MCom I Semester International Trading Environment World Trade Problems developing Countries Notes

MCom I Semester International Trading Environment World Trade Problems developing Countries Notes : Meaning of Intonations trading Environments Trend in World Trade International Trading Environments Future Trends of World Trade Problems of Developing Countries Economics Problems

BCom 2nd Year Recovery Refund Tax Study Material Notes in Hindi

International Trading Environment, World Trade and Problems of Developing Countries

MEANING OF INTERNATIONAL TRADING ENVIRONMENT

International trading is the performance of business activities designed to plan, price, promote and direct the flow of a company’s goods and services to consumers or users in more than one nation for a profit. Even though trading and marketing concepts are universally applicable, the environment within which a company must confront its trade changes drastically from country to country and region to region.

The total international trading environment can be broadly divided into two factors: (i) Controllable and (ii) Uncontrollable.

(i) Controllable factors are those that are inner to the organisation, on which companies has controlling power.

(ii) The uncontrollable forces are those which are external to the organisation which affect its functioning.

The most significant elements in uncontrollable environment, include:

(a) Political level forces, (b) Economic forces, (c) Competitive forces, (d) Level of technology, (e) Structure of distribution, (f) Geography and infrastructure, (g) Culture forces.

Importance : International trade has increased at a great pace. A large number of enterprises of all sizes are involved in international operations, besides their domestic operations. More particularly, the process of economic reforms and globalization gained momentum as well as has acquired a certain urgency and irreversibility. The change of the political system in Eastern Europe towards a greater participation in global economy, emphasis on privatization by the World Bank and IMF, and the willingness on the part of developing countries to open up for competition are some major factors that have increased international economic activity, with a tremendous potential for expansion in future. Business that were immune to global competition only a few year ago now find themselves locked in fierce and ferocious competition battles all around the world. In view of persistently growing liberalisation of economic systems across the world and economic interdependence, globalisation of markets, free flow of capital and knowledge, and rapidly moving customer’s tastes have renderd global busine scenario much more volatile and competitive. So an analysis of international environment is essential to identify business opportunities and threats

In short, need for the study of international business environment is clear from the following points :

1 Increasing role of multinational corporations.

2. Rapid increase in international trade.

3. Free flow of goods in different countries because of reduction in tariff and non-tariff barriers.

4. Increase in International Trade Agreements in different nations, corporate houses etc.

5. Increase in foreign investment.

6. Increase role of international organisations like IMF, World Bank, WTO, UNCTAD, etc.

7. Effect of economic crisis in one country to other countries.

8. Free flow of technology.

9. Effect of economic, political, socio-cultural, legal and technological environment of ne country in other countries.

Earlier in India too, most of companies did not have much to do with international business environment except the transactions related to exports and imports. Most of the trade was also channelized through specific agencies, leaving a little scope for autonomous decision-making for a manager as regards international operations. After the coming into effect of the convertibility of the national currency on current account and opening up of the economy for greater competition, an opportunity has opened up for managers to manage their exposure as well as to use different instruments in their dealings. Therefore, it is imperative for today’s managers to grasp the international business environments.

International Trading Environment World

INTERNATIONAL TRADING ENVIRONMENT

The years 2008 and 2009 were tumultuous ones for global business. The simmering sub-prime crisis in the US in 2007 which triggered the global financial crisis in September 2008 spread its tentacles in full, leading to a full blown global recession resulting in unprecedented fall in global business.

The fall in global output 2008-09 (-2.3%) was the first of its kind since the Great Depression in the 1920s and 30s, prompting strong fiscal and monetary policy responses from Government around the world.

After a deep global recession, economic growth has turned positive, as wideranging public intervention has supported demand and lowered uncertainty and systematic risk in financial markets. Thus, the global economy is expending again, pulled up by the strong performance of Asian economies and stabilization or modest recovery elsewhere.

