Multilateral Trading System
Commercial Policy Instruments (CPI) like levying import duty (tariff) as well as other tariffs and adapting other non-tariff barriers like quantitative restrictions enable a country such as India to safeguard its industries from these gigantic claws of the developed countries. If there are no commercial policy instruments, it would be very difficult to compete with developed countries with their higher economic status and connected facilities, subsidies and encourage merit in increasing production and reducing their costs. If these products are permitted in India without any restrictions and different forms of tariffs to their prices, Indian products may not find markets, either inside or outside the country.
So, the basic objective of various commercial policy instruments is to protect the domestic industry.
But in an international environment, where it has become imperative for the entrepreneurs and the export managers in view of the growing globalization, liberalization and competition in the world trade, a rule-based multilateral trading system, trading blocks, trade agreements and trade policies of individual countries has developed as International Trading Environment which is called Multilateral Trading System.
By MTS we refer to a system that governs the trading among various countries. This system has been established over the years as a result of the continuous international negotiations among the various countries. These negotiations provide the guidelines to member countries for the formulation of their policies governing international trade. Besides, the emergence of various trading blocs reflecting varying degrees of economic integration and bilateral trade agreements amongst the countries have had a profound impact on course of international trade flows and the state of competition at the global market place. In 1949 GATT was established and in 1995, WTO came out of the negotiations that lasted almost half a century.
Following graphics shows the basic framework of the MTS