The GAFTA Agreement - Assignment Example

Question What is GAFTA and what does it mean on behalf of its members? According to (Abedini & Peridy, 2007 p this is an agreement which was signed in 1997 among 14 Arab states. By signing this document, the 14 Arab states had a vision of achieving Greater Arab Free Trade Area by the 7th year of the new millennium. With the implementation of this agreement, the member states were to enjoy trade without tariffs and other barriers that blocked a healthy trading relationship among the states. On agricultural products a country had the liberty to exclude 10 products during the harvest season. The regulations were set at 40%. GAFTA is the only agreement that comprises of all the Arab states coming together to agree on trade relations. It was also guided by politic institutions which include the Gulf Cooperative Council and Arab League. It removes several walls that would have prevented an easy flow of trade which include the tariffs, monetary, administrative and NTBS. It has well defined rules from the routes of these communities. Benefits With this agreement, All the member states are expected to expand their intra-regional trade. Production is bound to increase since his agreement will encourage exploitation of comparative advantage and scale economies. With an increase in competition in the market, there will be a choice for consumers as companies are going to struggle and venture in other form of producing different products. Rules and regulations of trade will improve as import prices are going to go down. With GAFTA in effect, regional development is going to be noticed drastically. Question 2 How to reduce the risk for global commodity trader Since there is high profit expected in any global commodity trade, the risks are also high. According to (Williams, 1999), when one is involved in commodity trading, he is bound to lose more cash than what he takes to the bank. Always have a strategy to control some risks. If you have a valid risk plan, it will warn you when to indulge in the risk or run away. A global commodity trader should interpret all the risks involved in a business deal so that he does not get confused in the time of when to stay put or to run. Every commodity global trader should have established a specific price so as to prevent losses unlike when he does not have a stop price. If this trader has a stop price he is more likely to manage his losses and vice Versa. Risks due to language barriers can be solved with the presence of an interpreter or trading in the market where there is a language spoken in common. The trader should always make sure that he is trading with registered and incensed traders. He should upgrade his license every time it is required of him to avoid problems that may arise from it. It is up to the seller to determine where to deliver his goods. The place of trade should be a peaceful place free from war. He should be positively confident that the country he is trading in has a foreign currency. It is up to the seller to have the right quality and quantity of goods needed in the market foe efficiency. He should also learn about the markets he is involved in and try to understand them fully. This includes their terms and conditions. He should understand the culture of the particular people he is trading with and should avoid all corrupt deals as they are likely to backfire. Learn about all the governments you are involved in during trade and know their capabilities of them paying their debts. There are other markets that a global commodity trader can consider. According to (Cark, Lesourd, & Thieblemont, 2001) trading of commodities, markets may be physical or derivative. Question 3 What do the following ICC Inco terms stand for? According to (Moens & Gillis, 1998) EXW: this Inco term stands for EX Works/Ex factory. When doing business under the influence of this policy, the seller is supposed to make the products available to the buyer at the sellers’ business premise. It is up to the buyer to collect it. WWD: Weather Working Days. This means that if a vessel wants to return after bringing goods, the cargo should be off loaded without questioning. DAF: stands for Delivery at Frontier. FAS: this term stands for Free alongside Ship/ Free Alongside. The seller has the responsibility to deliver the goods to the buyer and the buyer is to pay for all costs and risks encountered during transportation period. DDP: stands for Delivered Duty Paid. This is an intercom of sale duplicate applicable to all modes of transport. This is when he seller has already delivered goods to the seller wherever he might be and clearance has been done. At CIF what are the main duties of a buyer and a seller? DUTIES OF THE SELLER DUTIES OF THE BUYER Providing goods in accompaniment of an invoice that will confirm the contract type Paying for the goods as indicated in the contract The seller should obtain all the licenses, authorizations and formalities for the exportation of the goods The buyer should obtain all the licenses, Authorizations and formalities for the goods. The seller should obtain a contract for the carriage of goods. He should also pay for the expense of the cargo insurance. The buyer has no obligation at this point. Delivery of goods should be done a port on the agreed day The buyer should accept the goods immediately they have been delivered. He should also receive them from the carrier at the port of delivery The seller should cater for any risks on the goods until they have passed the ship’s rail as agreed The buyer will be responsible for all the risks after his goods have passed the ships ail to port of destination. The seller should notify the buyer about the goods being delivered and to alert him on anything that he needs to know The buyer should notify the seller on the time he expects the goods and the port where he expects to take them from. The seller should pay for the cost of checking, packaging and