World trade value, which fell sharply from US$ 16 trillion in 2008 to US $ 12.4 trillion in 2009, recovered to US $ 15.1 trillion in 2010 though it was still below the pre-crisis level. World trade volume growth also picked up sharply to 12.7 percent in 2010 from-10.7 percent in 2009, though this was also still below pre-crisis growth. In the absence of the earlier low base effect, it moderated to 6.9 percent in 2011.

In the first half of 2011,world trade had reached US $ 8.7 trillion with a value growth of 23.1 percent. But with the escalating euro area crisis entering a perilous new phase in the fourth quarter of 2011, world trade volume growth is expected to decelerate to 3.8 percent in 2012 as per the International Monetary Fund’s (IMF), World Economic Outlook (WEO), January 2012. This near halving of trade growth in 2012 is an ominous sign of the impending crisis as in 2008.

With the IMF moderating its growth projections of world output to 3.3 percent in 2012 and 3.9 percent in 2013 and with limited policy options in their Armoury, the advanced economies are expected to grow at 1.2 percent in 2012. This is also reflected in their expected import and export trade volume growths at 2.0 and 2.4 percent respectively. The emerging and developing economies are expected to grow at a relatively better rate of 5.4 percent in 2012 with import and export volume growths at 7.1 percent and 6.1 percent respectively.

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TRENDS IN WORLD TRADE

Trade in world trade can be analysed under the following heads :

1 Increase in World’s Exports: World exports have been witnessing robust growth and displaying a tendency of moving to a higher growth trajectory since 1950.

In the year 1950 world’s exports were only 55 billion dollars and in the year 2011 it has increased to 18,255 billion dollars. It means that in these 61 years, world exports have increased 332 times as shown in the following

Table 3:

Table 3: Trends in World Exports

Year	World’s Exports in Billion Dollars)
1950	55
1960	113
1970	314
1980	1,998
1990	3,304
2000	6,254
2006	12,083
2007	13,899
2008	15,775
2009	12,419
2010	15,328
2011	18,255

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But the volume of world trade declined by 23% in 2009. The trade slump in 2009 was of synchronized nature. Exports and imports of all conutries fell at the same time, leaving no region untouched. Thus, the fall in world trade would have been smaller if contraction in some regions had been balanced by expansion in other regions :

Reasons For Trade Contraction : The main reasons for the decline in trade in 2009 are following:

(i) One is that the fall-off in demand is more widespread than in the past, as all regions of the world economy are slowing at a time.

(ii) A second element in current conditions that is likely to contribute to the contraction of trade is a shortage of trade finance.

(iii) A third factor that could contribute to trade contraction is protection. Any kind of rise in protection will threaten the prospects for recovery and prolong the down turn. The risk of aggravated protectionism is rightly a source of concern for going forward.

2. Leading Exporters in Merchandising(goods) World Trade: In the year 2011, the largestexporting country in world trade was China.Its share in total world’s export is 10.4%. The top five exporting countries of the world are China, USA, Germany, Japan and Netherland. The share of these five big exporting countries in the world trade of goods is 35 percent. Thus China has emerged as a big exporter amongst developing countries and its ranking has improved to first in the world’s top exporting countries (see Table 4)

Table 4: World’s Merchandise (Goods) Export Trade-2011

India’s participation in the world economy is very small. In respect of exports, for example, India’s share is meagre 10-4% of the world’s total exports. India’s ranking in the world’s export is 19th.

3. Top Importers in Merchandising World Trade : The world’s five importers are: U.S.A., China, Germany, Japan and France. The combined share of these five countries in world’s import is 37.1%.

The share of the developing countries in the world imports is around 30%. It is over 70% for the developed countries.

