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National Control Over International Trade Scope in present era

Economic liberalization, rapid technological change and aggressive competition continue to alter the environment in which industries operate. The relentless global pressure has produced some interesting changes in the development and structure of nations’ respective industrial sectors. The gradual globalization process has emphasized the traditional notion that domestic policies, which once were oriented toward increasing local industrial and economic advantages, have become less effective (UNCTAD 1999). Indeed, governments and industries consistently may view these types of domestic policies as isolationist and limited approaches to economic efficiency. Some of the evidence of these changes includes some countries’ implementation of economic policies that are designed to attract global industrial investment, the prominent role of cross-border mergers and alliances, and the cooperation among national and sub-national governments. These features of the globalization process point to the need to examine the growing importance of a nation’s competitiveness by investigating the combination of industry-specific competitive advantages as well as a nation’s comparative advantages (which is reflected in its ability to create an environment conducive for trade and development).[1]

One important question any free trade system must resolve is the manner and degree of regulatory autonomy individual jurisdictions retain despite a commitment to the free flow of goods and services.[2] The expansion and development of international trade is the need of time, but it may affect adversely if allows to go unrestricted. Although the trend is falling toward adopting a open and liberal international policy and impetus is given on the free flow of international trade, still some restrictions to some extent are also desirable on the part of domestic governments to save their own economic and social growth from the adverse effects of unregulated and unrestricted global trade. International Trade Control (ITC) laws regulate the movement of goods, services and technology across borders for customs, national security and foreign policy reasons. These laws apply to many areas of GE’s operations including shipping/ receiving, logistics, manufacturing, engineering, sourcing, finance, sales/marketing, customer service, IT and EHS. Software and technical information exchanges across national boundaries, including e-mail, fax, web, server and SupportCentral use, are subject to trade controls. The United States also controls the release of technical information to non-U.S. nationals within the United States as a “deemed export.” It is critical that we carefully observe ITC laws in connection with these activities.[3]

Meaning of International Trade

International trade means trade between the two or more countries. International trade involves different currencies of different countries and is regulated by laws, rules and regulations of the concerned countries. Thus, International trade is more complex than the domestic trade.[4]

Foreign and domestic trade relationship

Modern transportation and communication have forced a revolution in distribution, creating an international market for more and more local products. Paralleling this increase in the number of items and volume of foreign trade, the world has also been afflicted with a growth in new and more cumbersome trade barriers. To make more domestic products "go international," the amount of trade between nations must grow; to make this possible, trade barriers must be curtailed or eliminated. Hence, the nations of the world in the post war period should turn to fuller cooperation in the field of international trade.[5]
Even though the foreign trade of a nation may appear small as compared to its total national income, it has been demonstrated that a nation cannot long be prosperous when the rest of the world with which it trades is suffering from depression. Disturbances arising in one country tend to spread to others, and involve their economic entities.[6]

Need of International Trade Control

Standards have many roles and functions. Not only do they establish a common trading language between buyers and sellers, but they also ensure public safety and the protection of the environment within and outside national borders. Moreover, in today’s globalized production systems, standards ensure that parts produced across borders fit and that networks are compatible. Regulations and standards and the verification of their application through conformity assessment procedures have, therefore, many benefits. However, inappropriate regulations can result in high costs and inefficiencies in trading partner countries as well as in the domestic economy and have international repercussions.[7]

History of Foreign Trade policy or foreign Trade Control in India

Historically, India ran a trade surplus for centuries together through export of spices, handicrafts, textiles etc. No restrictions on imports or exports were officially maintained. But, the situation changed after the British took over power. Before India got Independence, import of goods from Great Britain received official encouragement through Imperial preferences. There was a corresponding disincentive for import of goods from other countries.[8]

Statutorily, it was the Sea Customs Act, 1878 that provided the basis for implementing the official bias in favour of imports from Britain. Goods originating from other countries could be simply charged higher import duties than the goods originating from Britain or territories favoured by Britain. 2.04 There was, however, no separate statutory mechanism or enactment to prohibit or restrict import of goods, except under the Sea Customs Act, 1878. In other words, goods could be freely imported provided the import duties were paid. Under the Sea Customs Act, 1878, only a few goods were subjected to import duties and the duty rates were also not too high. The Imperial government preferred Land Revenue as the principal means to raise revenues. Import duties did not constitute a significant share of the revenues.[9]

The Government of India Act, 1935 granted the Central government the exclusive legislative powers to regulate import of goods into India and export of goods from India. However, this power was never used till 1947, when the Imports and Exports (Control) Act, 1947 was enacted. The need for the Act arose out of the consequences of the Second World War.

