1. World Trade Investment Pattern
Presented by :
Richa priyadarshini (65)
Rohan Keshri (66)
Varun Sikri (101)
2. • International trade is exchange of capital, goods,
and services across international borders or territories.
In most countries, it represents a significant share of
gross domestic product (GDP).
• While international trade has been present
throughout much of history (see Silk Road, Amber
Road), its economic, social, and political importance
has been on the rise in recent centuries.
International trade
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4. • Without international trade, nations would be limited
to the goods and services produced within their own
borders.
• International trade is the backbone of our modern,
commercial world, as producers in various nations try
to profit from an expanded market, rather than be
limited to selling within their own borders.
• There are many reasons that trade across national
borders occurs, including lower production costs in
one region versus another, specialized industries, lack
or surplus of natural resources and consumer tastes.
Importance of International Trade
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5. Rank Country International Trade of Goods
(Billions of USD)
- World 36,534.0
- European Union 4,468.6
1 United States 3,882.4
2 China 3,866.9
3 Germany 2,575.7
4 Japan 1,684.4
5 Netherlands 1,247.4
6 France 1,243.9
7 United Kingdom 1,149.4
8 South Korea 1,067.5
9 Italy 986.9
10 Hong Kong 947.9
11 Canada 917.3
12 Belgium 882.0
13 Russia 864.7
14 Singapore 788.1
15 India 779.4
16 Mexico 751.4
17 Spain 624.9
18 Taiwan 571.8
19 Saudi Arabia 529.8
20 Australia 518.2
List of Countries by Export and List of
contries by Import
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6. Rank Commodity Value in US $(000)
1 Mineral fuels,oils, distilation
products,etc
$2,183,079,941
2 Electrical, electronic equipment $1,833,534,414
3 Machinery, nuclear reactors,
boliler,etc.
$1,763,371,813
4 Vehicles other than railway,
tramway
$1,076,830,856
5 Plastics and articles $470,226,676
6 Optical, photo, technical, medical,
etc. apparatus
$465,101,525
7 Pharmaceutical products $443,596,577
8 Iron and Steel $379,113,147
9 Organic chemicals $377,462,088
10 Pearls, precious stones, metals,
coins, etc
$348,155,369
Top traded Commodities(exports)
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7. • Buyer insolvency (purchaser cannot pay);
• Non-acceptance (buyer rejects goods as different from the
agreed upon specifications);
• Credit risk (allowing the buyer to take possession of goods prior
to payment);
• Regulatory risk (e.g., a change in rules that prevents the
transaction);
• Intervention (governmental action to prevent a transaction
being completed);
• Political risk (change in leadership interfering with transactions or
prices); and
• War and other uncontrollable events.
• In addition, international trade also faces the risk of unfavorable
exchange rate movements
Risks in international trade
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8. 8
Restrictions of Imports
• Many countries including the United States have
passed antidumping laws which help domestic
industries by restricting foreign products being
sold below the cost of production, or at prices
lower than those in the home market.
• Imports are also restricted by nontariff barriers,
such as buy-domestic campaigns. It is difficult to
remove these barriers.
• Imports can also be reduced by tightening
market access and entry of foreign products
through involved procedures and inspections.
9. 9
Effects of Import Restriction
• Import control may mean that the most efficient
sources of supply are not available, resulting in
second-best products or higher costs for restricted
supplies.
• Import control may result in the downstream change
in the composition of imports.
• Due to inefficiency,
import controls may
cause a lag in
technological
advancements.
10. 10
Restrictions of Exports
• Nations control their exports for reasons of
short supply, national security and foreign
policy purposes, or the desire to retain
capital.
• National security controls are placed on
weapons and high-technology exports.
• Although restriction of exports is a valuable
international relations tool, it may give a
country’s firms the reputation of being
unreliable suppliers and may divert orders
to firms of other nations.
11. 11
Export Promotion
• Export promotion is designed to help firms enter
and maintain their position in international
markets and to match or counteract similar efforts
by other nations.
