UNIT -V

Role of international trade and business organizations

What is international trade (definition)?
International Trade is usually referred to the exchange of goods, and services across international borders
or territories. In most countries, it represents a significant share of gross domestic product (GDP). In
2010, the value of international trade achieved 19 trillion (current US) dollars, i.e. about 30% of the world
GDP. That is, about one third of the produced goods and services are exchanged internationally around
the world.
Definition
The exchange of goods or services along international borders. This type of trade allows for a
greater competition and more competitive pricing in the market. The competition results in more
affordable products for the consumer. The exchange of goods also affects the economy of the world as
dictated by supply and demand, making goods and services obtainable which may not otherwise be
available to consumers globally.

What does international trade talk about?

1. Pattern of trade (trade model), the core subjects of trade theory are the pattern and volume of
trade: which goods are traded by which countries, and how much of those goods are traded. These
questions will be investigated by various international trade theories, mainly, Ricardian approach,
H-O-V theory, and monopolistic competition models.
2. Gains from trade: Why should nations exchange their products and services? Who is gainer and
who is loser, if there is any? Partial answers from any trade theory will be discussed, in order to
find some policy oriented results.
3. Protectionism: Should we protect our industries from international competition? Using what
selection criteria? What may be economic consequences of trade protectionism or trade
liberalization?
4. Free Trade Agreements (FTAs): What does mean a FTA? How to measure its impact on trade
between countries: members and non-members? What are trade potentials of a hypothetical FTA
(to be admitted)? What are required criteria to benefit from a special FTA? What are policies to
be considered?
5. International policy coordination: To where does the world go in international trade relations?
What are related international organizations, and what role they play?
6. Trade and development: What are the impact of trade on industrial specialization?
Industrialization? Economic growth? Poverty? Income discrimination? Could be international
trade considered as a development engine for less developed countries (special cases)?

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 7. Trade and labour economics: What are trade effects on employment, wages, and wage
inequality?
8. Trade and political economy: How trade affect the income distribution within a country? How
trade may affect the political regimes? Are trade pro-democracy or anti-democracy?
International trade takes place on account of many reasons such as:

1. Human wants and countries‟ resources do not totally coincide. Hence, there tends to be
interdependence on a large scale.
2. Factor endowments in different countries differ.
3. Technological advancement of different countries differs. Thus, some countries are better placed
in one kind of production and some others superior in some other kind of production.
4. Labour and entrepreneurial skills differ in different countries.
5. Factors of production are highly immobile between countries.

Salient Features of International Trade:

The following are the distinguishing features of international trade:
1. Immobility of Factors: The degree of immobility of factors like labour and capital is generally
greater between countries than within a country. Immigration laws, citizenship, qualifications,
etc. often restrict the international mobility of labour.
2. Heterogeneous Markets: In the international economy, world markets lack homogeneity on
account of differences in climate, language, preferences, habit, customs, weights and measures,
etc. The behaviour of international buyers in each case would, therefore, be different.
3. Different National Groups: International trade takes place between differently cohered groups.
The socio-economic environment differs greatly among different nations.
4. Different Political Units: International trade is a phenomenon which occurs amongst different
political units.
5. Different National Policies and Government Intervention: Economic and political policies
differ from one country to another. Policies pertaining to trade, commerce, export and import,
taxation, etc., also differ widely among countries though they are more or less uniform within the
country. Tariff policy, import quota system, subsidies and other controls adopted by governments
interfere with the course of normal trade between one country and another.
6. Different Currencies: Another notable feature of international trade is that it involves the use of
different types of currencies. So, each country has its own policy in regard to exchange rates and
foreign exchange.

What is its importance?

