ITO and GATT 1947

Harry Dexter White (l) and John Maynard Keynes at the Bretton Woods Conference — Both economists had been strong advocates of a liberal international trade environment, and recommended the establishment of three institutions: the IMF (fiscal and monetary issues), the World Bank (financial and structural issues), and the ITO (international economic cooperation).


The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), was established after World War II in the wake of other new multilateral institutions dedicated to international economic cooperation — notably the Bretton Woods institutions known as the World Bank and the International Monetary Fund. A comparable international institution for trade, named the International Trade Organization was successfully negotiated. The ITO was to be a United Nations specialized agency and would address not only trade barriers but other issues indirectly related to trade, including employment, investment, restrictive business practices, and commodity agreements. But the ITO treaty was not approved by the U.S. and a few other signatories and never went into effect.
In the absence of an international organization for trade, the GATT would over the years "transform itself" into a de facto international organization.

What is WTO

The World Trade Organization (WTO) is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. The organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements which are signed by representatives of member governments and ratified by their parliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round (1986-1994).
The organization is currently endeavoring to persist with a trade negotiation called the Doha Development Agenda (or Doha Round), which was launched in 2001 to enhance equitable participation of poorer countries which represent a majority of the world's population. However, the negotiation has been dogged by "disagreement between exporters of agricultural bulk commodities and countries with large numbers of subsistence farmers on the precise terms of a 'special safeguard measure' to protect farmers from surges in imports. At this time, the future of the Doha Round is uncertain."
The WTO has 153 members, representing more than 97% of total world trade and 30 observers, most seeking membership. The WTO is governed by a ministerial conference, meeting every two years; a general council, which implements the conference's policy decisions and is responsible for day-to-day administration; and a director-general, who is appointed by the ministerial conference. The WTO's headquarters is at the Centre William Rappard, Geneva, Switzerland.

World Trade Organization

World Trade Organization  (English)

 
Organisation mondiale du commerce  (French)

 
Organización Mundial del Comercio  (Spanish)

WTO founder members (January 1, 1995)     WTO subsequent members
Formation	January 1, 1995
Headquarters	Centre William Rappard, Geneva, Switzerland
Membership	153 member states
Official languages	English, French, Spanish
Director-General	Pascal Lamy
Budget	189 million Swiss francs (approx. 182 million USD) in 2009.
Staff	625
Website	www.wto.int

Doha Development Round

The Doha Development Round started in 2001 and continues today.


The Doha Development Round or Doha Development Agenda (DDA) is the current trade-negotiation round of the World Trade Organization (WTO) which commenced in November 2001. Its objective is to lower trade barriers around the world, which allows countries to increase trade globally. As of 2008, talks have stalled over a divide on major issues, such as agriculture, industrial tariffs and non-tariff barriers, services, and trade remedies.The most significant differences are between developed nations led by the European Union (EU), the United States (USA), and Japan and the major developing countries led and represented mainly by China, Brazil, India, South Korea, and South Africa. There is also considerable contention against and between the EU and the USA over their maintenance of agricultural subsidies—seen to operate effectively as trade barriers.
The Doha Round began with a ministerial-level meeting in Doha, Qatar in 2001. Subsequent ministerial meetings took place in Cancún, Mexico (2003), and Hong Kong (2005). Related negotiations took place in Geneva, Switzerland (2004, 2006, 2008); Paris, France (2005); and Potsdam, Germany (2007).
The most recent round of negotiations, 23–29 July 2008, broke down after failing to reach a compromise on agricultural import rules. After the breakdown, major negotiations were not expected to resume until 2009. Nevertheless, intense negotiations, mostly between the USA, China, and India, were held in the end of 2008 in order to agree on negotiation modalities. However, these negotiations did not result in any progress.