• Various approaches toward export promotion
include:
• knowledge transfer
• direct or indirect subsidization of export activities
• reducing governmental red tape for exporters
• export financing and mixed aid credits to
exporters
• altered tax legislation for nationals living abroad
12. 12
Import Promotion
• Countries that maintain large
balance-of-trade surpluses use
import promotion measures.
• The Japan External Trade
Organization (JETRO) has begun to
focus on the promotion of imports
to Japan.
13. 13
Restrictions on Investment
• Many nations that lack
necessary foreign exchange
reserves restrict exports of
capital, because capital flight
can be a major problem.
• Once governments impose
restrictions on the export of
funds, the desire to transfer
capital abroad increases. This
creates problems for gaining
new outside investors.
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Investment Pattern
14. 14
U.S. Perspective on Trade and
Investment Policies
• The U.S. seeks a positive trade policy rather than
reactive, ad hoc responses to specific situations.
• Protectionist legislation can be helpful, provided
it is not enacted into law.
• Trade promotion authority gives Congress the
right to accept or reject treaties and
agreements, but reduces the amendment
procedures
15. 15
International Perspective on
Trade and Investment Policies
• From an international perspective, trade and
investment negotiations must continue.
• In doing so, trade and investment policy can
take either a multilateral or bilateral approach:
• bilateral negotiations are carried out mainly
between two nations.
• multilateral negotiations are carried out among a
number of nations.
16. Economies by size of merchandise trade
2011
51%
The top ten
merchandise
traders
accounted
for just over
half of the
world’s total
merchandise
trsde in 2011
45%
APEC
countries
had a 45%
share in
world
merchandise
trade in 2011
Us$
16.7
tn
Merchandise
exports from
WTO
members
totalled us$
16.7 trillon in
2011
17. Economies by size of trade in commercial
services 2011
49%
The top ten
commercial
services
traders
represented
almost half of
total trade in
commercial
services in
2011
39%
APEC
countries
accounted for
39% of total
trade in
commercial
services in
2011
US$
4.03
tn
Exports of
commercial
services by
WTO members
totalled us$
4.03 trillion in
2011
18. Merchandise trade flows with in regions
outperform flows between region
37
476
18
201
382
65
1103
Africa
Asia
Commonwealth of
Independent
States
Central & South
America & the
Carribean
Europe
Middle East
NorthAmerica
22. Leading economies of merchandise trade,
2011
0
500
1000
1500
2000
2500
Imports US $
BILLION
Export
The United States
was the world’s
biggest merchandise
trader in 2011
US $ 1,480 BN
Exports
US $ 2,266 BN
Imports
23. Commercial service exports 2010-2011
0 10 20 30
world
CIS
C and…
Europe
Asia
Middle…
North…
Africa
2010
2011
11%
Growth in
export of world
commercial
Services in 2011
24. Leading traders in commercial services, 2011
-200 0 200 400 600 800
United States
Germany
United…
China
France
Japan
India
Netherlands
Ireland
Itay
Balnce
Import
Exports
US$ 976 bn
United States
US$ 542 BN
Germany
US$ 444 BN
United Kingdom
29. • Trade and commerce have been the backbone of
the Indian economy right from ancient times.
• Textiles and spices were the first products to be
exported by India.
• The Indian trade scenario evolved gradually after the
country’s independence in 1947.
• From the 1950s to the late 1980s, the country followed
socialist policies, resulting in protectionism and heavy
regulations on foreign companies conducting trade
with India.
Trade In India
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30. India’s major imports comprise of crude oil machinery,
military products, fertilizers, chemicals, gems, antiques and
artworks. Imported goods are divided into the following
categories:
• Freely importable items: For these items, no import license
is required. They can be freely imported by an individual or
a firm.
• Canalized items: These items can only be imported by
public sector firms. For example petroleum products fall
under this category.
• Prohibited items: Items such as unprocessed ivory, animal
rennet and tallow fat cannot be exported to India.
