB will be looking into that appeal directly and try to solve the problem. directly and try to solve the problem.

It will take further 3 months.It will take further 3 months.

Institutional structureInstitutional structure

The WTO members, governments, The WTO members, governments, usually at ambassadorial level, meet usually at ambassadorial level, meet together to decide the outcome of a together to decide the outcome of a trade dispute.trade dispute.

On the recommendation of a Dispute On the recommendation of a Dispute Panel and on a report from the Panel and on a report from the Appellate Body of WTO.Appellate Body of WTO.

Contd..Contd..

The DSB uses a special decision The DSB uses a special decision procedure known as 'reverse procedure known as 'reverse consensus' or 'consensus against' consensus' or 'consensus against' that makes it almost certain that the that makes it almost certain that the Panel recommendations in a dispute Panel recommendations in a dispute will be accepted. will be accepted.

Contd…Contd…

The process requires that the The process requires that the recommendations of the Panel recommendations of the Panel should be adopted "unless" there is a should be adopted "unless" there is a consensus of the members against consensus of the members against adoption. adoption.

Contd..Contd..

If the losing party fails to restore the If the losing party fails to restore the conformity of its laws within the conformity of its laws within the "reasonable period of time", "reasonable period of time",

International Agencies for conflict resolution

United Nations Conference on Trade and Development (UNCTAD)

LONDON COURT OF INTERNATIONAL ARBITRATION (LCIA)

International Chamber of Commerce American Arbitration Association

Contd.. International Centre for Dispute

Resolution (ICDR) INTERNATIONAL ARBITRATION Association of International Arbitration

(AIA) International Investment Arbitration (IIA)

THANK YOU, THANK YOU,

RAJESH VRAJESH V

Guest Lecture Guest Lecture

S.A.Engineering.CollegeS.A.Engineering.College