WTO

 GATT to WTO in 1995 is a significant event in the field

of global trade.

 World trade is governed by the rules and regulations

framed by WTO.

 The Dunkel Proposals encompass 28 different areas of

International trade.

 WTO is based in Geneva, Switerland

WTO
 WTO has 147 countries as its members.

 Objectives of WTO
 Free trade without discrimination
 Growth of Less Developed Countries (LCD)
 Protection and preservation of environment
 Optimum utilization of world’s resources

 WTO adopts the principle of Sustainable Development

WTO and Trade Liberalisation
 WTO is for free trade
 However it has failed to achieve the objective of free trade

 Developed and developing countries have failed to

introduce a time bound programme for the removal of
tariffs.
Latest developments at WTO
 WTO is dominated by rich and developed countries of
Europe.

 Developing countries will have to stand together to protect

their interest.

 There have been a lot of Implementation Related

Concerns - Not fulfilled their obligations towards
developing countries
Latest developments at WTO
 DOHA Round (2001)– US and EU made attempts to
bulldoze the developing countries.

 India and other developing nations opposed the new

negotiations

 India’s main objective was to get the ‘implementation

issues’ addressed first.
Latest developments at WTO
 Cancum Round (2003)

 The developing countries pressed for reduction and

phasing out of agricultural subsidies provided to farmers
of developed countries.

 Hong Kong Declaration (2005)

 It is no longer possible for the developed countries to push
their agendas down the developing countries
MNCs
 The term MNCs is American origin.

 Maximum number of MNCs have their origin in USA.

 Coca-Cola operates in 130 countries

Definition of MNC
 Corporations which have their home in one country but
operate and live under the laws and customs of other
countries (host countries)

 A company that attempts to carry out its activities on an

international scale as though there are no boundaries on
the basis of common strategy directed from a corporate
centre,
Characteristics of MNCs
 Large size

 Different types
 Public utility companies
 Manufacturing companies
 Services Institutions
 MNCs providing turnkey projects
 MNCs providing licensing facilities
Characteristics of MNCs
 Multifarious activities

 Multinational management
 Owners and top management do not come from one
country.

 Invest funds in poor/ developing countries

 Dominate global economy

 Globalisation and MNCs are the same side of a coin
Role of MNCs in International Trade
 Advantages of MNCs
 Contribute to the growth of developing countries
 They increase government revenues
 MNCs provide better products at low cost

 Disadvantages of MNCs
 They exploit local labour and resources by paying lower
prices.
 MNCs involvement results in the lack of development of
local R&D.

Foreign Direct Investment (FDI)
 Foreign Direct Investment (FDI) is defined as a form of
investment made in order to gain unwavering and long-
lasting interest in enterprises that are operated outside of
the economy of the shareholder/ depositor.

 In FDI, there is a parent enterprise and a foreign associate,

which unites to form a Multinational Corporation (MNC).

 In an FDI, the investment must give the parent enterprise

power and control over its foreign affiliate.
Foreign Direct Investment in India
 In India, Foreign Direct Investment Policy allows for
investment only in case of the following form of
investments:

 Through financial alliance

 Through joint schemes and technical alliance
 Through capital markets, via Euro issues
 Through private placements or preferential allotments
Foreign Direct Investment in India
 Foreign Direct Investment in India is not allowed
under the following industrial sectors:
 Arms and ammunition
 Atomic Energy
 Coal and lignite
 Rail Transport
 Mining of metals like iron, manganese, chrome, gypsum,
sulfur, gold, diamonds, copper, zinc
Foreign Direct Investment in India
 Foreign direct investment is allowed in all the sectors,
including service sector.

 For a few sectors FDIs are not permitted beyond the ceiling.

 FDIs for all items / activities can be brought in through the

automatic route under the powers delegated to the RBI.

 For other items / activities through government approval, it is

accorded on the recommendation of the Foreign Investment
Promotion Board (FIPB)