India : Trade Imports
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31. • Indian exports comprise mainly of engineering and
textile products, precious stones, petroleum products,
jewelry, sugar, steel chemicals, zinc and leather
products. Most of the exported goods are exempt
from export duties.
• India also exports services to several countries,
primarily to the US. In fact, India is among the world’s
largest exporters of services related to information
and communication technology (ICT). It is also the
key destination for business process outsourcing
(BPO).
India Trade: Exports
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32. Year Export Import Balance of
trade
2001-02 2035.71 2308.73 -273.02
2002-03 2090.18 2452.00 -361.82
2003-04 2551.37 2972.06 -420.69
2004-05 2933.67 3591.08 -657.41
2005-06 3753.40 5010.65 -1257.25
2006-07 4564.18 6604.09 -2039.91
2007-08 5717.79 8405.06 -2687.27
2008-09 65558.64 10123.12 -3654.48
2009-10 8407.55 13744.36 -5336.80
2010-2011 8455.34 13637.36 -5182.02
India's Exports, Imports, and Balance of
Trade from 2001-02 to 2010-11
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33. 28
3
22
15
28
22
25 25
15
28
7 6
21 21
40
32
27 27
20
36
Export Import
Percentage growth of India’s Exports and
Imports from 2001-02 to 2010-2011
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34. Percentage Growth of Balance of trade
from 2001-02 to 2010-2011
-60
-40
-20
0
20
40
60
80
100
Axis
Title
Series 1
Series 1
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35. 18%
16%
16%
6%
5%
4%
4%
3%
2%
2%
24%
Engineering Goods
Gems & Jewellery
Petroleum Products
RMG of all types
Drug, Phaarmaceutical & Fine
Chemicals
Other Basic Chmicals
Iron Ore
Electronic Goods
Cotton Yarn/Fabs/made-ups etc.
Man Made yarn/Fabs/Made of
Handloom Products
Other
Percentage share of India’s Export of
major item group in 2010-11
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36. Export Promotion Capital Goods
Scheme
• Zero duty import of capital goods for
products :
• Engineering and electronic products
• Basic chemical and pharmaceutical
• Apparel
• Textiles
• Plastic
• Handicrafts
• Leather
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Investment Pattern
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37. Example
• Under the Focus Market Scheme, if an
exporter exports to an identified country
Rs.100 worth of goods, he will get 2.5%
of Rs.100 on export of all products to the
notified countries.
• Which he can either use to pay
customs duty on his imported inputs or
sell in the market as these scrips would
be freely transferable.
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38. Export Oriented Units
• EOUs have been allowed to sell products
manufactured by them in DTA (Domestic
Tariff Area, outside the Special Economic
Zone) up to the limit of 90 percent instead of
existing limit of 75 percent.
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39. Simplification of Procedure & Reduction
in Transaction cost
• The application and redemption form
under the EPCG scheme have been
simplified.
• Maximum fee on license application
slashed to Rs. 1 lakh from Rs. 1.5 Lakh
(manual application)
• For Electronic application from Rs.
50000/- which was Rs. 75000/-
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40. • In order to reduce transaction cost,
dispatch of imported goods directly from
port to site has been allowed under the
Advance Authorization Scheme
• To facilitate duty-free import of sample by
exporters number of samples or pieces has
been increased from 15 to 50.
• Custom clearance of these samples shall
be based on declarations given by the
importers for value and quantity of
samples.
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Investment Pattern
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41. Other Initiative
• Income Tax exemption to 100
percent for EOU and STPI (Software
Technology Park) units has been
extended.
• Exporters have been assured that their
need for dollar credit, specially for
small and medium enterprises, will be
met in a timely manner.
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42. The effect of new Foreign Trade
Policy on Different sectors
Gems and Jewelry:
• The government has declared duty
draw backs on gold Jewelry exports, in
case the yellow metal has been
imported independently by Jewelry
makers.