In the early fifties, the Indian Govt. took several measures to build an industrial base in the country. It allocated substantial resources for infrastructure building such as steel plants and developing the core sector. The private sector was also encouraged to set up industries in the non-core sector. These infant industries needed protection from influx of imported goods. So, the Govt. issued the Imports (Control) Order 1955 allowing most of the imports only against an import licence.[10]

In 1976, far-reaching changes were made to the Imports & Exports (Control) Act, 1947. The amended Act gave the Central Government wider powers to prohibit, restrict and control the Imports and Exports Trade. The Act covered practically all articles of trade and manufacture except those permitted to be imported under a licence or customs clearance permit or an Open General Licence. The Exports (Control) Order 1988 held sway before liberalization process was launched in 1991

International Trade Controls

Many countries regulate international trade transactions, such as imports, exports and international financial transactions, for a variety of reasons, including national security and foreign policy.[11] The Government of a specific country would like to impose restrictions in the following forms or types:- 1. Tariffs Rate or Customs Duties 2. Quantitative Restrictions. Type 1. Tariffs Rate or Customs Duties:
To protect the interest of the local manufacturer, traders and service providers, a government of a particular country, may implement different types of tariff system.[12]

A. Single Column Tariff System:
In this system, same or uniform percentage of tariff duty rate is applied or same amount of duty per unit of measurement is applied for a product irrespective of the country of origin.

B. Conventional Tariff System:
Under this system, except a country with whom the bilateral agreement entered into as a part of specific treaty, a uniform rate is applied on imports from all other countries. Generally, specific treaties have been entered into with specific countries due to political, racial or regional ties. Hence the tariffs rates applicable for import and export with such country are called preferential tariffs.

C. Specific Duty:
Whenever the tariff duty is imposed in as amount per units of a goods, commodities, and services (e.g., tonnes, number, skill man hours, etc.), it is known as specific duty rate. Instead of per unit of measurement, if the duty as applicable as a percentage of value of the goods, commodities, or services, then it is known as an ad valorem duty.

D. Compensatory Tariff Rate:
Whenever the imported product is available at quite a lower price than the domestic running price of product, then to protect the interest of domestic producers, a specific duty is imposed on imported goods. As an action of this, the imported goods will not be in a position to stand in the domestic market. Such duty is known as compensatory tariff duty.

E. Countervailing Duty:
Importing country will impose additional duty on imported goods if imported from a particular country, in the case, when an exporting country supports its goods to be exported through the monetary support provided in the form of subsidy. Such additional duty is imposed on the import of such goods by importing country to ensure the protection to domestic manufactures.

2. Quantitative Restrictions:
Government is also imposing the quantitative restrictions in addition to the tariff controls to protect the interest of the domestic players. Through this, it limits the physical quantity of goods to be imported during a given period in a country.

To impose the quantitative restrictions, government resorts to the quota specification, and also the import license. Quota limits the total quantity of goods to be imported, while import license will limit the imports of an individual importer.

Besides these there are some other restrictions or measures to control the international trade which are generally applied by different nations few of them are as follows:
1. Embargo
Embargo is a legal prohibition by a government or group of governments restricting the departure of vessels or movement of goods from some or all locations to one or more countries.
Embargoes may be broad or narrow in scope. A trade embargo, for example, is a prohibition on exports to one or more countries, though the term is often used to refer to a ban on all commerce. In contrast, a strategic embargo restricts only the sale of goods that make a direct and specific contribution to a country’s military power; similarly, an oil embargo prohibits only the export of oil. Broad embargoes often allow the export of certain goods (e.g., medicines or foodstuffs) to continue for humanitarian purposes, and most multilateral embargoes include escape clauses that specify a limited set of conditions under which exporters may be exempt from their prohibitions.[13]

2. Dumping
A common political rationale for establishing tariffs and quotas is the need to combat dumping: the practice of selling exported goods below the price that producers would normally charge in their home markets (and often below the cost of producing the goods). Usually, nations resort to this practice to gain entry and market share in foreign markets, but it can also be used to sell off surplus or obsolete goods. Dumping creates unfair competition for domestic industries, and governments are justifiably concerned when they suspect foreign countries of dumping products on their markets. They often retaliate by imposing punitive tariffs called anti-dumping tariffs that drive up the price of the imported goods.[14]

3. Foreign investment Limits
Countries used to put restrictions on the foreign investments by way of imposing limits on Foreign Direct Investment (FDI) and Foreign institutional investors(FII) to promote and save their domestic market. However these restrictions sometimes seems as barrier to the expansion of the market of a particular country.