As for imports of the Indian economy the picture is no better. Its imports are under 2.5% of the world imports. (See Table 5)

Table 5: World’s Merchandise (Goods) Import Trade-2011

4. World Trade in Services: Service sector mainly includes banking, insurance, telecommunication, travel, tourism, consultancy, advertising, media services, transportation etc. In terms of annual average rate of growth, world exports of services, not only increased faster (7%) than such exports of merchandise (5%) between 2000 and 2003, but also accelerated by 12% between 2000 and 2008, but in 2009 world commercial services exports declined to -13%. Transport services recorded the largest drop amongst services categories followed by travel and other commercial services. (See Table 6)

Table 6: World Exports of Commercial Services by Major Category, 2011

5. Leading Exporters in Services: The first five exporters/importers in services are: U.S.A., U.K., Germany, China and France. Their combined share in world’s export in services is 43.1 percent. India’s ranking in world’s export in services is 8th. Its percentage share in world’s export in services is 3.3 percent. The largest export of services in the world is America. Its share in total world’s export of services is 13.9 percent (See Table 7).

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Table 7: World’s Export in Services-2011

6. Composition of World Trade: World trade both exports and imports in terms of product groups comprises food, agricultural raw materials, ores and metals, fules, manufactured goods etc. Earlier, most of the world trade was confined to traditional goods like agricultural products, fuel, ores, textiles etc. But now there is a shift in the composition of world trade. Presently, world trade includes engineering goods, capital goods, technology, computer software services, chemicals, alongwith agricultural goods.

The developing countries have been benefited the most from the growth of manufactured goods exports.

 

7. Channging Pattern of Terms of Trade in World Trade: The rate at which one country’s goods exchange against those of another is referred to as the Terms of Trade. Terms of trade depend on the prices of commodities entering into foreign trade. Thus, terms of trade express the relation between export prices and import prices and are said to be favourable to a country when prices of its exports are high relatively to the prices of its imports. When a country’s prices of imports are high relatively to its export prices, the terms of trade are obviously unfavourable to the country. If a country has favourable terms of trade then it will have larger share of gains of world trade.

Ealierterms of trade were unfavourable for developing countries. It was mainly because of high cost-ratios, backward technology, primary products, high population growth, lack of adaptability etc. But now due to industrial growth and technological advancement the bargaining power of developing countries in world trade is improving. So now terms of trade are not always unfavourable to developing countries, It has shifted the benefits of world trade to both developed and developing countries. Developing countries like China, Hong-Kong, Korea, Taiwan etc. have gained significantly from the world trade.

8. Growth of Regional Blocs in World Trade : Some of the leading trade blocs have improved their share in world trade. The share of European Community (EC), European Free Trade Association (EFTA), Association of SouthEast Asian Nations (ASEAN), South Asian Association for Regional Co-operation (SAARC), South Asian Free Trade Areas (SAFTA), North American Free Trade Agreements (NAFTA),etc. has increased considerably. In 2005, 2011 Regional Trade Agreement were in force and this number is expected to increase to 300 by the end of the year 2007.

9. Shift from Bilateral to Multilateral Trade in World Trade : With the growth in World Trade Organisation, there is shift from bilateral trade to multilateral trade. In multilateral trade, trade agreements are done among many nations at a time. The multilateral agreement involves both importers and exporters to buy and sell certain quantities of the commodity. So if any agreement is finalised at the platform of WTO, then it is applicable simultaneously to its member countries.

FUTURE TRENDS OF WORLD TRADE

Future trends of world trade have been summarized as follows:

1 Opposition of developing countries : Developing countries have opposed the provision of WTO. The Seattle Ministerial Conference collapsed without being able to reach a consensus on the declaration. Two very sensitive issues from the point of view of the developing countries are the issues relating to labour standards and environment. Developed countries trade unions are in the forefront of the demand for linking trade with labour standards. It is not international solidarity with the workers in the developing countries but the desire to protect their own jobs.

2. Existence of Regional Grouping : Regional economic grouping is a new and striking idea for the expansion of foreign trade among the developing countries. It implies the creation of the most desirable structure of inter-regional economy through the formation of a customs, union or a free trade within the region and by deliberately introducing all desirable elements of co-ordination and unification. Economic regional grouping divides the world into smaller groupings which works against the interest of the rest of the world. In fact grouping emerged because of the erstwhile GATT’s failure in establishing an open trade world. GATT is reborn as WTO with renewed enthusiasm and wider membership. It is only hoped that the interest of WTO and the trading blocks do not clash.