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43. • Exporters participating in overseas
exhibitions will be permitted to carry
merchandise worth $5 million earlier it was
2 million allowed.
• Even the limit of personal carriage-samples
for export promotion tours has been
increased by US$ 1 million.
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Investment Pattern
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44. Leather Sector:
• Re-exporting of unsold imported hides
and skins and semi-finished leather
have been permitted on payment of
50% export duty.
• Increase of FPS rate to 2% will
reportedly benefit this sector.
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45. • Pharmaceuticals
• Export obligation period (EOP) has been
extended from 6 months to 36 months for
advance authorizations for Pharmaceutical
Products.
• Domestic drug exporters will hugely benefit
from the extension of export obligation period.
• This will encourage exporters to import raw
materials and enjoy tax benefits for a period of
three years for exporting finished goods.
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Investment Pattern
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46. Tea
• Exports of tea have been brought under
Videsh Krishi and Gram Udyog Yojana
(VKGUY), which provides 5% incentive.
• This exporter-friendly policy is expected
to offset some of the soaring costs, like
transportation.
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Investment Pattern
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47. Agriculture
• To bring down the transactions costs and
handling costs in agricultural sector, a single-
window system has been put in place to
facilitate export of perishable agricultural
produce.
• The system will include, setting up of multi-
functional nodal agencies to be accredited by
(Agricultural and Processed Food Products
Export Development Authority)APEDA.
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48. • Set up by an act of parliament in September 1981
• Wholly owned by Government of India
• Commenced operations in march, 1982
• Established “for providing financial assistance to
exporters and importers, and for functioning as the
principal financial institution for coordinating the
working of institutions engaged in financing export
and import of goods and services with a view to
promoting the country’s international trade…”
EXIM BANK
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49. India – Africa
Trade and Investment Relationship
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50. The weak economic conditions in the western world could impact the flow of
FDI, ODA and trade with African economies.
Increasing role of large developing countries in global trade, finance and
investment coupled with their rapid economic growth suggest that Africa
focuses on long-term & mutually beneficial engagement with the these
economies.
India and Africa have shared healthy economic and political ties for a long
time. To further boost the ties, India has undertaken major policy initiatives
e.g. India-Africa Partnership conclaves, India-Africa Forum, Focus Africa
Programme etc.
India has emerged Africa’s fourth largest trade partner after EU, China and US.
India Africa trade has soared from US$ 4.5 bn in 2000-01 to US$ 67.9 bn in
2011-12 and is expected to reach US$90 bn by 2015.
SOUTH-SOUTH COOPERATION
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51. • India’s engagement in Africa is aimed at building a sustainable partnership centered
around capacity building, technology dissemination, people-centric approach,
educational support, capital support etc.
• At the 2nd India-Africa Forum Summit, held in May 2011, India announced a Duty Free
Tariff Preferential scheme (DFTP) for the 49 least developed countries, 33 of whom are in
Africa. This will cover 94% of India’s total tariff lines and, more importantly provide
preferential market access on tariff lines for 92.5% of the global exports of all LDCs.
• Items covered - cotton, cocoa, aluminium ores, copper ores, cashew nuts, cane sugar,
readymade garments, fish fillets, non industrial diamonds etc.
• It is hoped that the LDC’s in Africa, who have not yet subscribed to the DFTP scheme,
would do so shortly and make use of this increased market access to the large Indian
market.
SOUTH-SOUTH COOPERATION CONTD..
