Hi all

There is a provision of Reciprocity in the principles of WTO(world trade order) which says tht to acquire MFN status a nation must establish first tht the gains tht ll occur 2 her if MFN granted are greater by those tht can occur to her in unilateral liberalization of trade.

I ll like a simple explanation of this what actually it means

Hi all

Koi tu bol do kch. Aisa kch out of the blue b nae pocha main nay. Koi MA ecnomics wala bro/sis who knows about how balance of trade is affected by various parameters shd be able to answer this

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aoa dear im also looking for some explaination from some more learned member first,then ll be to add my share.....
i hope somebody explain me these two terms,i ll be grateful
a-synthetic reserves(currncy reserves)
b-settlement currency
thnx.Regards

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Reciprocity means mutuality of Interest. Any relationship to endure must be based on not the interest of one party but of both. Take for example Pak-US relationship which favors US on the cost of Pakistan. Reciprocity lies at the core of Foreign Policy of any country.

There is a provision of Reciprocity in the principles of WTO(world trade order) which says tht to acquire MFN status a nation must establish first tht the gains tht ll occur 2 her if MFN granted are greater by those tht can occur to her in unilateral liberalization of trade.

I ll like a simple explanation of this what actually it means[/QUOTE]

Hope this makes the deal simpler for you to grab the idea..

First understand "Reciprocity"
Reciprocity means
1-- the granting of concessions on tariffs, quotas etc.
2-- these concessions are not extended to other countries with which the "contracting" parties have trade ties.

e.g Country A and Country B move into a "Reciprocity Agreement" -- means agreed to relief on tariffs and quotas.
Now
If Country A has trade ties with another Country C.. Country A will not offer the same lowered tariff to Country C -- in simple words its "discriminatory behavior on the part of Country A.

Now Understand MFN
MFN means "Most Favorite Nation" (here and generally it means "Most favorite nation for Trade Ties)

According to WTO principles
1-- All Members are MFNs ( viz Members are to be treated equally in terms of tariffs, quotas, trade favors etc and not Special relief be extended to other members which are not for all members)

Now if you see, Reciprocity is reciprocal to the very basic illegibility criteria for WTO membership.

This Provision serves as a Precaution for the states intending to be member of WTO viz before applying for membership, the states must make their calculations for the revenue which is to be gained through "equal" trade ties and not on "favoritism".

If a state believes she can get more revenue while extending equal trade terms to all MNFs of WTO, fine. But if they assume they can not make more revenue by doing so, better not be a member of WTO.

This is something which i understood while reading the above provision in 3 minutes.
An in depth study might reveal more dynamics of the Provision.

Have a Good Day
and All the Best!

@ Chosen one

Thnx bro for ur concern but i didn't asked fr a general sense of the term reciprocity. Needed an explanation in the light of WTO provisions.

@ Humayun

Thnx bro fr ur effort. While it did help me little to improve my understanding but im afraid im still not fully clear about it. I ll need u to explain further over these following points.

"Reciprocity. It reflects both a desire to limit the scope of free-riding that may arise because of the MFN rule, and a desire to obtain better access to foreign markets. A related point is that for a nation to negotiate, it is necessary that the gain from doing so be greater than the gain available from unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialize." Source wikipedia

Query # 1: For a nation to negotiate,...... Here it is talking of negotiating MFN or a reciprocal agreement.

Query #2: gain from doing so be greater than the gain available from unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialize Here i dont understand tht if unilateral liberalization means reducing tariffs nd quota from only one party then it shd be quite obvious tht gains to tht party ll always be lesser as compared to a reciprocal agreement. Then what is the need to specifically describe this as a pre condition.

