Import substitution industrialization
Import substitution industrialization is a trade and economic policy which advocates replacing foreign imports with domestic production. ISI is based on the premise that a country should attempt to reduce its foreign dependency through the production of industrialized products. The term primarily refers to 20th-century development economics policies, although it has been advocated since the 18th century by such as Friedrich List. ISI policies were enacted by countries in the Global South with the intention of producing development, ISI works by having the state lead economic development through nationalization, subsidization of vital industries, increased taxation, and highly protectionist trade policies. Import substitution was heavily practiced during the century as a form of developmental theory that advocated increased productivity. This was an economic theory practiced by developing nations after WW2. Many economists at the time considered the ISI approach as a remedy to mass poverty, mercantilist economic theory and practices of the 16th, 17th, and 18th centuries frequently advocated building up domestic manufacturing and import substitution.
This formed the basis of the American School in economics, which was a force in the United States during its 19th-century industrialization. As a set of development policies, ISI policies are theoretically grounded on the Singer-Prebisch thesis, on the infant industry argument, in many cases, these assertions did not apply. Volkswagen, Ford, GM, and Mercedes all established production facilities in Brazil in the 1950s and 1960s, import substitution policies were adopted by most nations in Latin America from the 1930s until the late 1980s. This served as an incentive for the production of the goods they needed. Positivist thinking, which sought a government to modernize society. Among the officials, many of whom rose to power, like Perón and Vargas, ISI gained a theoretical foundation only in the 1950s, when Argentine economist and UNECLAC head Raúl Prebisch was a visible proponent of the idea, as well as Brazilian economist Celso Furtado. Prebisch had experience running his country’s central bank and started to question the model of export-led growth and these unequal powers were taking the wealth from third world countries leaving them with no way to prosper.
He believed that developing countries needed to create local vertical linkages, the tariffs were designed to allow domestic infant industries to prosper. ISI was most successful in countries with populations and income levels which allowed for the consumption of locally produced products. Latin American countries such as Argentina, Brazil and Chile, thus and poorer countries, such as Ecuador and the Dominican Republic, could implement ISI only to a limited extent. Peru implemented ISI in 1961, and the policy lasted through to the end of the decade in some form, in Latin American countries in which ISI was most successful, it was accompanied by structural changes to the government
Protectionist policies protect the producers and workers of the import-competing sector in a country from foreign competitors. According to proponents, these policies can counteract unfair trade practices, protectionists may favor the policy in order to decrease the trade deficit, maintain employment in certain sectors, or favor the growth of certain industries. In recent years, protectionism has become closely aligned with the anti-globalization movement, There is a broad consensus among economists that the impact of protectionism on economic growth is largely negative, although the impact on specific industries and groups of people may be positive. The doctrine of protectionism contrasts with the doctrine of free trade, a variety of policies have been used to achieve protectionist goals. Tariff rates usually vary according to the type of goods imported, import tariffs will increase the cost to importers, and increase the price of imported goods in the local markets, thus lowering the quantity of goods imported, to favour local producers.
Tariffs may be imposed on exports, and in an economy with floating exchange rates, since export tariffs are often perceived as hurting local industries, while import tariffs are perceived as helping local industries, export tariffs are seldom implemented. Import quotas, To reduce the quantity and therefore increase the price of imported goods. The economic effects of a quota is similar to that of a tariff. Economists often suggest that import licenses be auctioned to the highest bidder, administrative barriers, Countries are sometimes accused of using their various administrative rules as a way to introduce barriers to imports. Anti-dumping legislation, Supporters of anti-dumping laws argue that they prevent dumping of cheaper foreign goods that would cause local firms to close down, however, in practice, anti-dumping laws are usually used to impose trade tariffs on foreign exporters. Direct subsidies, Government subsidies are given to local firms that cannot compete well against imports. These subsidies are purported to protect jobs, and to help local firms adjust to the world markets.