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According to "Global Policy Forum", till 2030, 60% of the world economy be exchanged internationally.
That is the share of the rest of the world in each national economy will be more than the share of his own
domestic economy. Many current evidences are in line with this prediction. For example, either country in
the world is now member of, at least, one international trade agreement. In such circumstances, domestic
economy will be affected more and more by the world economy. That is, the level of income,
employment, wages, growth, and development in a country is not only a result of its domestic policies,
but also determined by its position in the world economy. No market is spared by this fact. Consequently,
a good knowledge of International Economics becomes vital for any economist. Some times, a good
economic policy regarding his international relations is more beneficial than any policy arranging
domestic economic issues of that country.
The following are the major gains claimed to be emerging from international trade:

1. Optimum Allocation: International specialisation and geographical division of labour leads to

the optimum allocation of world‟s resources, making it possible to make the most efficient use of
them.
2. Gains of Specialization: Each trading country gains when the total output increases as a result of
division of labour and specialisation. These gains are in the form of more aggregate production,
larger number of varieties and greater diversity of qualities of goods that become available for
consumption in each country as a result of international trade.
3. Enhanced Wealth: Increase in the exchangeable value of possessions, means of enjoyment and
wealth of each trading country.
4. Larger Output: Enlargement of world‟s aggregate output.
5. Welfare Contour: Increase in the world‟s prosperity and economic welfare of each trading
nation
6. Cultural Values: Cultural exchange and ties among different countries develop when they enter
into mutual trading.
7. Better International Politics: International trade relations help in harmonising international
political relations.
8. Dealing with Scarcity: A country can easily solve its problem of scarcity of raw materials or
food through imports.
9. Advantageous Competition: Competition from foreign goods in the domestic market tends to
induce home producers to become more efficient to improve and maintain the quality of their
products.
10. Larger size of Market: Because of foreign trade, when a country‟s size of market expands,
domestic producers can operate on a larger scale of production which results in further economies
of scale and thus can promote development. Synchronised application of investment to many
industries simultaneously become possible. This helps industrialisation of the country along with
balanced growth.

Disadvantages of International Trade:

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When a country places undue reliance on foreign trade, there is a likelihood of the following
disadvantages:

1. Exhaustion of Resources: When a country has larger and continuous exports, her essential raw
materials and minerals may get exhausted, unless new resources are tapped or developed (e.g., the
near-exhausting oil resources of the oil-producing countries).
2. Blow to Infant Industry: Foreign competition may adversely affect new and developing infant
industries at home.
3. Dumping: Dumping tactics resorted to by advanced countries may harm the development of poor
countries.
4. Diversification of Savings: A high propensity to import may cause reduction in the domestic
savings of a country. This may adversely affect her rate of capital formation and the process of
growth.
5. Declining Domestic Employment: Under foreign trade, when a country tends to specialize in a
few products, job opportunities available to people are curtailed.
6. Over Interdependence: Foreign trade discourages self-sufficiency and self-reliance in an
economy. When countries tend to be interdependent, their economic independence is jeopardised.
For instance, for these reasons, there is no free trade in the world. Each country puts some
restrictions on its foreign trade under its commercial and political policies.

Concept of Ombudsman
Government official appointed to investigate citizen's complaints against government officials, large
public and private corporations, and/or print and broadcast media. While, in general, ombudsmen have
wide investigative powers, they have only a few punitive powers.

An Ombudsman/Ombudsperson assists with the fair and expeditious resolution of complaints in

an impartial,confidential and independent manner. Services are free of charge and the Ombudsman/person
is not a representative of the person raising the complaint or the organization being complained about.
Depending on how it is has been established, Ombudsman/person roles include:
1. The use of informal resolutions for complaints using tools like mediation, negotiation and shuttle
diplomacy.
2. The use of Inquiries and structured investigations to determine whether a complaint is founded
along with the ability to make recommendations to correct unfair situations, both in individual
cases and to address systemic issues.
3. Assistance with resolving complaints through advice, referral and discussion and by exploring
available options.
4. Looking for trends and patterns in complaints to identify and make recommendations to address
potential systemic issues and seek system-wide improvements to influence positive changes.
Origin of the Word "Ombudsman"

