International Trade
Introduction
Countries across the world have recognized the economic potentials that result from cross border trade in exchange of goods and services. This has been facilitated by globalization that has enhanced the nations’ ability to import and export products from other countries. Globalization is where economies of nations across the world become integrated, and are able to exchange goods and services (Batra, 2006). Globalization has enabled companies and nations to access a wider consumers market and a greater variety of products and services. Countries such as the UK have enhanced their trade activities with Asian countries and other nations across the world due to globalization. However, before countries export or import goods globally, there are various multilateral and bilateral arrangements between them that dictate the terms of trade between them. For example, country’s trade policy, laws and regulations and tariffs are always enforced by countries (Kawai and Wignaraja, 2011). The report presents some of the factors and influences that may affect the exportation of electronic products from the UK to India.
A report on factors that influence the export of electronic products from the UK to India
There are various factors that influence the export of foreign products into the Indian market. These influences are discussed below;
Indian Tariff and Non-Tariffbarriers to Electrical Imports
India has import tariffs that control the entrance of products from foreign markets. A tariff in this case refers to a tax put on all goods imported to India (Linn and Tiomkin, 2006). Taxes and import duties are due when importing products into India whether by commercial or private entity. The taxes payable are calculated by including all the costs incurred in shipping, insurance and the cost of imported goods. The aims of these tariffs in India are to limit imports and are also ways of raising government revenues (Buckley and Ghauri, 2004). Therefore, import tariff is a potential factor that hinders the export of electronic goods from the UK to India.
Additionally, India has non-tariff barriers that affect the importation of products from other countries. Non-Tariff barriers are measures other than normal tariffs. They include regulations and standards that restrict trade between nations. The study conducted by Trebilcock et al., (2012) indicated that there are tariffs and non-tariff barriers that affect the export of products to India. Special labeling, testing requirement and complex harmonized code classifications are among the major non-tariff barriers imposed by the Indian authorities that affect imports into the country. In addition, Indian authorities have imposed additional technical regulations and mandatory standard requirements that affect imports. These requirements are put in place to enhance the quality of products seeking an access into the domestic market of India. However, in some cases, India uses these measures as a protection method of controlling the entrance of foreign products into the domestic market (Greenaway, et al, 2002). This implies that the imports of electronic products may be subjected to these measures, hence affecting the volume of products imported from the UK to India.
Mercantilism theory states that countries try to accumulate wealth by increasing on exports while discouraging imports. This is accomplished by government interventions that control the entrance of the import products into the domestic market. In relation to India, imports have been regulated by stringent policies and tariffs as indicated above. This has mainly affected countries that are outside the trade blocs that face both tariff and non-tariff measures while importing products to India. India has only softened barriers on textile and agricultural goods which are perceived to have greater value to the country. Additionally, electronic goods that are imported in India must get certified before they are allowed in India’s market (Baldwin and Seghezza, 2010). Also, despite the high demand for electrical and electronic goods especially in North East India, these products must comply with the India’s Bureau of Standards and the mandatory standard and marketing requirements that also affect exports to India.
India’s Attitude to Imports of Electrical Goods
Another influencing factor in exporting electronic products to India is the country’s attitude to imports of electronic products. India was in the past known for inward inward-oriented strategies and with almost a hostile attitude towards international trade. The country was reluctant engaging in international trades because it has always feared that other countries will take advantage of its economic prosperity (Buckley and Ghauri, 2004). Consumer Ethnocentrism model can best elaborate on the India’s attitude to foreign products such as electronics. The model is based on the belief that domestic products are more valuable than the foreign products. India has been for a long time limited the amounts of imports in order to promote its local products and companies. In some cases, purchasing imported products in India is not promoted because it is believed to affect the economy negatively (Hill and Jain, 2007). This is also an indication that exporting electronic goods from the UK to India will be at be at a low pace because of the beliefs held in India’s domestic market that affect peoples’ willingness to buy foreign products.
Sbragia (2010) counter attacked India’s of overreliance on locally produced products. He argued that in the past, the volume of electronics produced locally in India could meet the demands of consumers. This had created a higher dependency on the locally produced products. As a result, local authorities had enhanced policies and regulations that promoted locally produced products. India had a large internal market for electronic products and this reduced the tendencies of consumers to foreign products because of lack of knowledge and experience (Zahra, 2005). Currently, the population of India has increased, and the demands of customers have also changed significantly. As a result, India imports some of the electronic products from countries such as China in order to meet the demands of the people (Greenaway et al, 2002). This current trend of importing electronic products provides a greater opportunity for UKEGTA members to export their products to India.
Membership of India with Various World Institutions and Trading Blocs
Another influential factor that may influence the export of electronic products to India is that; India is a member of various world trade institutions and has also formed trading blocs with some countries. Trading blocs are the associations of countries to promote trade and defend members against global competitions. To begin with, India formed a trade association with the South East Asians Nations to enhance its trade with these nations (Heron and Siles‐Brügge, 2012). This engagement implies that India extends its special treatment to these nations. The nations have free access to the India’s goods, services and also to the domestic market of India. In addition, the trading bloc allows cooperation of services and products, investments, items of exchange and other areas of economic value. In addition, India also formed trade agreements with countries such as Sir Lanka in order to export and import electrical machineries and equipment (Achterbosch, et al, 2008). This implies that UKEGTA members may face competition in their exports to India due to the available these formed trading blocs.
