Evidence account An often used but little understood countertrade method is the evidence account.

The evidence account is a countertrade arrangement whereby two parties agree to credit a clearing account with the sales made to each other and debit it with their purchases. In effect they establish a third party account where each can readily monitor the state of the transaction. The evidence account is mostly used when offsetting purchases are a requirement and the existing trade figures between the two parties are large, easily monitored and are expected to increase. It is also tends to be used where the existing trade figures between the two parties are large and are expected to increase. This would tend to limit it suitability to the promotion of tourism, particularly in cases where tourism is being promoted between two countries for the first time from scratch. Nevertheless, it may have potential as a means for promoting tourism, particularly where countries have a history of counter trading between each other for other goods. Counter Trade 6A.13 (i) Counter-trade proposals involving adjustment of value of goods imported into India against value of goods exported from India in terms of an arrangement voluntarily entered into between the Indian party and the overseas party through an Escrow Account opened in India in U.S. dollar will be considered by the Reserve Bank. All imports and exports under the will be payable on balances standing to the credit of the Escrow Account but the funds temporarily rendered surplus may be held in a short-term deposit up to a total period of three months in a year (i.e. in a block of 12 months) and the banks may pay interest at the applicable rate. No overdraft will be permitted in the Escrow Account nor any loans will be permitted to be granted against funds in the account. ii) Application for permission for opening an Escrow Account may be made by the overseas exporter/organisation through the authorised dealer with whom the account is proposed to be opened, to the office of Reserve Bank under whose jurisdiction the authorised dealer is functioning.

Anti Dumping In economics, "dumping" is any kind of predatory pricing, especially in the context of international trade. It occurs when manufacturers export a product to another country at a price either below the price charged in its home market, or in quantities that cannot be explained through normal market competition. Dumping can force established domestic producers out of a market and lead to monopolistic positions by the exporting nation. For example, a glut of Chinese garlic exports in the mid 2000s forced many North American producers to switch crops and leave the market. When the price of Chinese garlic soared in 2009, the shuttered North American businesses were unable to quickly re-enter the local market due to barriers to entry If a company exports a product at a price lower than the price it normally charges in its own home market, it is said to be "dumping" the product. Opinions differ as to whether or not such practice constitutes unfair competition, but many governments take action against dumping to protect domestic industry. The WTO agreement does not pass judgment. Its focus is on how governments can or cannot react to dumping it disciplines antidumping actions, and it is often called the "anti-dumping agreement". (This focus only on the reaction to dumping contrasts with the approach of the subsidies and countervailing measures agreement.) The legal definitions are more precise, but broadly speaking, the WTO agreement allows governments to act against dumping where there is genuine ("material") injury to the competing domestic industry. To do so, the government has to show that dumping is taking place, calculate the extent of dumping (how much lower the export price is compared to the exporters home market price), and show that the dumping is causing injury or threatening to cause injury.

Definition of 'Currency Basket' A selected group of currencies in which the weighted average is used as a measure of the value or the amount of an obligation. A currency basket functions as a benchmark for regional currency movements - its composition and weighting depends on its purpose.

Investopedia explains 'Currency Basket' A currency basket is commonly used in contracts as a way of avoiding (or minimizing) the risk of currency fluctuations. The European currency unit (which was replaced by the euro) and the Asian currency unit are examples of currency baskets. A currency basket is a portfolio of selected currencies with different weightings. A currency basket is commonly used to minimize the risk of currency fluctuations. An example of a currency basket is the European Currency Unit that was used by the European Community member states as the unit of account before being replaced by the euro. Another example is the special drawing rights of the International Monetary Fund.

Definition of 'Currency Convertibility' The ease with which a country's currency can be converted into gold or another currency. Convertibility is extremely important for international commerce. When a currency in inconvertible, it poses a risk and barrier to trade with foreigners who have no need for the domestic currency. Investopedia explains 'Currency Convertibility' Government restrictions can often result in a currency with a low convertibility. For example, a government with low reserves of hard foreign currency often restrict currency convertibility because the government would not be in a position to intervene in the foreign exchange market (i.e. revalue, devalue) to support their own currency if and when necessary.

The major functions of the EPCs are: (a) To provide commercially useful information and assistance to their members in developing and increasing their exports; (b)To offer professional advice to their members in areas such as technology upgradation, quality and design improvement, standards and specifications, product development, innovation, etc.;

(c )To organise visits of delegations of its members abroad to explore overseas market opportunities; (d)To organise participation in trade fairs, exhibitions and buyer-seller meets in India and abroad; (e)To promote interaction between the exporting community and the Government both at the Central and State levels; and (f)To build a statistical base and provide data on the exports and imports of the country, exports and imports of their members, as well as other relevant international trade data.