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"Ombudsman" is a Swedish term dating back to the 1800‟s. It means a person who has an ear to the
people. It is used world-wide to designate impartial, confidential and independent offices that receive
inquiries and concerns from groups of people, and work to achieve fair solutions.
The term ombudsman is used to communicate to the widest possible community and is not intended to
discourage others from using alternative forms of this word, such as ombudsperson or ombuds.
The institution of the ombudsman, first created in Sweden more than 200 years ago, is designed to
provide protection for the individual where there is a substantial imbalance of power.
Initially, this imbalance was between the citizen and the state but as the institution has developed, it has
embraced other sectors. Ombudsmen now exist, not just in the public sector, but also covering the private
and independent sectors.
As well as considering complaints about public services, Ombudsman Association member schemes
consider disputes between consumers and companies or between universities and students, for example.
However, in the private sector, coverage is fragmented and sparse with, in a very few cases, some
duplication (where the „industry member‟ can choose which scheme to belong to). None of this is ideal,
but will require legislation to improve the situation as few sectors now readily establish schemes
voluntarily.
Concept of Ombudsman
Old concept:
Muslims offer the ancient Mohtasib who toured through the cities, towns and marketplaces on a daily
basis to ensure that officials were acting correctly and morally, that customers were not cheated, and to
offer resolution of disputes. The Mohtasib had the authority to reverse an official order which they
deemed to be unjust. The word Mohtasib is derived from the term Hisba, or accountability, not only
before society, but to one‟s self and before higher powers.
In ancient times, China had an institution known as the Censorate. Its mandate was to monitor
government administration to detect any maladministration which threatened the rights of the people.
Many cultures in the Pacific offer examples. In Hawaii, there is a practice known as Ho'oponopono,
which has respected elders resolve disputes according to principles of unity known as Lokahi. In Guam,
the ombudsman is called the Suruhanu, a term meaning a wise and capable healer who is regarded as
having special capacities to resolve grievances.
The Modern Concept of Ombudsman
When the Swedish King Charles XII was in self-exile in Turkey after the Battle of Poltava in Russia, he
learned about the second Muslim Caliph, Umar (634-644) and the concept of Qazi‟ul‟Quzat (“judge of
judges”) developed in the Islamic law of the Ottoman Turks.

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When King Charles returned to Sweden in 1713, he created the Office of Supreme Ombudsman to make
government administrators more accountable. There followed fifty years of dispute between the King and
Parliament about who the Chancellor of Justice would report to. The outcome was that in 1809, an
ombudsman was established in the Swedish Constitution–linked to Parliament, not the executive. It was
designed to be a supervisory agency independent of the executive branch of government, charged with the
responsibility of protecting the rights of the people.
It was not until a century and a half later that the Swedish model began to attract the attention of the
English-speaking world.
Some people react to the “-man” in ombudsman, thinking this loads the term as the property of males, as
in the term “manpower” or “mankind.” However, the term ombudsman comes from an entirely different
construction. The origin of the word is found in an Old Swedish term, umbuds man, meaning
“representative of the people.” In the 16th century, there was the Norwegian "ombudsmann" and the
Danish "ombudsmand."
Definition
1. A government official who hears and investigates complaints by privatecitizens against other offi
cials or government agencies.
2. A person who investigates and attempts to resolve complaints andproblems, as between employee
s and an employer or betweenstudents and a university.
Role of Ombudsmen
1. Ombudsmen offer their services free of charge, and are thus accessible to individuals who could
not afford to pursue their complaints through the courts.
2. They are committed to achieving redress for the individual, but also, where they identify systemic
failings, to seek changes in the work of the bodies in their jurisdiction, both individually and
collectively.
3. They can generally undertake a single investigation into multiple complaints about the same
topic, thus avoiding duplication and excessive cost.
4. They are neutral arbiters and not advocates nor “consumer champions”.
5. They normally ask the body concerned and the complainant to try to resolve complaints before
commencing an investigation.
6. They usually seek to resolve disputes without resort to formal investigations where this is
possible and desirable.
7. Where they identify injustice, they seek to put this right.
Activities and functions
Activities and functions most frequently undertaken by an ombudsman include, but are not limited to:

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 1. Listens and understands issues while remaining neutral with respect to the facts. The ombudsman
doesn‟t listen to judge or to decide who is right or wrong. The ombudsman listens to understand
the issue from the perspective of the individual. This is a critical step in developing options for
resolution.
2. Assists in reframing issues and developing and helping individuals evaluate options. This helps
individuals identify the interests of various parties to the issues and helps focus efforts on
potential options to meet those interests.
3. Guides or coaches individuals to deal directly with other parties, including the use of formal
resolution resources of the organization. An ombudsman often seeks to help individuals improve
their skill and their confidence in giving voice to their concerns directly.
4. Refers individuals to appropriate resolution resources. An ombudsman may refer individuals to
one or more formal organizational resources that can potentially resolve the issue.
5. Assists in surfacing issues to formal resolution channels. When an individual is unable or
unwilling to surface a concern directly, the ombudsman can assist by helping give voice to the
concern and /or creating an awareness of the issue among appropriate decision-makers in the
organization.
6. Facilitates informal resolution processes. An ombudsman may help to resolve issues between
parties through various types of informal mediation.
7. Identifies new issues and opportunities for systemic change for the organization. The unique
positioning of the ombudsman serves to provide unfiltered information that can produce insight to
issues and resolutions. The ombudsman is a source of detection and early warning of new issues
and a source of suggestions of systemic change to improve existing processes.
Because of the informal, neutral, confidential and independent positioning of an ombudsman in an
organization, they typically do not undertake the following roles or activities:

