Friday, August 28, 2009

State Trading

In the former centrally planned economics like Russia, Cuba and Viet-Nam etc the foreign trade took place through govt. institutions and departments. The decision to import or export any commodity is made in ‘National Plan’. Then the state departments are assigned the duty to arrange the exports for imports. Here the exports are made on political basis, not on economic basis. In socialist countries the greater emphasis is laid upon ‘Self-sufficiency’. The foreign trade is treated as ‘Necessary Evil’. Trade is mostly carried out under ‘Bilateral Agreements’. And in bilateral agreements the barter trade pre-dominates. As Pakistan can give leather and cotton to Russia while Russia in its exchange can give us chemicals and machinery etc. It is because of this reason that currencies of socialist countries are not acceptable or convertible in Western Countries. There ahs been a time when socialist countries strengthened their links. They formed an institution CMEA with the aim of promoting trade between communist countries and the dependence on the Western countries was to be minimized. The trade between Western and Eastern countries was given the name of “East-West Trade”. The eastern countries used to import technology from western countries. While Western countries would import labour intensive goods and raw material from the eastern countries. All this shows that act of controlling the international trade on the part of govt. is also an instrument of commercial policy. With this instrument a country can influence foreign trade. In this way the country can raise its receipts and decrease its payments. Consequently the balance of payments position of a country will improve. Keeping it in view, Pakistan established “Cotton Export Corporation” as well “Rice Export Corporation” to export cotton and rice to the foreign countries, especially to socialist countries. In addition to them, we have “Trading Corporation of Pakistan” (TCP) which is engaged in exportation and importation of goods at state level, particularly, if goods like pulses, sugar and cement etc had to be imported in bulk amount it is done through TCP.

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