ASSIGNMENT NO.

INTERNATIONAL TRADE OPERATIONS AND LOGISTICS

Case Briefs1. Trade Facilitation : A Paramount Need for India 2. Indias Trade Policy: Making it Work ; No Another Jerk 3. Indias Tea Exports: Challenges from RTA/FTA

Submitted to, Mr. SHRIRAM PURANKAR Submitted by, SAURABH KAPOOR 12609088 (Marketing and IB)

TRADE FACILITATION: A PARAMOUNT NEED FOR INDIA

The annual supplement as released on april 2008 has envisaged an 8 fold increase in Indian foreign trade in next 12 years. Achieving such a target is tough but achievable provided the government, industry, trade community, bureaucracy and TPO shall act in tandem to achieve it. Trade Facilitation has been defined as simplification and harmonization of trade procedures, procedures being further defined as activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade. The term trade facilitation is extended to refer a wider agenda in economic development and trade and may include improvement of transport infrastructure, removal of government corruption, reduction in customs tariffs etc. Putting India in league of global export champions require international norms of efficiency, productivity and cost reduction in Indian foreign trade. The cost of moving cargo to and from the country is critical element of country logistical efficiency and competitiveness. Most problematic factors for doing business in India are: Inefficient government bureaucracy and Political Instability, Foreign currency regulations, Inflation, Tax rates and tax regulations, Corruption, etc.

The two most crucial elements of foreign trade efficiency and competitiveness are price of the goods and time taken to deliver the goods and has emerged as critical success factors for global trade success in LPG&M era. India faces several problems in seamless trade transactions and the costs involved in trading with India are significant. While some impressive gains have been made over the last decade in terms of reducing transaction costs, India is not at par with current global standards. In spite of world class trade practices and procedures set by the authorities, there is hell lot of loopholes and problems in reality, which are needed to mend. For being in league of export champions, India has to devise simple and ingenious mechanisms through trade facilitations measures and if such measures are sincerely devised and intelligently executed, it can help in transactional cost reduction. Present round of trade negotiations can be of immense help in capacity development and enhancement for Indian bureaucracy and machinery involved in trade promotion, regulation, facilitation and control area and it shall stand up and take lead in trade facilitation.

INDIAS TRADE POLICY: MAKING IT WORK; NO ANOTHER JERK Failures of WTOs Doha Development Round Talks should be an eye opener for Indias policymakers who still depend on multilateral to advance Indias economic interests and promote trade in LPG & M era. It has now become clear after almost more than 6 years of negotiations on Doha Development Agenda last year, that multilateral trade negotiations will not result in any tangible gain for India and other emerging market economies. Even then, our policy makers are concentrating all their efforts on the quagmire of multilateral negotiations when a historic opportunity beckons them in international trade for promoting Indias foreign trade through Bilateral Free Trade Agreements and Investment Treaties. Chile; a small South American Country has taken the lead into enhancing its foreign trade. It has signed 52 bilateral investment agreements, 35 of which have taken effect. Indian policy makers on the other hand, has been busy in an utopian world so that they can eventually emerged as moral leader of developing countries at WTO, forgetting the fact that India eventual has an opportunity of promoting its trade especially with USA and EU which is connected to the present troubles of China, its rival in the global trade arena. China is facing international backlash due to various reasons, which will provide India a golden opportunity for it seems it is not prepared as it does not have the potential to match Chinese economic strength of being a key supplier of low cost items in the world market. Another key question which Indian Policy makers has consistently neglected is that India does not have deep economic ties with its immediate neighbors, Indias exports to South Asian Countries constitute only 2.8% of its total exports with Pakistan(0.2%), Nepal(0.5%), Sri Lanka (1.2%), and Bangladesh(1%). India this is in a position to raise its imports from the South Asia region substantially if the policy makers may ensure that India which constitutes almost 80% GDP of the region has to take lead for it. The market determined rupee which has become open to large scale vagaries has confused India Small Scale exporters who are at the mercy of god to trade as appreciating rupee has made their profit margin negligible and when rupee depreciates they do not have sufficient production capacity to reap the benefits. The only way that they can be enabled is to ensure the technological up-gradation of their operations so as to scale up and bring down cost of production at par with Chinese. Adding salt to woes is the fact Indian exports has less than 0.4% share in the products which constitute almost 65% world trade. In order to improve such structural weaknesses in Indian export basket; what is needed is that government should allow phased doses of direct foreign investment so as to chum out Indian entrepreneurship and cost advantages and making Indian MNCs which may eventually lead Indias march toward handsome share in world trade as has been successfully done in case of Information Technology.

INDIAS TEA EXPORTS: CHALLENGES FROM RTA/FTA

Tea is indigenous to India and is an area where the country can take a lot of pride. This is mainly because of the pre-eminence as a foreign exchange earner and its contribution to the countrys GNP. India produces some of the worlds finest tea, as also the larg est varieties. India has long held the title of being the largest tea producer and consumer in the world. Tea is grown in 16 states of India of which Assam, Kerala, Tamil Nadu and West Bengal account for 96% of production. The teas originating from Darjeeling, Assam and Nilgiris are well known for their distinctive quality world over. Tea exports bring in a significant amount of foreign exchange into the country as well as revenue to the National Exchequer. More than two million people derive their livelihood from the tea plantation and its ancillary activities. However, India, the worlds largest tea producer is facing rising competition in the world tea market. Sri Lanka another major tea producer and strong competitor to India faces similar problem. Tea in these countries is currently on a downward trend with reduced demand followed by an over abundance of tea. Tea prices have been falling worldwide because of an oversupply in production. Some of the reasons for this downgrade are: Fragmented nature of the industry. Losing of major markets like Iraq, Russia and CIS due to political reasons. Organically grown products are gaining popularity worldwide and India still is in its nascent stage for this category. The signing of Free Trade Agreement with Sri Lanka in 1999 and subsequent beginning of tea imports at a preferential tariff of 7.5% has further aggravated the problems of Indian tea producers and exporters.

Sri Lanka is the biggest exporter. India and Sri Lanka together account for 60% of worlds black tea export market and such preferential tariff to Sri Lanka exporters is a cause of concern for Indian exporters and producers. In a time of financial crisis, tea exports hit further as orders decline sharply and it seems that it is testing time for Indian tea exporters as they are hit not only by loopholes in Free and Regional Trade Agreements and has been exposed to actual decline in orders from two important markets viz Europe and North America. The only hope that comes under such downturn market is from CIS countries; which consisted of former states of USSR, dominated the Indian exports with 27%, followed by United Arab Emirates(19%), and Iran(7%) till October 30th 2008.