1. Participate in formal investigations or play any role in a formal issue resolution process
2. Serve in any other organizational role that would compromise the neutrality of the ombudsman
role
3. Receive notice for the organization
4. Make binding decisions or mandate policies
5. Create or maintain records or reports for the organization

Overview of NGO
A non-governmental organization (NGO) is any non-profit, voluntary citizens' group which is organized
on a local, national or international level. Task-oriented and driven by people with a common interest,

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NGOs perform a variety of service and humanitarian functions, bring citizen concerns to Governments,
advocate and monitor policies and encourage political participation through provision of information.
Some are organized around specific issues, such as human rights, environment or health. They provide
analysis and expertise, serve as early warning mechanisms and help monitor and implement international
agreements. Their relationship with offices and agencies of the United Nations system differs depending
on their goals, their venue and the mandate of a particular institution.
NGO Registration
In India non profit / public charitable organisations can be registered as trusts, societies, or a private
limited non profit company, under section-25 companies. Non-profit organisations in India (a) exist
independently of the state; (b) are self-governed by a board of trustees or „managing committee‟/
governing council, comprising individuals who generally serve in a fiduciary capacity; (c) produce
benefits for others, generally outside the membership of the organisation; and (d), are „non-profit-
making‟, in as much as they are prohibited from distributing a monetary residual to their own members.
Formation and Registration of a Non -Profit organisations in India
1) Trust
2) Society
3) Section-8 Company (previous section 25) Additional Licensing/ Registration
1. Guidelines NGO Registration India as a Society:

A Society under The Societies Registration Act, 1860 can be registered by a group of seven desirous
persons who can form the bye laws and the rules governing the society and submit the same for
registration before the Registrar of Society according to the local rules and the Registrar after due
verification of all compliances issues a Certification of Registration of the Society. The affairs of the
society can be regulated in accordance with the bye laws and the common laws.
The steps as guidelines NGO Registration India involved with the formation of a Society are described
hereunder:

STEP-I: Forming a group of minimum seven people as desirous persons agree to form the said society.

STEP-II: Clearance of the name of the society from the Registrar concerned where the office of the
society is proposed to be located. In case of all India Society the name is cleared by the Ministry.

STEP-III: Drafting of the deed of society as per the Society Registration Act 1860 and all other standing
orders issued from time to time which contains the rules and regulations for running the society and the
bye laws. (The format is available on our website www.legalhelplineindia.com in the legal format
section) .

STEP-IV: Obtaining a NOC from the owner of the premises where the office of the society is proposed
to be located.

STEP-V: Filing the proof of residence and identification of the desirous persons.

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STEP-VI: Submitting the society documents alongwith all the relevant documents and the drafted deed
before the registrar for registration.

STEP-VII: Issuance of the Registration Certificate by the Registrar of Society.

STEP-VIII: Obtaining a PAN card for the society from the Income Tax Department.

STEP-IX: Opening a bank account for the society for the regulation of funds of the society.

STEP-X: Getting the exemption under Section 80 (G) of the Income Tax Act for exempting the donations
from taxation.

STEP-XI: Getting clearances from RBI for receipt of foreign funds in the society.

STEP-XII: Filing of ITR for the society after the end of the financial year.

2. Guidelines for NGO Registration in India as a Trust:

Any legal entity can establish a Trust in India through a registered Trust Deed which becomes a legal
entity. All activities of a NGO can be done through the aims and objectives of the said trust. The
registration of Trust in India involves the following simple steps:

STEP-I: Selecting the name of the trust.