Foreign policy of the United States

The foreign policy of the United States is the policy by which the United States interacts with foreign nations and sets standards of interaction for its organizations, corporations and individual citizens. The U.S. is highly influential in the world. The global reach of the United States is backed by a $14 trillion economy, approximately a quarter of global GDP, and a defense budget of $711 billion, which accounts for approximately 43% of global military spending. The U.S. Secretary of State is the foreign minister and is the official charged with state-to-state diplomacy, although the president has ultimate authority over foreign policy; that policy includes defining the national interest, as well as the strategies chosen to both safeguard that and achieve its policy goals.
The officially stated goals of the foreign policy of the United States, as mentioned in the Foreign Policy Agenda of the U.S. Department of State, are "to create a more secure, democratic, and prosperous world for the benefit of the American people and the international community." In addition, the United States House Committee on Foreign Affairs states as some of its jurisdictional goals: "export controls, including nonproliferation of nuclear technology and nuclear hardware; measures to foster commercial intercourse with foreign nations and to safeguard American business abroad; International commodity agreements; international education; and protection of American citizens abroad and expatriation." U.S. foreign policy and foreign aid have been the subject of much debate, praise and criticism both domestically and abroad.

Department of Foreign Affairs and International Trade

The Department of Foreign Affairs and International Trade (DFAIT), more commonly known as Foreign Affairs and International Trade Canada, is a department in the Government of Canada which has responsibility for foreign policy and diplomacy, as well as import/export and international trade policies.
The department was founded as the Department of External Affairs and later became the Department of External Affairs and International Trade, the word "foreign" being deliberately avoided by Commonwealth Dominions such as Canada, since the department was founded while Canada's foreign policy was still controlled by the United Kingdom. The department's name was finally changed to the Department of Foreign Affairs and International Trade in 1993 some 60 years after Canada had gained control over its foreign policy.
The change in name was formalized by an Act of Parliament in 1995. DFAIT maintained two separate ministers: the Minister of Foreign Affairs with lead responsibility for the portfolio, and the Minister of International Trade. The Minister for International Cooperation, with responsibilities for agencies such as the Canadian International Development Agency (CIDA), also fell under DFAIT.
A separate Department named Foreign Affairs Canada (FAC) and another International Trade Canada (ITCan) were created in December 2003 through an administrative separation of the Department of Foreign Affairs and International Trade.
However, on February 15, 2005 legislation to formally abolish the Department of Foreign Affairs and International Trade and provide a statutory basis for a separate Department of Foreign Affairs and a Department of International Trade failed to pass a first vote in the Canadian House of Commons. However, the government maintained the administrative separation of the two departments despite neither having been established through an Act of Parliament.
In early 2006, under the new government of Prime Minister Stephen Harper, Foreign Affairs Canada and International Trade Canada were rejoined to again form a single department known as Foreign Affairs and International Trade Canada. The acronym DFAIT is still used, however.
Leadership of DFAIT is provided by three ministers. The Minister of Foreign Affairs is responsible for foreign policy matters and, as the senior minister in the department, has overall responsibility for the department. The Minister of International Trade is, as the name suggests, responsible for international trade matters. The Minister of International Cooperation is responsible for certain delegated foreign policy matters. Lawrence Cannon now serves as Minister of Foreign Affairs and Peter Van Loan serves as Minister of International Trade. Peter Kent serves as the Minister of State of Foreign Affairs (Americas).
There are three Crown corporations that fall under the portfolios of the Ministers: the International Development Research Centre is the responsibility of the Minister of Foreign Affairs, while Export Development Canada and the Canadian Commercial Corporation fall to the Minister of International Trade.^[1]
DFAIT is headquartered in the Lester B. Pearson Building on the banks of the Rideau River in Ottawa.

Foreign Exchange Management Act

The Foreign Exchange Regulation Act of 1973 (FERA) in India was repealed on 1 June, 2000. It was replaced by the Foreign Exchange Management Act (FEMA), which was passed in the winter session of Parliament in 1999. Enacted in 1973, in the backdrop of acute shortage of Foreign Exchange in the country, FERA had a controversial 27 year stint during which many bosses of the Indian Corporate world found themselves at the mercy of the Enforcement Directorate (E.D.). Any offense under FERA was a criminal offense liable to imprisonment, whereas FEMA seeks to make offenses relating to foreign exchange civil offenses.

FEMA, which has replaced FERA, had become the need of the hour since FERA had become incompatible with the pro-liberalisation policies of the Government of India. FEMA has brought a new management regime of Foreign Exchange consistent with the emerging frame work of the World Trade Organisation (WTO). It is another matter that enactment of FEMA also brought with it Prevention of Money Laundering Act, 2002 which came into effect recently from 1 July, 2005 and the heat of which is yet to be felt as “Enforcement Directorate” would be invesitigating the cases under PMLA too.