Export subsidies, Export subsidies are often used by governments to increase exports, Export subsidies have the opposite effect of export tariffs because exporters get payment, which is a percentage or proportion of the value of exported. Export subsidies increase the amount of trade, and in a country with floating exchange rates, have similar to import subsidies. Exchange rate control, A government may intervene in the exchange market to lower the value of its currency by selling its currency in the foreign exchange market. Doing so will raise the cost of imports and lower the cost of exports, international patent systems, There is an argument for viewing national patent systems as a cloak for protectionist trade policies at a national level. Peter Drahos explains that States realized that patent systems could be used to cloak protectionist strategies, There were reputational advantages for states to be seen to be sticking to intellectual property systems. In the modern trade arena many other initiatives besides tariffs have been called protectionist, for example, some commentators, such as Jagdish Bhagwati, see developed countries efforts in imposing their own labor or environmental standards as protectionism
Timeline of international trade
The history of international trade chronicles notable events that have affected the trade between various countries. In the 21st century, the European Union and the United States are the three largest trading markets in the world, records from the 19th century BCE attest to the existence of an Assyrian merchant colony at Kanesh in Cappadocia. The domestication of camel allows Arabian nomads to control long distance trade in spices, the Egyptians trade in the Red sea, importing spices from the Land of Punt and from Arabia. Indian goods are brought in Arabian vessels to Aden, the ships of Tarshish, a Tyrian fleet equipped at Ezion Geber, make several trading voyages to the East bringing back gold, silver and precious stones. Tiglath-Pileser III attacks Gaza in order to trade along the Incense Route. The Greek Ptolemaic dynasty exploits trading opportunities with India prior to the Roman involvement, the cargo from the India and Egypt trade is shipped to Aden. With the establishment of Roman Egypt, the Romans initiate trade with India, the goods from the East African trade are landed at one of the three main Roman ports, Berenice or Myos Hormos.
Myos Hormos and Berencie appear to have been important ancient trading ports, gerrha controls the Incense trade routes across Arabia to the Mediterranean and exercises control over the trading of aromatics to Babylon in the 1st century BC. Additionally, it served as a port of entry for goods shipped from India to the East, due to its prominent position in the incense trade, Yemen attracts settlers from the fertile crescent. Pre-Islamic Meccans use the old Incense Route to benefit from the heavy Roman demand for luxury goods, in Java and Borneo, the introduction of Indian culture creates a demand for aromatics. These trading outposts serve the Chinese and Arab markets, following the demise of the incense trade Yemen takes to the export of coffee via the Red Sea port of al-Mocha. The Abbasids use Alexandria, Damietta and Siraf as entry ports to India, at the eastern terminus of the Silk Road, the Tang Dynasty Chinese capital at Changan becomes a major metropolitan center for foreign trade and residence.
This role would be assumed by Kaifeng and Hangzhou during the Song Dynasty, guangzhou was Chinas greatest international seaport during the Tang Dynasty, but its importance was eclipsed by the international seaport of Quanzhou during the Song Dynasty. Merchants arriving from India in the city of Aden pay tribute in form of musk, camphor and sandalwood to Ibn Ziyad. Indian exports of spices find mention in the works of Ibn Khurdadhbeh, al-Ghafiqi, Ishak bin Imaran, the Hanseatic League secures trading privileges and market rights in England for goods from the Leagues trading cities in 1157. Due to the Turkish hold on the Levant during the half of the 15th century the traditional Spice Route shifts from the Persian Gulf to the Red Sea. In 1492 a Spanish expedition commanded by Christopher Columbus arrive in America, Portuguese diplomat Pero da Covilha undertakes a mission to explore the trade routes of the Near East and the adjoining regions of Asia and Africa. The exploration commenced from Santarém to Barcelona, Alexandria, Portuguese explorer and adventurer Vasco da Gama is credited with establishing another sea route from Europe to India
A trade route is a logistical network identified as a of pathways and stoppages used for the commercial transport of cargo. The term can be used to refer to trade over bodies of water, among notable trade routes was the Amber Road, which served as a dependable network for long-distance trade. Maritime trade along the Spice Route became prominent during the Middle Ages, during the Middle Ages, organizations such as the Hanseatic League, aimed at protecting interests of the merchants, and trade became increasingly prominent. In modern times, commercial activity shifted from the trade routes of the Old World to newer routes between modern nation-states. Innovative transportation of modern times includes pipeline transport and the relatively well-known trade involving rail routes, one of the vital instruments which facilitated long distance trade was portage and the domestication of beasts of burden. Organized caravans, visible by the 2nd millennium BCE, could carry goods across a distance as fodder was mostly available along the way.