STEP-II: Drafting the Trust Deed which should contain all the important aims and objectives of the trust.

STEP-III: One settlor or trustee can also run the said trust however a board of trustees can be also named
and several persons can be involved in the running of the trust.

STEP-IV: Getting the PAN card for the trust after its registration.

STEP-V: Opening a bank account for the trust after its registration.

STEP-VI: Getting the exemption under Section 80 (G) of the Income Tax Act for exempting the
donations from taxation.

STEP-VII: Getting clearances from RBI for entitling the trust for receipt of foreign funds.

STEP-VIII: Filing of ITR of the trust.

3. Guidelines for NGO Registration in India as a Company:

Section 25 (1) (a) and (b) contemplate that a Company can be established for the purposes of promoting
art, culture, science, religion, charity, or any other useful object provided the profits, if any, or other
income is applied for promoting only the objects of the company and no dividend is paid to its members.

STEP-I: Application alongwith a fees of Rs 500/- submitted for clearance of name of the proposed
Company. The office of the Registrar of Companies accordingly approve the name if found under the
rules.

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STEP-II: Three sets of printed Memorandum and Articles of Association of the proposed Company duly
singed by the promoters is submitted alongwith a declaration by a CA, Advocate that the same are in
accordance with the provisions of Act and all the requirements of law have been complied with in this
regard.

STEP-III: Three sets of the details of the promoters giving their names, addresses and occupations with
all details of the proposed Directors if they are already Director in any other company.

STEP-IV: A statement showing the details of the assets and liabilities of the association, as on the date of
the application or within seven days of that date.

STEP-V: An estimate of the future annual income of the proposed Company, specifying the source of its
income and the objects of the expenditure.

STEP-VI: A statement giving the brief description of the work already done by the association and of the
work proposed to be done by it after the registration in pursuance of Section 25.

STEP-VII: A statement specifying the grounds on which the application is being made in brief.

STEP-VIII: A declaration by each of the persons making the application that he/she is of sound mind,
not an undischarged insolvent, not convicted by a court for any offence and does not stand disqualified
under section 203 of the Companies Act 1956, for appointment as a director.

STEP-IX: The applicant is required to furnish to the Registrar of Companies (of the state in which the
registered office of the proposed company is to be, or is situate) a copy of the application and each of the
other documents that had been filed before the Regional Director of the company law board.

STEP-X : Publication of a notice in a Newspaper, within a week from the date of making the application
to the regional director of the company law board, in the prescribed manner at least once in a newspaper
in a principal language of the district in which the registered office of the proposed company is to be
situated or is situated and circulating in that district, and at least once in an English newspaper circulating
in that district.

STEP-XI: The regional director may, after considering the objections, if any, received within 30 days
from the date of publication of the notice in the newspapers, and after consulting any authority,
department or ministry, as he may, in his discretion, decide, determine whether the licence should or
should not be granted.

STEP-XII : The Registrar may issue the certificate of incorporation of the Company which makes the
legal existence of the Company and all the formalities relating to the issuance of PAN, Bank Account etc
are taken thereafter.

Registration Certificate

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On receiving the documents mentioned above the Registrar shall satisfy himself about the compliance of
the provisions of the Act and correctness in his hand that the society is registered under the Principal Act
1860 or other corresponding Acts.
Foreign Contribution
The Foreign Contribution (Regulation) Act, 1976 (FCRA) requires all Indian NGOs that receive foreign
contributions to receive clearance from the Ministry of Home Affairs, in the form of either permanent
FCRA registration or prior permission on a case-to-case basis.
Refusal to grant registration
As far as the rejection or refusal of an application for registration is concerned, section 6 does not state
anything clearly. Section 6(1) is completely silent about the grounds or the reasons on the basis of which
an application can be rejected. Any authority possessing the power to register has an implicit power to
reject or refuse to register, as well, but the power of refusal should not be arbitrary, ambiguous and
unreasonable and should be in consonance with the purpose and intent of section10 of the Act. If the
application of an association is refused, then the authorities have to communicate the reasons for refusal
to the applicant. It is necessary that the order of rejection must contain the reason on the basis of which
the refusal has been made, so that in case of an appeal the court could study the tenability of such reasons.
The principles of “audi alteram partem” are very much applicable during the rejection of an application as
basic principle of natural justice.

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