3. Effects of Provisions of World Trade Organisation : There is extreme inequality within the structure of WTO. The basic agreements and subsequent amendments are stacked in favour of developed countries. A single undertaking framework was adopted under the Uruguay Round of negotiations which required every country to accept all the Uruguay Round of Agreements irrespective of its level of economic development. The most disturbing aspect of the functioning of WTO is that the disputes settlement mechanism of WTO is by its very nature biased in favour of the rich and against the poor. Agreement on Agriculture has legitimised the various trade distorting practices of the developed countries in their favour.

Under the guise of ‘rule based multilateral order,’ ‘global integration’ and ‘development of free international trade the developed nations have succeeded in building up a new international economic order that fully serves their interests and sacrifices the interests of the large, silent and deprived majorities of the developing countries.

4. Growing importance of multinational corporations : Globalisation, liberalisation and the various provisions of WTO have opened the doors in India and other developing countries for the foreign capital and multinational corporations. Many MNCs are taking advantage of liberal rules to increase their stakes in their existing affiliates in the country while a large number of MNCs are opting the route of acquisition of existing enterprises to enter India. Such tendencies do not promote industrial expansion and competition but only result is change in management

PROBLEMS OF DEVELOPING COUNTRIES

Peculiar characteristics of the developing countries create problem of development in these countries. So long as obstacles to the development are not removed, economic development in developing countries is not possible. Various factors, economic-non-economic, i.e., social, political and international have conspired to retard economic growth of the developing countries.

1 ECONOMIC PROBLEMS

Economic problems and obstacles are as follows:

1 Lack of economic and basic structure: The developing countries are characterised by the lack of sufficient and basic overheads. The means of transportation and communication, irrigation and power, the banking system educational facilities are all imperfectly developed. Lack of economic and basic structure retard economic growth.

2. Problem of domestic market : The low level of earnings in the developing countries is reflected in their low level of living. General poverty is also reflected in the very low standards of consumption of industrial goods and services. Due to low consumption level, domestic market in developing countries is limited

3. Improvement of land and agriculture problem : In the developing countries, agriculture has been carried on in a very inefficient manner. Lack of adequate irrigation facilities and fertilisers, primitive agricultural practices, poverty of peasants, out moded system of tenure, uneconomic holding are some of the reasons for backwardness of agriculture in developing countries.

4. Misuse of resources : Another important reason for the economic backwardness of the developing countries is the misuse of resources owing to market imperfections. By the market imperfections we mean the immobility of the factors of production, price rigidities, ignorance regarding market trends, static social structure, lack of specialisation etc. These market imperfections are great obstacles in the way of economic growth. It is due to market imperfections that productive efficiency in these countries is low, the resources are either unutilised or under-utilised and the resources are misallocated.

5. Problem of vicious circle of poverty : The main cause of the developing countries remaining poor is that they are caught up in the vicious circle of poverty. Poverty means that their per capita income is low because the level of productivity per man is low, naturally income per capita is low which means poverty. According to Nurkse, vicious circle of poverty “implies a circular constellation of forces tending to act and react upon one other in such a way as to keep a poor country in a state of poverty. A country is poor because a country is poor.”

6. Problem of capital formation : Poverty in the developing countries means that the per capita income in such countries is low. Since per capita income is low, their capacity to save is low. The rate of savings being low, the rate of investment is low, the rate of capital formation is low and hence there is a great shortage of capital in the developing countries. In this way, we see that the cause of a country’s poverty is poverty itself and as Nurkse says, “underdeveloped countries are poor because they are poor.”

2. SOCIOLOGICAL AND POLITICAL PROBLEMS

In developing countries, social problems are also responsible to retard economic growth. In these countries social institutions are too strong to control. Social system based on traditional and orthodox ideology is very rigid. Social structure have proved inimical to economic progress. Some of the social forces impeding economic progress are mentioned below:

1. Social view on education : Education system in developing countries suffers from many problems. The expansion of higher education has been completely unplanned, unwidely and chaotic. The general standard of education is low and the percentage of failures and drop-outs is very high.