According to the theory of preferential trade agreements, trading partners in a bloc agree on the terms and tariffs that facilitate the exchange of products among members of the same trade bloc (Hill and Jain, 2007). This theory implies that countries that have formed trading blocs with India try to eliminate the barriers such as laws that may hinder the imports of products from one country to another. However, a country such as UK that is not part of this trading bloc is likely to face these trade barriers. Kawai and Wignaraja (2011) also stated that after developing its regional trade policy, India became a member of South Asia Association for Regional Cooperation (SAARC) and also formed other Regional Trade agreements (RTA). These trading blocs may also mean that UK’s products may be restricted in the Indian markets because blocs control members within the bloc against competition. This also implies that, since UK is not among the members of the regional blocs such as SAARC, the exports to India are likely to incur barriers such as higher tariffs.
These trade blocs may also be a threat for the UK to maintain competition in in the India’s domestic market. Similarly, the firms within the bloc that manufacture electronic products may gung up against the UK’s firms by preventing market access (Baldwin and Seghezza, 2010). In addition, India also signed the Asia-Pacific Trade Agreement (APTA) that allows the countries to address the economic issues that the region faces. The countries that signed this agreement collaborate on a mutual basis to also promote intra-regional trade. As a result, they expand and liberalize trade by elimination of tariff and non- tariff measures (Batra, 2006). This implies that UKEGTA members will face trade barriers since they are not members of APTA and other trade organizations from the region. Also, member countries will have an increase in their exports to India compared to non-member countries such as the UK.
The favorable factor that can enhance the exportation of electronic products from the UK is that India is one of the members of World Trade Organization (WTO). Also, India occupies a significant position in the World trade organization (Goldberg, et al, 2010). This implies that negotiations between the UK and India can be enhanced because of this common membership to this organization. The two countries can sign trade agreements that allow free flow of products from one country to another. Similarly, being a member of WTO, India can easily eliminate tariff and non-tariff barriers to facilitate the export of electronic products to India. Sbragia (2010) also stated that World Trade Organizations (WTO) members can discuss modalities and terms for eliminating customs tariffs on international trade on various products. This can enhance the collaboration between India and the UKEGTA members to export electronic products to India because they are both members of World Trade Organizations (WTO).
India’s Policy and the Implications of UK Membership of the EU for Trading with India
Also, India’s policy to the international trade is an influential factor in exporting electronic products to India. Though India had formed trade blocs with different nations across the southern Asia, it has also signed a trade agreement with the European Union. This indicates a commitment to increase trade in both products and services between these countries. UK being a member of the EU can further this relationship and export more of its electronic products to the India’s market. The EU has become one of the main economic and trade partners with India. Park (2000) stated that before the year 2000, India engaged in international trade agreements, but its main objective was always to ensure more exports than imports into the country. However, its policy towards the European community improved their coordination on economic and political issues in their multilateral dimensions (Rajan and Sen, 2002). They developed means of how to deepen their investment relationship and bilateral trade. This relationship can also enhance exportation of electronic products to India.
Additionally, UK being members of the EU has some influences in its ability to trade with India. Negotiations for a free trade agreement between India and the European Union have been successful in enhancing trade links between them (Goldberg, et al, 2010). The EU is providing assistance to India to facilitate its efforts of integrating better into the world economy. This may be an opportunity to negotiate and export electronic products to India. Additionally, the EU has formed trade agreements with India such as a free access to each other’s markets, for products and services (Khorana and Perdikis, 2010). This implies that the UK, being a member of the EU can as benefit from these trade relations in exporting its electronic goods to India.
Gravity model illustrates how bilateral trade agreements can benefit members within the trade bloc. The model implies trade flows between countries is influence by factors such as distance, relations and trading blocs (Linn and Tiomkin, 2006). Countries that share the same trading blocs can easily collaborate and work together to facilitate the international business. Similarly, UK being a member of the EU bloc can develop trade relations and export products to India due to the bond that exists between India and EU. The EU is one of the largest trading partners of India accounting for up to 25% of Indian trade. They have formed a legislative framework that allows cooperation on trade, partnership and development. The relationships have extended to include non-economic areas such as academic exchanges (Achterbosch, et al, 2008). Therefore, the UK being a member of the EU that has developed good trade relationship with India can benefit from exporting its electronic products to India.
Conclusion
The report is a presentation of factors and influences from trade blocs, world institutions and the import policies that may influence the international trade of India with the UK. The report has presented the possible factors that would affect or influence the possibility of exporting electronic goods from the UK to India. From this report, it is evident that international trade between countries is influenced by factors such as the existing trade relations between them, tariffs and government regulations. For example, the export of electronic products from the UK to India is influenced by the policies enforced by the India’s government. In addition, international trade is enhanced by the trade agreements signed by both countries to enhance exchange of products from one country to the other. In this report, electronic products from the UK can access or fail to access the India’s market depending on the trade relations that exist between the two countries. The report concludes that free trade agreements reduces trade barriers and enhances the movement of products and services between countries. The report recommends that India needs to diversify its international trade by signing free trade agreements with different countries across the world. This will enable India to have a wider access to the global market that allows more imports and exports of products.
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