Unlike other laws where everything is permitted unless specifically prohibited, under FERA nothing was permitted unless specifically permitted. Hence the tenor and tone of the Act was very drastic. It provided for imprisonment of even a very minor offence. Under FERA, a person was presumed guilty unless he proved himself innocent whereas under other laws, a person is presumed innocent unless he is proven guilty.

Foreign direct investment in India

A recent UNCTAD survey projected India as the second most important FDI destination (after China) for transnational corporations during 2010-2012. As per the data, the sectors which attracted higher inflows were services, telecommunication, construction activities and computer software and hardware. Mauritius, Singapore, the US and the UK were among the leading sources of FDI. FDI for 2009-10 at USD 25.88 billion was lower by five per cent from USD 27.33 billion in the previous fiscal. Foreign direct investment in August dipped by about 60 per cent to USD 1.33 billion, the lowest in 2010 fiscal, industry department data released showed.

Foreign direct investment

Foreign direct investment (FDI) or foreign investment refers to long term participation by country A into country B. It usually involves participation in management, joint-venture, transfer of technology and expertise. There are two types of FDI: inward foreign direct investment and outward foreign direct investment, resulting in a net FDI inflow (positive or negative) and "stock of foreign direct investment", which is the cumulative number for a given period. Direct investment excludes investment through purchase of shares.

Horizontal FDI

Horizontal FDI is FDI in the same industry abroad as that in which a firm operates at home, but why should a firm choose FDI rather than the options of exporting and licensing?
FDI is both expensive and risky compared with either exporting or licensing. It is expensive because the firm is literally starting from scratch to build a new enterprise in a foreign country, unless of course it has bought a going concern. It is risky because of the problems likely to arise in a different culture (which we discussed in Chapter 2) and because of distance and communication problems. The reasons FDI is often chosen in preference to the other two options are complex and are concerned with five factors:
• transportation costs
• market imperfections
• competition
• the product life-cycle
• location-specific advantages.
Transportation costs vary greatly with the type of product. When transportation costs are added to production costs it becomes unprofitable to ship low value-to-weight products such as cement and beverages over long distances. That makes exporting far less attractive than licensing or FDI. On the other hand, high value-to-weight products such as computer hardware and software, and medical equipment have little impact on the relative attractiveness of exporting, licensing, or FDI.
We will consider the other four factors listed above in the next section under 'Theories of horizontal FDI'. The reason for this is that in your textbook, Hill (2005) uses the word 'theory' with some elasticity. Thus 'transportation costs' are a 'factor', but 'market imperfections' rates it using the term 'theory'. Also, competitors are discussed under the rubric of Knickerbocker's theory and the product life-cycle theory (also discussed in Chapter 3), both of which are of course legitimately theories.



Backward FDI is investing in an industry which supplies your firm at home. Buying or building a supplier. For example, if Ford builds an engine production facility in Mexico which ships engines to it manufacturing site in Texas. This would be backward vertical FDI.

Read more: http://wiki.answers.com/Q/What_is_backward_vertical_foreign_direct_investment#ixzz16ml5MkEc


There are two types of vertical direct investment. The first type of foreign investmentis called foreign vertical direct investment which is invest in the industry of foreign country. Historically most backward vertical foreign direct investment has been in extractive industries like oil extraction, bauxite mining, tin mining and copper mining. The objective has been to provide inputs into a firm's downstream operations for example oil refining, aluminum smelting and fabrication. Firms such as Royal Dutch/Shell, British Petroleum, RTZ and Alcoa are among the classic examples of such vertically integrated multinationals.

The second type of the foreign direct investment included forward vertical foreign direct investment in which an industry abroad sells the outputs of a firm's domestic production process. Forward vertical foreign direct investment is less common than backward vertical foreign direct investment. For example when Volkswagen entered the United States market it acquired a large number of dealers rather than distribute its cars through independent United States dealers.

With both horizontal and vertical foreign direct investment the question that must be answered is why would a firm go to all the trouble and expense of setting up operations in a foreign country? The location specific advantages arguments help explain the direction of such foreign direct investment.