2. Conditions regarding population : Rapid population growth is the greatest obstacle to economic growth. Whatever increase takes places in the national output and income in such countries as a result of development is devoured by the ever pouring torrent of babies. It slows down the rate of capital formation. A rapidly growing population increases the number of consumers in the country and hence consumption expenditure. Owing to increase in consumption expenditure, it becomes difficult to increase the rate of saving and investment which is so essential for economic development. According to Colin Clark, if there is one percent increase in population, it becomes necessary to increase national income by 4 percent just to keep the per capita income constant. This shows what a great obstacle the rapidly growing population is in the way of rapid increase in the per capita incomes.

3. Deficiency of qualified entrepreneur: The developing countries are generally waiting in dynamic entrepreneurship. No wonder trade and industry have been conducted at a very low level and few new grounds have been broken. Economic development requires an army of trained and skilled personnel who cerves as instruments of economic progress. These developing countries lack and consequently remain backward.

4. Lack of awareness regarding planned development : For the implementation of plans whole-hearted cooperation of the people is Due to the lack of literacy in developing economies, people do not he importance of planning. They do not have the necessary will to They should be convinced that their self-interest coincides successful implementation of plans

5. Problems of political stability : In addition to the economic and social factors, there are the political factors which have retarded economic growth in developing countries. These countries have the problems of political instability. Due to their economic weakness, they are exploited by the powerful developed countries. Some dishonest and corrupt leaders come to the fore. Favouritism. nepotism and corruption are rampant all over the country. The people too lack sense of duty and devotion to the country and such conditions are hardly conducive to the growth.

6. Problems regarding labour: Peculiarities of labour are the problems of economic development. They are : (1) They lack in mobility due to social restrictions. (2) Being poor, they lack the means to prosper. Poverty leads to inefficiency and incapacity to do well. (3) There is lack of permanent labour-force in developing countries. Labour turnover ratio is very high in these countries. (4) Illiteracy is another cause of inefficiency of labour in developing countries.

7. Fortune Dependence: Out-moded religious beliefs and lack of secular and rational outlook generate other worldly attitude to neglect the economic endeavour in the present life. They encourage austere living. Positive attitude towards work and wealth is wanting. Superstitions and costly rituals eat up the savings of many years creating shortage of capital.

III. ADMINISTRATIVE PROBLEMS AND OBSTACLES

1 Faulty Administrative Governance: In developing countries lack of efficient, able and honest administrative services hamper economic growth. Most of the developing countries have been at one time or another under an alien rule. The foreigner rulers, naturally, exploited their dependent countries and used their resources to promote their own interest. Because of this a well organised and flawless administrative system became difficult.

2. Problem of priority : In developing countries all economic sectors are in backward state. As a developing country is incapable of financing and managing simultaneously a balanced investment package in industry and the needed investment in agriculture, in order to give a big push to development. Therefore, the problem arises which sector should be given priority.

 3. PROBLEMS REGARDING INTERNATIONAL CONDITIONS

Many international situations which are obstacles to growth in developing countries are as follows:

1 Competition from developed countries : Sometimes developed countries create problem in the development of developing countries :

(1) Import of capital goods is expensive.

(2) The process of globalisation has led to an unequal competition-a competition between ‘giant MNCs and dwarf enterprises of developing countries’.

(3) Sometimes technology supplied by the developed countries may not suit the real needs of the developing countries.

(4) Sometimes developed countries restrict the export of modern technology to the developing countries.

(5) The developed countries usually supply the technology which is not advanced but generally obsolete.

2. Exhibition Impression : The under-development of the economically backward countries is due to exhibition effect, i.e., demonstration effect. It increases propensity to consume which reduces the rates of savings and investment. The developed countries export their higher standard of living to the developing countries. Their superior standard of living increase their propensity to consume. The higher the consumption the lesser is the saving. When poor countries imitate the higher standards of living of the rich countries. they have to pay the price for at. The price is that their capacity to save is reduced. In the developing countries there is a sharp conflict between the necessity to save and the desire to raise propensity to consume. Generally, the consumption expenditure goes up and saving goes down. No wonder that economic growth suffers.