The domestication of camels allowed Arabian nomads to control the long distance trade in spices, caravans were useful in long-distance trade largely for carrying luxury goods, the transportation of cheaper goods across large distances was not profitable for caravan operators. With productive developments in iron and bronze technologies, newer trade routes—dispensing innovations of civilizations—began to rise, evidence of maritime trade between civilizations dates back at least 90 millennia. Navigation was known in Sumer between the 4th and the 3rd millennium BCE, and was known by the Indians. The Egyptians had trade routes through the Red Sea, importing spices from the Land of Punt, maritime trade began with safer coastal trade and evolved with the manipulation of the monsoon winds, soon resulting in trade crossing boundaries such as the Arabian Sea and the Bay of Bengal. South Asia had multiple maritime trade routes which connected it to Southeast Asia, Indian connections to various Southeast Asian states buffered it from blockages on other routes.
By making use of the trade routes, bulk commodity trade became possible for the Romans in the 2nd century BCE. A Roman trading vessel could span the Mediterranean in a month at one-sixtieth the cost of over-land routes, the peninsula of Anatolia lay on the commercial land routes to Europe from Asia as well as the sea route from the Mediterranean to the Black Sea. Records from the 19th century BCE attest to the existence of an Assyrian merchant colony at Kanesh in Cappadocia, trading networks of the Old World included the Grand Trunk Road of India and the Incense Road of Arabia. Parts of the Mediterranean world, Roman Britain, Tigris-Euphrates river system, beyond this was a margin which included not only temperate areas such as Europe, but the dry steppe corridor of central Asia. This was truly a world system, even though it occupied only a portion of the western Old World. Whilst each civilization emphasized its ideological autonomy, all were part of a common world of interacting components.
These routes - spreading religion and technology - have historically been vital to the growth of urban civilization
International Monetary Fund
The International Monetary Fund is an international organization headquartered in Washington, D. C. It now plays a role in the management of balance of payments difficulties. Countries contribute funds to a pool through a system from which countries experiencing balance of payments problems can borrow money. As of 2016, the fund had SDR477 billion, the rationale for this is that private international capital markets function imperfectly and many countries have limited access to financial markets. The IMF provides alternate sources of financing and this assistance was meant to prevent the spread of international economic crises. The IMF was intended to help mend the pieces of the economy after the Great Depression. As well, to provide investments for economic growth and projects such as infrastructure. The IMFs role was altered by the floating exchange rates post-1971. It shifted to examining the economic policies of countries with IMF loan agreements to determine if a shortage of capital was due to economic fluctuations or economic policy, the IMF researched what types of government policy would ensure economic recovery.
Rather than maintaining a position of oversight of only exchange rates and their role became a lot more active because the IMF now manages economic policy rather than just exchange rates. In addition, the IMF negotiates conditions on lending and loans under their policy of conditionality, nonconcessional loans, which include interest rates, are provided mainly through Stand-By Arrangements, the Flexible Credit Line, the Precautionary and Liquidity Line, and the Extended Fund Facility. The IMF provides emergency assistance via the Rapid Financing Instrument to members facing urgent balance-of-payments needs, the IMF is mandated to oversee the international monetary and financial system and monitor the economic and financial policies of its member countries. This activity is known as surveillance and facilitates international cooperation, the responsibilities changed from those of guardian to those of overseer of members’ policies. In 1995 the International Monetary Fund began work on data dissemination standards with the view of guiding IMF member countries to disseminate their economic and financial data to the public.