I know these queries of mine might sound childish to one who knows the system but i feel myself completely alien when it comes to something related to economics(I hate it. way too boring).
So anybody out there do elaborate this to me

Thnx in anticipation

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You were not born a winner, and you were not born a loser. You are what you make yourself be.

aoa dear memers thnks for adressing S Ranjha's querries.pls help me also in understanding these two terms:

a-settlement currency
b-synthetiv(currency/dollar) reserves.

pls reply me in this very thread,as i dnt see need to begin a new thread for such minor concern....
Regards

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a-settlement currency:The currency in which a settlement is paid.

b-synthetiv(currency/dollar) reserves:One of the national currencies (dollar, euro, yen, etc.) or IMF's special drawing rights (SDR) used by a country to hold its foreign currency reserves and gold for settling international trade transactions and other obligations. Also called key currency.

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thnk u so much.
pls somebody explain also what was the problem related to this synthetic currency system as regards America in the recent recession.
Regards

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United Nations conference calls for new global currency.

The United Nations Conference on Trade and Development said in a report published Monday that the U.S. dollar should be replaced as the world’s standard reserve currency, giving rise to a new global currency managed by an as-yet undetermined financial regulatory organization.
Heiner Flassbeck, director of the conference, told Bloomberg News that changes needed in the world’s financial systems rival the scope of the Bretton Woods or European Monetary System agreements.
The Bretton Woods agreement established in 1944 the International Monetary Fund and World Bank, following allied victory in World War II.
“[The] dominance of the dollar as the main means of international payments [has] played an important role in the build-up of the global imbalances in the run-up to the financial crisis,” the report says. “Another disadvantage of the current international reserve system is that it imposes a greater adjustment burden on deficit countries (except if it is a country issuing a reserve currency) than on surplus countries.”
The UN adds: “Such a multilateral system would tackle the problem of destabilizing capital flows at its source. It would remove a major incentive for speculation and ensure that monetary factors do not stand in the way of achieving a level playing field for international trade. It would also get rid of debt traps and counterproductive conditionality. The last point is perhaps the most important one: countries facing strong depreciation pressure would automatically receive the required assistance once a sustainable level of the exchange rate had been reached in the form of swap agreements or direct intervention by the counterparty.”
The move should not be surprising to observers of global economics, as a U.N. panel of currency experts came to the same conclusion in March, according to Reuters.
The conference specifically emphasizes the enhancement of the International Monetary Fund’s “special drawing right” (SDR), which may serve as the “supranational” currency.


World-wide shake-up

The past year has seen a dramatic shake-up in oversight and management of the U.S. and global economies.
For months, Russia and China have been calling for a new world reserve currency.
Russia, for its part, supports replacing the dollar on the world stage, suggesting the Chinese yuan may be the quickest path to diversified reserves.
“There is a need to make the IMF a true representative of the world’s leading economies. It’s not there right now,” said Russian finance minister Alexei Kudrin in June, noting that China had a lower representation quota than Switzerland or Belgium.
Kudrin also said he did not expect to see any new monetary unions rise, although the Gulf states agreed in May to use Saudi Arabia as a base for a pending “monetary union” and new central banking authority.
The issue of IMF reform should therefore be raised “in earnest, in a bold way,” Kudrin said, adding countries should be “represented in proportion to the strength of these economies and their role in the world economy.”
Over the weekend, U.S. Treasury Secretary Timothy Geithner argued successfully to strengthen the “Basel II” framework for international commerce, which would see all G20 member nations increase their currency liquidity and allow centralized, “global supervision” of financial industries. The Obama administration is committed to full compliance with the framework by 2011.
The Group of 20 finance ministers and central bank governors plan to meet in Pittsburgh, Pennsylvania on Sept. 24 and 25. Several major liberal groups are planning demonstrations, including the A.N.S.W.E.R. Coalition. The city has already secured a deal to use National Guard troops to provide a security buffer for the world’s financial elite during their meeting.
Also on Sunday, a key Chinese official predicted that the dollar’s increasing supply, which grows with added liquidity, meant the currency could “fall hard” within “a year or two.” The official also signaled that China is moving its reserves away from the dollar and toward gold, euros and yen.
Washington has staunchly defended the dollar as the world’s reserve, with President Obama, Federal Reserve chairman Ben Bernanke and Treasury Secretary Timothy Geithner all insisting there is no need for a new global reserve currency.

reference: http://rawstory.com/

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