3. Trade conditions : The rate at which one country’s goods exchange against those of another is referred to as trade conditions. Terms of trade depend on the prices of commodities entering into foreign trade. Thus, terms of trade express the relation between export prices and import prices and are said to be favourable to a country when the prices of its exports are higher relatively to its prices of imports. Fair trade conditions are very important for economic development of the developing countries. Favourable trade conditions enable a country to import a large quantity of goods for the same quantity of exports or for the same quantity of imports for a smaller quantity of exports. This is a potential source of capital formation. It may be emphasised that unless the additional resource is made available by the favourable terms which are turned into savings and investment, economic development will not be promoted. Favourable terms of business by themselves do not accelerate development automatically.

GENERAL NEEDS OF DEVELOPING COUNTRIES

For the economic development of the developing countries following needs are essential to be fulfilled :

1 Capital accumulation : For the economic development of developing countries, accumulation of real capital is necessary. There are three stages of capital accumulation :

(i) Collection of savings.

(ii) Formation of real savings.

(iii) Investment of real savings in capital assets.

Capital may be raised through the international sources also. International or external sources of capital are Foreign Direct Investment (FDI), external loans and aids, terms of trade etc.

2. Capital Absorption Force: Due to slow rate of capital formation, lack of technical knowledge, shortage of efficient labour, lack of mobility in labour etc, in the developing countries, the power of capital absorption or rate of investment remains very limited. The productivity of capital depends upon many factors such as degree of technological development associated with capital investment, the efficiency of new types of equipment, the quality of managerial

d organisational skills, the existence and the extent of the utilisation of economic overheads and the pattern and rate of investment. For caining the most from capital formation, a country must also undergo techno organisational progress, so that the capital may be used more productively.

3. Domestic base and domestic forces: Process of economic development in developing countries should be based on domestic forces. Foreign capital is not an unmixed blessing. Usually, there are political strings attached to foreign capital. Proper utilisation of foreign capital is the crux of problem. It should be so utilised as to transform the economy into a self-reliant and self-sustain economy.

4. Perfectness of market: Owing to market imperfections, the developing countries are not making the fullest and most efficient use of their productive resources with the result that these resources remain unutilised or under-utilised in large quantities. There are monopolistic tendencies which aggregate the market imperfections. By removing the market imperfections and by making fuller and optimum use of their resources, the developing countries can accelerate the process of economic development.

5. Investment Criteria : Since the investible resources in low-income countries are very much limited in face of growing and urgent needs for them, the problem of choosing between alternative employment of these resources is of great importance. Given the total investment and its distribution over different sectors and given the alternative technical and locational possibilities, the question is how to rank alternative projects so that some of them are preferred to others. According to Morris Dobb, the developing countries should consider three things while determining investment policies :

(i) Distribution of investible resources in various sectors.

(ii) Selection of technical knowledge or technology.

(iii) Ratio of total investment to total income.

Practically, resources are allocated to industries according to their marginal productivity. An investment criteria that has often been advocated by various economists is that of capital output ratio. That is, in choosing among investment projects and in determining priorities, capital-output ratios of different investment projects must be compared. Those investment projects should be selected that minimise the capital-output ratio. Again, to strengthen its balance of payments, the country may have to direct some of new investments into export production. If the export industries are capital-intensive, investment may have to be directed to these capital industries for the sake of earning the necessary foreign exchange.

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MEASURES FOR SOLVING PROBLEMS OF ECONOMIC DEVELOPMENT

For the developing countries, desirous of accelerating development planning is a sine quo non of progress. India has also adopted economic planning system to attain the objectives of economic development. But there are some problems and they are:

1 Reorganization and Modernization of agriculture : Reorganisation and modernisation of agriculture is essential for industrial development. Surplus agricultural workers can be transferred from agricultural sector to the nonagricultural sector without diminishing agricultural output.