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52. Total Exports to Africa $ 24.7 bn
To LDCs
$ 7.2 bn
(29.1%)
To non-LDCs
$ 17.5 bn
(70.9%)
LDC* vs. NON-LDC
INDIA’S EXPORTS TO AFRICA
• KEY PLAYERS
2011-2012 USD bn
% Share
in Africa
SOUTH AFRICA 4.7 19.2
NIGERIA 2.7 10.9
EGYPT A RP 2.4 9.8
KENYA 2.3 9.2
TANZANIA REP^ 1.6 6.5
TOTAL 13.7 55.6
*Least Developed Countries
Source: Commerce Ministry, India ^LDC
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53. Total Imports from
Africa
$ 43.2
bn
From LDCs
$ 9.4 bn
(21.8%)
From non-LDCs
$ 33.8
bn
(78.2%)
LDC vs. NON-LDC
INDIA’S IMPORTS FROM AFRICA
• KEY PLAYERS
2011-2012 USD bn
% Share
in Africa
NIGERIA 14.7 34.0
SOUTH AFRICA 9.9 23.1
ANGOLA* 6.6 15.3
EGYPT A RP 3.0 7.0
ALGERIA 2.2 5.0
TOTAL 36.5 84.4
Source: Commerce Ministry, India *LDC
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54. 63.3
73.4
52.6
43.1 42.7
2007 2008 2009 2010 2011
USD billion
AFRICA - FDI INFLOWS
Source: World Investment Report 2012, African Economic
Outlook 2012
FDI inflows to Africa declined for the third consecutive year after peaking in
2008.
In 2011, while FDI inflows increased by 14% in East & South East Asia and 16% in
Latin America & Caribbean, it declined by 1% in Africa.
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55. FDI is an important source of productive investment (fixed assets & inventories) in
Africa. According to UNCTAD 2010 investment report, the average share of FDI in
gross fixed capital was 19.2% in Africa which is almost double the world average
and well above 12.4% for other developing countries.
Between 2010 and 2011, FDI to Africa from developed countries fell leading to
increase in share of developing and transition economies for the first time.
According to World Investment Report 2012, share of the later increased from
45% in 2010 to 53% in 2011.
This is expected to rise further as these economies look for additional natural
resources and access to growing African markets.
Apart from natural resources, investment is also getting routed into
manufacturing and services which enhances the potential for technology
transfer and increasing productivity and thereby aiding economic growth of
countries not rich in resources.
AFRICA - FDI INFLOWS
(CONTD..)
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56. • Total Indian investment in Africa is upwards of US$ 33 bn.
• According to research agency “fdi Intelligence”, Africa
recorded 26 new manufacturing projects from Indian
companies in 2011, a rise of 44% from 2010. This led to
almost 17000 new job creation.
• Between 2003-2009, 70 Indian companies invested in
greenfield projects in Africa, totaling US$ 25 billion; this
represents close to 5 percent of total greenfield FDI
projects in Africa, according to African Development
Bank.
INDIAN INVESTMENT IN AFRICA
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57. 30
32
34
36
38
40
42
44
46
48
50
2005 2006 2007 2008 2009 2010 2011e 2012p
OVERSEAS DEVELOPMENT ASSISTANCE, NET
(USD BN)
ODA, an important source of finance along with FDI, has stagnated in the post crisis
period.
The trend could continue well in the future because of the sovereign debt crisis and the
austerity measures in the OECD countries.
Source: African Economic Outlook 2012
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58. • Indian aid to Africa is mostly in the form of capacity building, skill
development, credit lines, scholarships and knowledge sharing.
• Total aid to Africa during 2011-12 was Rs. 150 cr (USD 27.5 mn) as
compared to a miniscule Rs. 10 cr in 1997-98.
• During the 2nd India-Africa summit held in May 2011, India
unveiled US$ 5.7 bn in credit and grants for development
projects and over a 100 capacity building institutions in Africa.
• Relationship between aid and trade can make the process
sustainable.
