The system of international trade regulation

Pricing at commodity markets.

Under the category of "world price" is understood the international monetary expression of value of goods as socially necessary labour to produce goods at world average conditions of production and labour intensity.

The key feature of world price (unlike internal price) is plurality, when different prices can be set for the same product. Plurality of international prices is due to the following factors:

• differences in trade policy in relation both to specific markets, and to certain importers;

• state and interstate exchange rate policy;

• protectionism;

• differences in pricing methodology and calculation method;

• other factors.

Regarding the specific types of prices in international trade, they systematized by classification features, presented in Fig. 2.2.

World prices

According to the conditions of payments: · комерційні; · програм допомоги; · трансфертні

According to the inclusion of expenses: · nett-prices; · consumers prices.

According to the character of realization: · wholesale; · retail.

According to the degree of fixation: · firm; · moving; · changeable; · with further fixation

According to the direction of commodity flows: · Export prices; · import prices.

According to informational level: · published prices; · information prices; · exchange rates; · auction prices; · statistic prices; · real agreement prices; · offers of large companies; · calculation prices

Fig. 1. Classification of prices in international trade.

Sources of information about the level of world prices for specific types of products include:

• published data of international commodity exchanges about the quotes on commodities: corn, rubber, copper, tin;

• information in handbooks on prices;

• import contracts of domestic partners with foreign suppliers;

• information prices used by foreign trade organizations of neighbouring countries;

• proposals, invoices, letters of intent, letters of understanding and other documents prior to agreements, which determine the estimated contract price;

• price lists, catalogues etc.

Although, at first glance, disordered and unsystematic multibillion transactions, carried out simultaneously in different parts of the world, international trade is subject to certain rules and regulatory mechanisms.

There are the following types of state regulation of international trade:

1) one-sided (unilateral);

2) bilateral;

3) multilateral.

Unilateral regulation lies in application of the methods of government influencing unilaterally without coordination or consultation with trading partners. Such measures are usually taken during the tense political relations.

Bilateral regulation provides that trade policy measures are subject to prior agreement by the partner countries. Each side prevents its trading partner on the use of any measures which usually do not significantly affect the trade relations, but only make them more dynamic.

Multilateral regulation provides the coordination and regulation of trade policy by multilateral agreements.

Depending on the scale of intervention into international trade policy free trade and protectionist trade policies are distinguished.

The term "free trade" implies the policy of minimal government intervention into foreign trade, developed on the basis of free market forces of supply and demand. This policy is based on removing any obstacles to the import and export of foreign and domestic goods. As for customs, they perform only registration functions. This policy is carried out in the countries with high level of development of productive forces, allowing local businesses to compete with foreign producers.

Unlike the free trade, protectionism is a state policy designed to protect domestic market from foreign competition by means of the use of tariff and non-tariff trade policy instruments.

Implementing the policy of protectionism, the government protects domestic producers, promotes the development of national production. However, such a policy can lead to stagnation, as it weakens the incentives to technological progress, which in turn leads to a drop in competitiveness of national products. Under this policy the smuggling of goods increases. In addition, trading partners may take appropriate measures on exports to this country, which would cause damage to its economy. Protectionism prevails in foreign trade policy of developing countries.

Forms of protectionism:

• selective - directed against certain countries or certain types of goods;

• industrial - aiming at the protection of certain industries, mostly agriculture;

• collective – is carried out by associations of countries against the countries that are not members of these associations;

• hidden – carried out by the methods of domestic economic policy.

As to what and for which country is better - a policy of free trade or protectionism, there is no consensus. Modern protectionism is concentrated mainly in relatively narrow areas. The policy of free trade is more attractive. Therefore, most countries have a flexible foreign trade policy, using both methods of protectionism and free trade policies.

Levels of regulation of international trade:

Firstly, company level, in which between firms agreements on sharing markets of raw materials, salesmanship, spheres of influence and others are concluded.

Secondly, national level, characterized by the fact that foreign trade of each country is under the national legal regulation of foreign economic activity.

Thirdly, international level, resulting in the conclusion of appropriate agreements between states and groups of states.

Fourthly, the highest level - the supranational. It corresponds to the strategy of the international community and measures of regulating international trade by creating special international institutional structures and relevant agreements (WTO, the International Chamber of Commerce, etc.).