4. Licensing requirements
The requirement of prior approval, in the form of a license, to export, import or to make investment in a particular country, is a good a good and an important measure for international trade control. This practice establishes approved exporters or investors and can allow the government or other parties to benefit financially from the relatively scarce opportunities to export. Licenses are often used in conjunction with export quotas.[15] Licensing helps the host government to regulate the business of a foreign enterprise or a multinational company in their jurisdiction.

5. Quality standard norms
States control the quality of import items to their country by prescribing the quality standard norms. The foreign products have to pass through the tests prescribed by the government to ensure that they are fit for the purpose for which they are intended. These norms are helpful for the governments to keep the substandard and hazardous products out form there trade markets.

WTO prohibitions on trade restrictions
WTO in time will become a formidable arm of the international trade system together with the IMF and the World Bank. Article XI of the GATT (Which latter on concludes into WTO, in 1995) generally prohibits quantitative restrictions on the importation or the exportation of any product by stating that “No prohibitions or restrictions other than duties, taxes or other charges shall be instituted or maintained by any Member . . . .” One reason for this prohibition is that quantitative restrictions are considered to have a greater protective effect than do tariff measures, and are more likely to distort the free flow of trade. When a trading partner uses tariffs to restrict imports, it is still possible to increase exports as long as foreign products become price-competitive enough to overcome the barriers created by the tariff. When a trading partner uses quantitative restrictions, however, it is impossible to export in excess of the quota no matter how price competitive foreign products may be. Thus, quantitative restrictions are considered to have such a distortional effect on trade that their prohibition is one of the fundamental principles of the GATT.[16]

The restrictions by WTO are not restricted to the quantitative measures only, but due to its principles like Most favoured Nation or National Treatment, Which restricts its members to differently treat any of its member in the matter of tariffs or other trade restrictions. However the WTO also provides some exceptions in this regard on the considerations of environment, health, or the growth of less developed economies.

Impact of WTO on Indian Foreign Trade
India being a part of GATS by default becomes member of WTO in 1995, being member, it had to fulfil its commitments and remove quantitative restrictions on imports. However as india suffered major Balance of Payment crisis in 1991, it was allowed to maintain some quotas on its imports. Latter on these quotas were eventually removed in 2001and India moved to a tariff only trade regime. Currently India’s tariff rates on industries are 8.5% and average tariff on agriculture goods are 35%. Though India’s tariff rates are still higher than some East and Southeast Asian countries, compared to its own past the rates are much reduced and India is a now a more open country as compared to its past.[17]

India’s Trade policy in present scenario
India’s economic structure today presents a distinctly different picture from what it was in 1991 when economic reforms started. In 1991 our foreign exchange reserves had depleted substantially. We then had just enough reserves to tide over the import requirements of three weeks. It was in this context that India gradually started dismantling its quantitative restrictions, partially liberalised its exchange rate and reduced the peak rate of customs duties. The average duty on all products stands reduced from over 70% in 1991-92 to 12% in 2008-09.

The end of cold war at the international level and India's rejection of economic self reliance in favour of trade promotions at the domestic level, transformed India’s foreign economic relations. It leads to substantial economic engagement with US, IMF, WTO, South Asia and China.[18] India’s foreign trade policy after 1991, is more liberal and open for foreign trade specially with US and China. India and China has not allowed interfering their political issues with the trade. India’s trade with china has grown from $4.7 billion in 2002-03 to $25.7 billion in 2006-07.[19]

In the Mid-Term Review of the Foreign Trade Policy (FTP) 2015-20 the Ministry of Commerce and Industry has enhanced the scope of Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS), increased MEIS incentive raised for ready-made garments and made- ups by 2 per cent, raised SEIS incentive by 2 per cent and increased the validity of Duty Credit Scrips from 18 months to 24 months.[20]
All export and import-related activities are governed by the Foreign Trade Policy (FTP), which is aimed at enhancing the country's exports and use trade expansion as an effective instrument of economic growth and employment generation.[21]

The Department of Commerce has announced increased support for export of various products and included some additional items under the Merchandise Exports from India Scheme (MEIS) in order to help exporters to overcome the challenges faced by them.[22]

In any trade practices, now a days, the free flow of goods and services is considered as most important and crucial aspect, the same is true for the international trade also. The principles of GATS and WTO regulations are playing a significant role to ensure the free trade practices in international regime. Undoubtedly, free trade practices are appreciable for the advancement of international trade, sometimes when it goes unrestrictive becomes hazardous to the nation’s economic and social structure. Where a nation is bound to its commitments in the international regime, its commitments also lies toward the positive and healthy advancement of its own domestic regime, which is its first priority. To take steps for the welfare and advancement of one’s own territory is the most important aspect of nation’s sovereignty which cannot be taken away from him. In this way the restrictions levied away by a nation for the welfare and protection of its own economy especially when comes to issues of environment, health and basic economical and social needs of its subjects may be considered legitimate, but they will become hazardous when purpose exceeds the boundaries of moral and ethical requirements, is illegitimate and hazardous for the development of international trade practices.