INDIAN AID TO AFRICA
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59. FUNDING REQUIREMENTS & DEFICIT FOR
INFRASTRUCTURE IN AFRICA
USD bn. annually
• Current spending on infrastructure in Africa is roughly $ 45 bn. per year there
is a
gap of $ 48.3 bn. annually which needs to be filled
Source: World Bank (2010)
Sector
Capital
expenditur
e
Operation and
maintenance
Total
Requiremen
t
Actual
Spendin
g
Defici
t
Total 60.4 33 93.3 45.3 48
Power 26.7 14.1 40.8 11.6 29.2
Water & Sanitation 14.9 7.0 21.9 7.6 14.3
Transport 8.8 9.4 18.2 16.2 2.0
ICT 7.0 2.0 9.0 9.0 0.0
Irrigation 2.9 0.6 3.4 0.9 2.5
According to African Economic Outlook 2012, “Africa’s inability to mobilize finance and
private sector involvement has held up energy and infrastructure development. The recent
Africa Energy Outlook 2040 study (NEPAD, African Union and AfDB 2011) concludes that an
estimated USD 43.6 billion per year will be needed to meet forecast energy demand for
Africa up to 2040.”
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60. At 200 mn, Africa has the youngest (15-24 yrs) population
in the world and it is expected to double by 2040.
Working age population (15-64 yrs) grew from 443 mn to
550 mn between 2000 and 2008, an increase of 25%
(CAGR of 2.7%) and is likely to reach 1 bn by 2040.
The youth population is not only growing fast but also
getting better educated which calls for creation of
meaningful jobs to engage them in the productive sectors
of the economy. Failure to do so could pose a risk and
threat to social cohesion and political stability in Africa.
EMPLOYMENT GENERATION IN AFRICA
THROUGH MEANINGFUL COLABORATION
Source: African Economic Outlook 2012
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61. • In many segments, the emerging African demand
pattern is similar to India’s 10 years ago.
• Consequently, the technology and product offerings
of Indian firms can meet the cost structure and
product aspirations can of the African consumers.
• This provides an opportunity to Indian firms to invest in
Africa and thereby creating meaningful employment
opportunities.
EMPLOYMENT GENERATION IN AFRICA THROUGH
MEANINGFUL COLABORATION (CONTD..)
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62. The WTO-CII study indicates:
Since 2005, India-Africa economic partnership has moved to a new
trajectory.
Trade and investment are the two facets of this relationship, followed by
development assistance.
Notwithstanding global economic crisis, South-South economic
partnership has grown.
Key sector of Indian investment – IT, telecom, energy, automobile,
engineering services, project management and supplies.
Trade has gone beyond natural resources and encompasses value
added products.
INDIA-AFRICA TRADE RELATIONSHIP
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63. Survey results from 60 key African and Indian companies suggests - where
commercially driven development assistance can make a difference, key
problem areas for trade:
• Access to trade finance
• Access to market – knowledge about market
• Transport and logistics cost
• Africa’s difficulties in investing in India
• Absence of bilateral investment treaties
• Business environment
• Difficulty in securing finance
• India’s difficulties in investing in Africa
• Absence of bilateral treaties
• Business environment
• Market Size
• Lack of tax incentives
INDIA-AFRICA TRADE RELATIONSHIP
CONTD..
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64. • Africa is not a homogenous market, it is a fragmented economy
• Different countries are at different stages of development
• There has been some success in removing import duties within
regional groupings
• However a range of non-tariff and regulatory barriers remain –
raising transaction costs
• Movement of goods & services and people across borders is
somewhat restricted
• Consequently, internal transport costs are high. This adds to the
costs of goods & services in the hinterland
• Intra-Africa fragmentation restricts the size of the market
UNDERSTANDING INDIA-AFRICA
RELATIONSHIP
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65. Learning from CEO’s Forum (India-South Africa)
• Take up issues impacting bilateral trade and investment and
suggest policy measures to meet a trade target
• Focus on sectors of interest – Financial services, mining, pharma
& healthcare, infrastructure & power, manufacturing
• Issues considered – tariff barriers, visa applications, PTA possibility
and technology transfer
• Principles of reciprocity and partnership
• Action oriented proposals and need for policy
tweaking/change
Similar format can be used with other African countries/regions -
A private stakeholder’s initiative with government support
INDIA-AFRICA RELATIONSHIP
(A BILATERAL OR REGIONAL ALTERNATIVE)
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