The Leontief Paradox and the New Trade Theory The Leontief Paradox seemingly undermined the Factor Proportions theory of international trade and stimulated additional research that has improved our understanding of how trade takes place in theory and in practice. Two types of New Trade theories have emerged. 1. Adapting H-O to Contemporary Patterns of Trade. Human Capital Theory: Knowledge and skills (Human Capital) are much more important in production today than they were in Ricardos day or even when Heckscher and Ohlin studied trade. Countries like the United States and Japan are abundant in Human Capital (highly educated and trained workers) and export Human Capital intensive products such as computers and aerospace equipment. The H-O theory still holds for these products once we recognize that different countries have different relative endowments of Human Capital. Product Life Cycle Theory: Raymond Vernons theory that U.S. multinational corporations produce high tech products at home when they are Human Capital intensive, then export them to other wealthy (human capital abundant) countries, then finally import them when they have become standardized, which means that they intensively use semi-skilled labor rather than highly skilled labor. The H-O theory does explain the product cycle. Leontief was confused when he saw the U.S. importing products it used to export, not realizing that they had gone through a factor

intensity reversal. Intra-Industry Trade: Once upon a time trade involved mainly exchange of whole products such as autos and airplanes and economic theories tried to explain this type of trade. Today, however, the production of goods is increasing fragmented, with products shipped back and forth across national borders (see the Boeing 787 handout). Now, for example, capital intensive automobile engine blocks parts may be manufactured in capital abundant Canada, then shipped to labor abundant Mexico for sub-assembly, then shipped to Human Capital abundant U.S. for computerization and vehicle assembly. Each state of production makes sense according to the H-O theory. The entire pattern of trade would be puzzling for Leontief, however, as he would wonder why we would export and import such similar products, not realizing that this reflected a complex international division of labor. 2. Some Trade Doesnt Follow the H-O Theory. Linders Theory of Overlapping Demands: The H-O theory is a theory of trade based upon supply: trade takes place because of differences in the supply of factors such as capital, labor and human capital. The Swedish economist Stefan Linder noticed that some trade (especially in consumer goods) has little to do with supply and is based upon demand. His theory of Overlapping Demands suggested that rich countries, with similar income levels and factor endowments, might actually trade similar products with each other based upon similar types of demands and differences in tastes and preferences. Thus, for example, Germany, Sweden and Japan all have high income levels and consumers who can afford to purchase luxury automobiles. German buyers may buy home-grown BMWs, for example, but they might decide to purchase Lexus from Japan or Volvo from Sweden based upon their tastes and preferences. This generates a pattern of trade in similar products that would confuse Leontief, but it makes sense to us. Linder type trade is therefore based upon similarities in overall demand (luxury cars) combined with variations in individual tastes. Trade due to Increasing Returns: This is one of the hot new areas in trade theory and we will return to this later in the class. The H-O theory supposed that all producers experience diminishing returns (marginal costs increase as production rises) so that factor costs is a key factor in comparative advantage. Increasing returns are known to exist in some industries,

however. This means that firms that produce more will have a cost advantage over smaller producers. The firms that produce the most first may be able to drive competitors out of business, leaving the industry dominated by a few large international oligopolies. Comparative advantage in the classical sense does not apply here and the H-O analysis doesnt really apply. Technology and strategic behavior determine who has the upper hand in the international market. TOT The ratio of exports to imports is called terms of trade (TOT). The concept of terms of trade (TOT) can better be understood by analysing different types of terms of trade which are as: 1. Commodity or Net Barter Terms of Trade: If one good is considered export good and the other good is supposed import good then the ratio between prices of exports to price of imports is given the name of net barter terms of trade. If we include so many goods then the ratio of price index of exports to price index of imports is called net barer terms of trade. 2. Income Terms of Trade: The income terms of trade allows the capacity to import of a country on the basis of imports. 3. Single Factor Terms of Trade: Single factor terms of trade shows the amount of imports which can be obtained against the domestic factor employed in export sector. 4. Double Factor Terms of Trade: Such terms of trade measures that how much of factors used in export sector could be substituted against how much of factors employed in import sector. 5. Utility Terms of Trade: The utility terms of trade is presented to explain welfare changes. The utility terms of trade indicates the total amount of gain from trade, as excess of total utility which is obtained from imports over the total sacrifice of utility in surrender of export.