The prohibitions on restrictive measures for control of international trade practices, by WTO are primarily lies on only the quantitative measure and also provides some exceptions on the ground economic, environment, health and other necessary grounds are justified, until they implemented with great caution and without the interference of international political aspects. There prohibitions and restrictions both must be reasoned and should purely on merits of circumstances exists, and then they are healthy for the international trade and harmony and for the global welfare.

Secondary Sources
# Gangualy, Sumit. India’s Foreign Policy Retrospective and Prospective. New York: OXFORD University Press, 2010.
# Gillies, Peter and Gabriel Moens. International Trade and Buisness: Law Policy and Ethics. Sydney: Cavendish, 1998.
# Institute of Charted Accountants of India. Handbook on Foreign Trade Policy and Guid to Export & Import. New Delhi: ICAI Publications, 2008. 25 04 2018
# Pal, Prathapratim. International Trade and India. New Delhi: Oxford University Press, 2014.

# Arvius, Christer. “Standard ad Regulations in International Trade.” UN Publications (n.d.) 25 04 2018 <>.
# Bonarriva, Joanna. “Export Controls: An Overview Of Their Use, Economic Effects, And Treatment In The Global Trading System.” 2009. 25 04 2018 <>.
# Chand, Smriti. “THe Meaning and Defination of Foreign Trade or International Trade-Explained!” (n.d.) 09 04 2018
# Floyd, M.Riddick and W.Romita Joseph. “Analysis of National and International Aims and Intrest in Trade.” (n.d.). 09 04 2018
# H, Hafsa. “Main Types of Trade Restrictions Government.” 25 04 2018 <>
# Marwell, Jeremy C. “Trade and Morality: The WTO Public Morals Exeption after Gambling.” NYULR (n.d.).
# Taren, Berna and Semra Oncu. “The Relationship Between International Trade and National Competitiveness.” (n.d.). 09 04 2018

[1] Berna Taren, Semra Oncu, “The Relationship Between International Trade And National Competitiveness” assessed on 09-04-2018 at 7:28pm
[2] Jeremy C. Marwell, “Trade And Morality: The WTO Public Morals Exception After Gambling” NYULR.
[3] assessed on 25-04-2018 at 12:04pm.
[4] Smriti Chand, “The Meaning and Definition of Foreign Trade or International Trade – Explained!”assessed on 09-04-2018 at 7:42pm
[5] M.Riddick Floyd And W.Romita Joseph, “Analysis of National and International Aims and Interests in Trade” assessed on 09-04-2018 at 7:53 pm
[6] Ibid.
[7] Christer Arvius, “Standards And Regulations In International Trade” UN Publications <> assessed on 25-04-2018 at 12:15pm.
[8] Institute of Charted Accountants of India, Handbook on Foreign Trade Policy and Guide to Export & Import (ICAI Publications, New Delhi, 2008) assessed on 25-04-2018 at 1:19 pm
[9] Ibid.
[10] Ibid.
[11] assessed on 09-04-2018 at 8:01pm
[12] Hafsa H, “Main Types of Trade Restrictions | Government” <> assessed on 25-04-2018 at 5:09pm.
[13] assessed on 25-04-2018 at 4:00pm.
[14] assessed on 25-04-2018 at 4:08pm
[15] Joanna Bonarriva, “Export Controls: An Overview Of Their Use, Economic Effects, And Treatment In The Global Trading System” U.S. International Trade Commission (2009)> assessed on 25-04-2018 at 04:32pm.
[16] assessed on 25-04-2018 at 5:47pm.
[17] Prathapratim Pal, “International Trade and India” 170 (Oxford University Press, New Delhi, 2014)
[18] Sumit Gangualy, India’s Foreign Policy Retrospective and Prospective 317 (OXFORD University Press, New York, 2010)
[19] Id. P-316
[20]> assessed on 26-04-2018 at 12:10pm.
[21] Ibid.
[22] Ibid.

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