With regard to the WTO, it is the main international organization that regulates trade of goods, services and intellectual property. This regulation contains the implementation of the agreed principles of conduct in international trade and complex events held under the auspices of the WTO, with most countries being participants.

Principles underlying the international trading system:

• trade without discrimination;

• liberalization of international trade;

• measures that restrict imports, only on the basis of WTO rules - the rejection of the use of protectionism as a means of trade policy;

• predictability of trade policy;

• promoting competition.

International trade is controlled by two groups of instruments:

1) tariff regulation;

2) non-tariff regulation.

Basic concepts relating to tariff regulation methods of international trade, a "duty", "Customs Tariff", "tariff quota", "customs value of the goods."

Duty – is a mandatory fee that is charged by the state via the customs institutions on goods when crossing the customs border.

Customs Tariff - a systematic commodity list showing duties, that the goods are taxed with when crossing the customs border of the state. Customs tariffs are based on the commodity classifications, the most common of which is a harmonized system of description and coding. It was adopted in 1983 and replaced the Brussels customs nomenclature, which operated from 1978. Most states have begun to apply the Harmonized System since 1988 1989, Ukraine - since January of 1991. Customs Tariff of each country contains specific duty rates.

Functions of duties: protectionist, fiscal and improving the conditions of access to foreign markets. Types of duties are distinguished by the following features: the way of collecting, the object of taxation, nature of revenue and others.

With regard to non-tariff regulation, it is dominant in the modern regulation of international trade relations. The main non-tariff instruments are quantitative instruments (quotas, "voluntary" export restraints, licensing), financial instruments (for state regulation of exports) and implicit measures (to control imports).

For quantitative restrictions, they are a form of administrative regulation of trade by establishing the number and range of goods permitted for export or import.

Among non-tariff regulation methods an important role is played by implicit methods that are called methods of hidden protectionism. Despite their variety, the main ones are: government purchase, internal taxes and levies, technical barriers and requirements of local content components.

Policy of government purchase is defined as a hidden method of trade policy under which various government agencies and businesses are committed to buy certain products only in national firms, even if they are more expensive than the imported.

Internal taxes and fees include methods aimed at increasing domestic prices on imported goods, and hence at reducing their competitiveness in the domestic market. They include direct (value added tax, excise tax etc.) and indirect instruments (registration fees, the cost of customs clearance, etc.).

Under the technical barriers the introduction of national administrative, technical and other rules and regulations, which do not prevent the import of goods from abroad (such as the requirement of compliance with national standards, special packaging, labelling, etc.) is understood. At the same time the demands for content of local components is classified as legally set share of the final product, which must be produced by the national manufacturers for sale in the domestic market.

The most significant of financial methods of trade policy used to stimulate exports are: subsidies, export credits and dumping.

Subsidies - are cash payments aimed at supporting the national producers. According to the nature of payments they are divided into: direct (direct payment of the difference between the costs and the revenue to the exporter, collected immediately after the export operation), indirect (implicit subsidies of exporters by providing tax benefits, preferential insurance terms, loans at low rates and others.), domestic subsidies (budget financing of goods that actually compete with imported ones) and export subsidies (budget payments to national exporters, allowing them to sell goods to foreign buyers at lower prices than in domestic market).

Forms of export credit:

• financing of national exporters by state banks at preferential loan rates;

• government loans to foreign importers subject to compliance with commitments to buy goods only from the producers of the country;

• insurance of commercial and political risks of national exporters.

In addition, one of the methods of export subsiding is dumping, which refers to the export of goods at prices lower than in the domestic and international markets through government subsidies to exporters or to the interested firms. Forms of dumping: sporadic (occasional extra sale of goods in the world market at low prices), appropriate (export of goods at prices lower than the prices of domestic market, or even lower than production costs); permanent (permanent export of goods at low prices), reverse (overpricing of export prices compared with sales of these products in the domestic market), mutual (countertrade of the same goods between two countries at low prices).

One of the non-tariff regulation methods of international trade is legal instruments that are studied more by international law, but closely linked to the international economy. The most important are trade agreements concluded between the governments mostly for 5-10 years and are ratified by parliaments and legal regimes.

Дата добавления: 2014-01-04