2. Development of basic industries : Development of basic industries like coal, iron and steel, electricity etc. also determine the rate of economic development in the country. An integrated basic industries programme should be implemented.

3 . Suggestions regarding Finance system : For the economic development of developing countries, like India, it is necessary that economic development should be financed from internal resources. Internal savings should be encouraged. Taxation is also an important method of increasing the volume of saving by restricting domestic consumption. Deficit financing should be used. in moderate doses only. Effective export policy should be adopted. Loans should be utilised for the productive purposes.

4. Suggestions regarding population control: The population explosion is a concrete reality in India. India’s overwhelming view is that the country’s existing population is an obstacle to economic development. To control the growing population, programmes like spread of education, raising the minimum age of marriage, social reforms, family planning programmes, etc. should be implemented.

5. Suggestions for Agriculture Development: Following suggestions may be given for agricultural development in India :

(i) Progressive and just land-tenure system.

(ii) Attention towards agriculture related education and introduction of agriculture concerned practical programmes.

(iii) Modernisation of Agriculture.

(iv) Consolidation of holdings and cooperative farming.

(v) Adequate management of good variety of seeds, fertilisers and irrigation facilities.

(vi) Easy loan for agriculture at low rate of interest

(vii) Proper arrangement of marketing of agricultural products.

6. Suggestions for development of Social Capital : In the initial stage of economic development formation of social capital like, road, irrigation, hydropower generation programme, expansion of railways etc. is necessary. India’s five year plans are taking drastic measures to develop these social capital.

7. Suggestions for industrial development: The quantity and quality of natural and human resources vitally affect the economic growth of the country. Proper utilisation of natural and human resources give a pace to the process of industrialisation. A country’s productive capacity largely depends on the natural resources available. The existence of natural resources is not a sufficient condition of economic growth. India is blessed by nature with good and sufficient resources, yet it is poor and under-developed. This is due to the fact that the natural resources have not been properly harnessed and fully exploited. Ability for effective utilisation of these resources is also required. The supply of natural resources can be increased by research and technological progress. Technological progress helps in the discovery of new resources.

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EXERCISE QUESTIONS

Long Answer Questions

1 What do you understand by International Business Environment? Write the present foreign environment.

2. Write the modern trends of world trade.

3. Write an essay on trends in world trade and the problems of developing countries.

4. Explain the economic, social and political obstacles of developing countries.

5. Explain present trends and estimate future conditions of world trade.

Short Answer Questions

1 What do you understand by International Business Environment?

2. Write the present foreign environment.

3. Write the problems of developing countries regarding world trade,

4. Write the general needs of developing countries. Objective Questions

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(1) Select the Correct Alternatives:

1 The modern trends of world trade include:

(a) participation in world trade

(b) land and agricultural problems

(c) objection of developing countries

(d) none of these

2. The main economic obstacle of developing countries is:

(a) lack of economic infrastructure

(b) trends of terms of trade

(c) participation in world trade

(d) all of above

3. Problem related to international conditions is :

(a) Flawless administrative system

(b) Fortune dependence

(c) Non-exhibiting impression

(d) Increase in exports according to national income

4. The main needs of developing countries are:

(a) capital absorption force

(b) agriculture development

(c) development of basic industries

(d) gradual development of world trade

[Ans. : 1. (a), 2. (a), 3. (d), 4. (a)]

(II) Write True or False :

1 In recent years trends in the composition of world trade have changed radically.

2. Worldwide trade is the determining factor of international economic and political environment.

3. World trade is not confined to the commodities and raw material but it is gradually including the service sector also.

4. Share of developing countries in world export is very high in comparison to the developed countries.

[Ans.: 1. True, 2. True, 3. True, 4. False)

(III) Fill in the Blanks :

1 The main trend of the …………. is its expansion.

2. In world trade conditions of …………… are very important.

3. …………… countries lack in basic and economic infrastructure.

4. Rapid growing …………. is the root cause of all problems.

[Ans: 1. world trade, 2. export-import, 3. Developing, 4. population]

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