The executive board approved the SDDS and GDDS in 1996 and 1997 respectively, the system is aimed primarily at statisticians and aims to improve many aspects of statistical systems in a country. It is part of the World Bank Millennium Development Goals, some countries initially used the GDDS, but upgraded to SDDS. The IMF does require collateral from countries for loans but requires the government seeking assistance to correct its macroeconomic imbalances in the form of policy reform, if the conditions are not met, the funds are withheld. The concept of conditionality was introduced in a 1952 Executive Board decision, conditionality is associated with economic theory as well as an enforcement mechanism for repayment
A tariff is a tax on imports or exports. In other languages and very occasionally in English, tariff or its equivalent may be used to any list of prices. A customs duty or due is the tax levied on the import or export of goods in international trade. In economic sense, a duty is a kind of consumption tax, a duty levied on goods being imported is referred to as an import duty. Similarly, a duty levied on exports is called an export duty, a tariff, which is actually a list of commodities along with the leviable rate of customs duty, is popularly referred to as a customs duty. This is no longer the case, Customs duty is calculated on the determination of the assessable value in case of those items for which the duty is levied ad valorem. This is often the transaction value unless a customs officer determines assessable value in accordance with the Harmonized System, for certain items like petroleum and alcohol, customs duty is realized at a specific rate applied to the volume of the import or export consignments.
For the purpose of assessment of duty, products are given an identification code that has come to be known as the Harmonized System code. This code was developed by the World Customs Organization based in Brussels, a Harmonized System code may be from four to ten digits. For example,17.03 is the HS code for molasses from the extraction or refining of sugar, within 17.03, the number 17.03.90 stands for Molasses. Introduction of Harmonized System code in 1990s has largely replaced the Standard International Trade Classification, in drawing up the national tariff, the revenue departments often specifies the rate of customs duty with reference to the HS code of the product. A Customs authority in each country is responsible for collecting taxes on the import into or export of goods out of the country, Evasion of customs duties takes place mainly in two ways. In one, the trader under-declares the value so that the value is lower than actual. In a similar vein, a trader can evade customs duty by understatement of quantity or volume of the product of trade, a trader may evade duty by misrepresenting traded goods, categorizing goods as items which attract lower customs duties.
The Evasion of customs duty may take place with or without the collaboration of customs officials, Evasion of customs duty does not necessarily constitute smuggling. Many countries allow a traveler to bring goods into the country duty-free and these goods may be bought at ports and airports or sometimes within one country without attracting the usual government taxes and brought into another country duty-free. Some countries impose allowances which limit the number or value of items that one person can bring into the country. These restrictions often apply to tobacco, spirits, gifts, often foreign diplomats and UN officials are entitled to duty-free goods
World Customs Organization
The World Customs Organization is an intergovernmental organization headquartered in Brussels, Belgium. The WCO maintains the international Harmonized System goods nomenclature, and administers the technical aspects of the World Trade Organization Agreements on Customs Valuation, in 1947, thirteen European countries established a Study Group to examine customs issues identified by the General Agreement on Tariffs and Trade. This work led to the adoption in 1948 of the Convention establishing the Customs Co-operation Council, on January 26,1953, the CCC’s inaugural session took place with the participation of 17 founding members. WCO membership subsequently expanded to all regions of the globe. In 1994, the organization adopted its current name, the World Customs Organization, today, WCO members are responsible for customs controls in 180 countries representing more than 98 per cent of all international trade. The HS multipurpose goods nomenclature is used as the basis for customs tariffs and it comprises about 5,000 commodity groups, each identified by a six digit code arranged in a legal and logical structure with well-defined rules to achieve uniform classification.
The WCO revised Kyoto Convention is sometimes confused with the Kyoto Protocol, 3) ATA Convention and the Convention on Temporary Admission. Both the ATA Convention and the Istanbul Convention are WCO instruments governing temporary admission of goods, the ATA system, which is integral to both Conventions, allows the free movement of goods across frontiers and their temporary admission into a customs territory with relief from duties and taxes. The goods are covered by a document known as the ATA carnet that is secured by an international guarantee system. 4) The Arusha Declaration on Customs Integrity was adopted in 1993, the Arusha Declaration is a non-binding instrument which provides a number of basic principles to promote integrity and combat corruption within customs administrations. 5) The SAFE Framework of Standards to Secure and Facilitate Global Trade was adopted in 2005, 6) The Columbus Program is a customs capacity building program works to promote customs modernization and implementation of their standards to secure and facilitate world trade.
