INSTRUMENTS OF COMMERCIAL POLICY

INSTRUMENTS OF COMMERCIAL POLICY

             The main instruments or tools which are now-a-day used for achieving the objectives of commercial policy are as follows:

(a) Tariffs or customs duties: tariff’s or custom duties may be defined as a schedule of duties by territorial government to be imposed upon a list of commodities that are exported. Tariffs are generally classified into three transit duties are those

(1) Transit duties

(2) Import duties

(3) Export duties

          Transit duties are those which are levied upon merchandise passing through the country and consigned for another country. Import duties are those which are levied on goods brought into the country. Exports duties, like import duties are also imposed for raising revenue and to restrict the export of certain raw material with the view to encourage the development of domestic industries (4) The duties which are imposed on the merchandise sent out of the country are called export duties. Transit duties are levied for raising money for the government.

          Custom duties may be discriminatory with respect to commodities of countries or it may be non-discriminatory. When a country is pursuing a discriminatory tariff policy, it may give

(a) Preferential treatment by levying lesser custom duties upon the merchandise of some of the countries OR

(b) Enter into agreement with other counties for ensuring fair and equal treatment to the imports or exports of each member country OR

(c) Join a common market where the merchandise of member countries are allowed free entry but the goods of other countries are subjected to tariffs.

(b) Bounties on exports: In order to promote the export of particular industry or the export of specified commodities, a government sometimes gives bounties on exports. The bounties or subsidies may be director, indirect. When subsidy is paid in cash from the public treasury, the bounty is said to be direct and when low freight rates are charged on the goods to be exported or they are exempted from taxes, etc, the bounty or subsidy is said to be indirect.

( c) Direct restriction on imports: The government may totally prohibit the import of certain commodities into the country with the intent of increasing foreign exchange or for protection of domestic industries or for discouraging the use of particular commodities because they are injurious to health. The government may regulate the imports by means of quota system, the maximum amount of a commodity which can be imported during a particular period is fixed by the government. In recent years, the government most of the countries are employing the import quota system because (1) it is very flexible and can be adjusted by the administrative authorities without resorting to legal action (2) the home producers know in advance the total quantity of goods to be imported during a particular period, so they can regulate their output accordingly, (3) it arouses less resentment than the custom duties from the consumers.

TRADE AGREEMENTS: The government of a country may enter into trade agreements with other countries for the exchange of goods. The trade agreement may be bilateral. When two country make a trade agreement for the exchange of goods, the agreement is said to be bilateral. When more two countries enter into, trade agreement for ensuring fair and equal treatment to the imports and exports of the member countries, the agreement is called multilateral. Efforts are being made by different countries of the world to secure to a general reduction of tariffs. A General Agreement on Trade and tariff (GATT) of 117 countries of the world was reached at.

          The main objectives of GATT were.

1)      To develop the resources of the world.

2)      To expand production and exchange of goods.

3)      To promote economic development.

4)      To help in raising standard of living.

5)      To achieve full employment without inflation.

In 1995, the GATT was replaced by WORLD TRADE ORGANIZATION (WTO). The WTO is established to oversee the trade agreements among nation and settle trade disputes. The globalization of trade among all the nation of the world is now taking the shape of new world economic order. Globalization in the free movement of capital, goods and services based on market based economy.