Because of its complexity, the WCO launched a capacity building program called the Columbus Programme which focuses on needs assessments for WCO Members using the WCO Diagnostic Framework tool. The WCO Secretariat is headed by a Secretary General, who is elected by the WCO membership to a five-year term, the current WCO Secretary General is Kunio Mikuriya from Japan, who took office on 1 January 2009. The WCO is governed by the Council, which brings together all Members of the Organization once a year, additional strategic and management guidance is provided by the Policy Commission and the Finance Committee
An embargo is the partial or complete prohibition of commerce and trade with a particular country or a group of countries. Embargoes are considered strong diplomatic measures imposed in an effort, by the imposing country, embargoes are similar to economic sanctions and are generally considered legal barriers to trade, not to be confused with blockades, which are often considered to be acts of war. In response to embargoes, an independent economy or autarky often develops in an area subjected to heavy embargo, effectiveness of embargoes is thus in proportion to the extent and degree of international participation. Companies must be aware of embargoes that apply to the export destination. Embargo check is difficult for both importers and exporters to follow, before exporting or importing to other countries, they must be aware of embargoes. Sometimes the situation even more complicated with the changing of politics of a country. If an embargo situation exists, the blocks the transaction for further processing.
The Embargo of 1807 was a series of laws passed by the U. S. Congress 1806–1808, during the second term of President Thomas Jefferson. Britain and France were engaged in a war, the U. S. wanted to remain neutral. The American national-interest goal was to use the new laws to avoid war, one of the most comprehensive attempts at an embargo happened during the Napoleonic Wars. In an attempt to cripple the United Kingdom economically, the Continental System – which forbade European nations from trading with the UK – was created, in practice it was not completely enforceable and was as harmful if not more so to the nations involved than to the British. The United States imposed an embargo on Cuba on February 7,1962, referred to by Cuba as el bloqueo, the US embargo on Cuba remains one of the longest-standing embargoes. The embargo was embraced by few of the United States allies, in 1973–1974, Arab nations imposed an oil embargo against the United States and other industrialized nations that supported Israel in the Yom Kippur War.
China, arms embargo, enacted in response to the Tiananmen Square protests of 1989, enacted 1979, increased through the following years and reached its tightest point in 2010. North Korea, luxury goods, enacted 2006 Turkish Republic of Northern Cyprus, consumer goods, live cattle because of cruel slaughter methods in Indonesia. Gaza Strip by Israel since 2001, under blockade since 2007 due to the large number of illicit arms traffic used to wage war. Syria and imports of oil, EU, US, Australia and Norway since August 2014, pork and vegetable produce, fish, cheese and dairy. On August 13,2015, the embargo was expanded to Albania, Switzerland, Iceland, federal Republic of Yugoslavia North Vietnam and Vietnam, trade embargo by the US Republic of Macedonia, complete trade embargo
There are various motivations to smuggle. Examples of non-financial motivations include bringing banned items past a security checkpoint or the removal of classified documents from a government or corporate office, Smuggling is a common theme in literature, from Bizets opera Carmen to the James Bond spy books Diamonds are Forever and Goldfinger. The verb smuggle, from Low German schmuggeln or Dutch smokkelen, apparently a frequentative formation of a meaning to sneak. Smuggling has a long and controversial history, probably dating back to the first time at which duties were imposed in any form, in England smuggling first became a recognised problem in the 13th century, following the creation of a national customs collection system by Edward I in 1275. Medieval smuggling tended to focus on the export of highly taxed export goods — notably wool, merchants also, sometimes smuggled other goods to circumvent prohibitions or embargoes on particular trades. Most studies of historical smuggling have been based on official sources — such as court records, according to Dr Evan Jones, the trouble with these is that they only detail the activities of those dumb enough to get caught.
This has led him and others, such as Prof Huw Bowen to use records to reconstruct smuggling businesses. Grain smuggling by members of the elite, often working closely with corrupt customs officers, has been shown to have been prevalent in East Anglia during the 16th century. In England wool was smuggled to the continent in the 17th century, the principal reason for the high duty was the need for the government to finance a number of extremely expensive wars with France and the United States. The thievery was boasted about and romanticized until it seemed a kind of heroism and it did not have any taint of criminality and the whole of the south coast had pockets vying with one another over whose smugglers were the darkest or most daring. The Smugglers Inn was one of the commonest names for a bar on the coast, in Henley Road, smuggling in colonial times was a reaction to the heavy taxes and regulations imposed by mercantilist trade policies. After American independence in 1783, smuggling developed at the edges of the United States at places like Passamaquoddy Bay, St.
Marys in Georgia, Lake Champlain, and Louisiana. During Thomas Jeffersons embargo of 1807-1809, these places became the primary places where goods were smuggled out of the nation in defiance of the law. Like Britain, a gradual liberalization of laws as part of the free trade movement meant less smuggling. In 1907 President Theodore Roosevelt tried to cut down on smuggling by establishing the Roosevelt Reservation along the United States-Mexico Border, Smuggling revived in the 1920s during Prohibition, and drug smuggling became a major problem after 1970. In the 1990s, when sanctions were imposed on Serbia. The state unofficially allowed this to continue or otherwise the entire economy would have collapsed, much smuggling occurs when enterprising merchants attempt to supply demand for a good or service that is illegal or heavily taxed. As a result, illegal trafficking, and the smuggling of weapons, as well as the historical staples of smuggling, alcohol
World Trade Organization
The World Trade Organization is an intergovernmental organization which regulates international trade. The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade, most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round. The WTO is attempting to complete negotiations on the Doha Development Round, as of June 2012, the future of the Doha Round remained uncertain, the work programme lists 21 subjects in which the original deadline of 1 January 2005 was missed, and the round is still incomplete. This impasse has made it impossible to launch new WTO negotiations beyond the Doha Development Round, as a result, there have been an increasing number of bilateral free trade agreements between governments. As of July 2012, there were various groups in the WTO system for the current agricultural trade negotiation which is in the condition of stalemate.
The WTOs current Director-General is Roberto Azevêdo, who leads a staff of over 600 people in Geneva, a trade facilitation agreement, part of the Bali Package of decisions, was agreed by all members on 7 December 2013, the first comprehensive agreement in the organizations history. Seven rounds of negotiations occurred under GATT, the first real GATT trade rounds concentrated on further reducing tariffs. Then, the Kennedy Round in the mid-sixties brought about a GATT anti-dumping Agreement, because these plurilateral agreements were not accepted by the full GATT membership, they were often informally called codes. Several of these codes were amended in the Uruguay Round, only four remained plurilateral, but in 1997 WTO members agreed to terminate the bovine meat and dairy agreements, leaving only two. Well before GATTs 40th anniversary, its members concluded that the GATT system was straining to adapt to a new globalizing world economy. In response to the problems identified in the 1982 Ministerial Declaration, the GATT still exists as the WTOs umbrella treaty for trade in goods, updated as a result of the Uruguay Round negotiations.
GATT1994 is not however the only legally binding agreement included via the Final Act at Marrakesh, the highest decision-making body of the WTO is the Ministerial Conference, which usually meets every two years. It brings together all members of the WTO, all of which are countries or customs unions, the Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements. When agricultural export subsidies were agreed to be phased out and adoption of the European Unions Everything, the WTO launched the current round of negotiations, the Doha Development Round, at the fourth ministerial conference in Doha, Qatar in November 2001. This was to be an effort to make globalization more inclusive and help the worlds poor, particularly by slashing barriers. The initial agenda comprised both further trade liberalization and new rule-making, underpinned by commitments to strengthen substantial assistance to developing countries. Among the various functions of the WTO, these are regarded by analysts as the most important and it provides a forum for negotiations and for settling disputes.
Another priority of the WTO is the assistance of developing, least-developed and low-income countries in transition to adjust to WTO rules and disciplines through technical cooperation and training
Domestic trade, known as internal trade or home trade, is the exchange of domestic goods within the boundaries of a country. This may be sub-divided into two categories and retail, wholesale trade is concerned with buying goods from manufacturers or dealers or producers in large quantities and selling them in smaller quantities to others who may be retailers or even consumers. Wholesale trade is undertaken by wholesale merchants or wholesale commission agents, retail trade is concerned with the sale of goods in small quantities to consumers. This type of trade is taken care of by retailers, in actual practice, however and wholesalers may undertake retail distribution of goods to bypass the intermediary retailer, by which they earn higher profits. The importance of trade in a country is that it facilitates exchange of goods within the country. By doing this it makes sure that factors of production reach to the right places so that the economy of the country can grow. And it helps the growth of an industry by ensuring the availability of raw materials, traders from outside the country will have to come in contact with internal traders, because it is not easy to come directly into another country and get the required products.
Wholesalers play a role in working of domestic trade. One could even say that it is the backbone of the domestic market, a wholesaler is one is directly in contact with the manufacturers but in indirect contact with the consumers. A wholesaler generally deals with one type of industry, a wholesaler is not only into selling of products as it is involved in packaging, advertising and market research. They have their own go downs which saves the manufacturers from bothering about storage and they normally make cash payments from retailers and sometimes consumers themselves and give advance payments which benefits the manufacturers. They sell in smaller quantities to retailers, which refrains the retailers from requiring storage space and they do allow credit facilities to retailers at times. A retailer is normally the final seller of a product and it makes its purchases made from Wholesalers and sales are made to the customers directly. Retailers do not particularly have to be from one industry i. e. they can trade in a variety of products at the same time and it generally has purchases made by credit and sales made in cash.
Sales as compared to wholesalers are made in small quantities
Surges of trade bloc formation were seen in the 1960s and 1970s, as well as in the 1990s after the collapse of Communism. By 1997, more than 50% of all commerce was conducted within regional trade blocs. Economist Jeffrey J. Advocates of worldwide free trade are generally opposed to trading blocs and economists continue to debate whether regional trade blocs are leading to a more fragmented world economy or encouraging the extension of the existing global multilateral trading system. Trade blocs can be stand-alone agreements between states or part of a regional organization. There are five major advantages of trade agreements, foreign direct investment, economies of scale, trade effects. Foreign Direct Investment, An increase in direct investment results from trade blocs. Larger markets are created, resulting in costs to manufacture products locally. Economies of Scale, The larger markets created via trading blocs permit economies of scale, the average cost of production is decreased because mass production is allowed.
Competition, Trade blocs bring manufacturers in countries closer together. Accordingly, the increased competition promotes greater efficiency within firms, Trade Effects Trade blocs eliminate tariffs, thus driving the cost of imports down. As a result, demand changes and consumers make purchases based on the lowest prices, market Efficiency, The increased consumption experienced with changes in demand combines with a greater amount of products being manufactured to result in an efficient market. The disadvantages, on the hand, regionalism vs. multinationalism, loss of sovereignty, concessions. Regionalism vs. Multinationalism, Trading blocs bear an inherent bias in favor of their participating countries, for example, NAFTA, a free trade agreement between the United States and Mexico, has contributed to an increased flow of trade among these three countries. Trade among NAFTA partners has risen to more than 80 percent of Mexican and Canadian trade and more than a third of U. S. trade, according to a 2009 report by the Council on Foreign Relations.
However, regional economies establish tariffs and quotas that protect intra-regional trade from outside forces, loss of Sovereignty, A trading bloc, particularly when it is coupled with a political union, is likely to lead to at least partial loss of sovereignty for its participants. Concessions, No country wants to let foreign firms gain domestic market share at the expense of local companies without getting something in return, any country that wants to join a trading bloc must be prepared to make concessions. Interdependence, Because trading blocs increase trade among participating countries, the countries become increasingly dependent on each other, regional integration Continental organization Continental union