marking. The buyer should carter for the inspection of the goods by the authorities of his country. Question 4 Cocoa sources: Cocoa was first imported to America to Spain in 1528 with an effort of expanding the growth of cocoa with the increasing demand for it. By the 17th century, all areas in Europe which could stand cocoa production were working on it. In was then introduced to Africa in the 19th century. Initially cocoa was used as a beverage alone. As technology developed, more innovations made cocoa to be improved to other types of foods including chocolate. Types of cocoa production Africa is known for producing the best caocao beans. The main cocoa trees include Forastero, Criollo and Trinitario. Forastero is mainly grown and has a rich taste of cocoa. It is pest and disease resistant with its low acidity. Criollo has a fruity taste. It is mainly grown in Latin America and its yields are low. Trinitario is a complex of the two coffee beans and it is highly acidic. By products of cocoa According to (Folayan, 2010), the byproducts of cocoa include cocoa itself, butter, cake, powder, liquor, and chocolate. International transport of cocoa All the cocoa selling happens in the physical markets because it is traded as a commodity. Cocoa selling channels differ from region to region due to distance. During exportation, cocoa grading is necessary as different countries import cocoa of different grades. After grading, it is then taken to a cargo vessel where it is put in bulk and shipped to their destinations. Questions 5 Clauses and their meaning Notices clause: it is vital information given by the addressee informing the other party where he wishes to receive execution copies of the contract, and identify the cooperate offices where he will take other various types of information in connection with the signed contract. ForceMajeure clause: this is translated to mean the Acts of God/a powerful force. This is used to refer to happenings that are not caused by either of the parties but by nature. They include wars and hurricanes. These events may interfere with export or import and it is always included in a contract. Odd day’s clause: in all the months that have an odd number of days, the day in the middle will be divided equally among the two weeks of the month.  The prohibition clause: It can also be called an establishment clause where it prohibits some economic activities to take place in a particular region. International conventions clause This applies mostly to international trade where by all partners are glued together by the same laws made by them in agreement. Domicile clause; this records the name and address of the registered company. Question 6 Dry bulk trade: this is a trade that is done on commodities like iron ore, timber, coal, grain, and steel which are exported in bulk. They are not carried in containers. This is done mainly by dry shipping industry. Impact of china on dry bulk market According to (Researchmoz, 2012) iron ore is the most bulky product being shipped in the world today. China is the biggest importer of iron ore. This is so because china is rapidly developing and it needs this iron ore to expand its physical industries. The development taking place in china is going a demand for more dry bulk goods importations. China has an impact on this trade because it is currently the main market. Question 7 Strategies to be used by an oil importing country to minimize the geopolitical risks associated with maintaining a continuous oil supply. As years move forth, the EU is growing fainter and fainter because of selfishness, nationalism, there is no reality anymore. The unity that once existed is no more. Difference has been noticed in the way they carry out their activities including trade. Free market could be an option in solving all these geopolitical misunderstandings. They could also introduce curb up the two things that are hindering a free market by rational taxation and a government policy that will be active, there will be a smooth market. 7 sisters include Bp, Shell, Texaco, Gulf, Socal, Mobil and Exxon. With each being superior to the other, no prices have been reached so as to sell at the same price. It is extremely challenging for any energy company to manage geopolitical challenges so as to maintain oil flow in a particular region. In companies that produce oil, a lot of geopolitical misunderstandings are likely to occur. They all want to share in the profits of the black gold. Others want to control the supply of the vital gold. So as to curb up these differences, there has been a lot of interaction by the two citizens and also the spirit of conversation which keeps these countries in working mood so as to benefit from each other despite the fact that they have their misunderstandings. Sporting activities and cultural events have been organized which saw the countries taking place in these games. Question 8 Discuss the services that Commodity Superintendents and Analysts provide to the international commodity trades. They do professional inspection. They are appointed by buyers and sellers. Their main duty is to give reports and certificates on business operations and to advise the board. On agricultural produce, they do inspections, verifications, and examinations and assess the grain, feeding stuff, pulses, rice and other produce that is traded across the borders. They advise the managers, directors and the technical team on how to maneuver in the markets. They help the markets to evade financial risks. Abedini, J., & Peridy, N., 2007. The Greater Arab Trade Area: an estimation of trade effects(preliminary version). United Nations Statistics Division , 1-21. Cark, E., Lesourd, J.-B., & Thieblemont, R., 2001. International commodity trading:physical and derivative markets. west susex, England: John Wiley and sons LTD. Folayan, J. A., 2010. Nigerian cocoa and cocoa by products: quality parameters, specifications and the roles of stake holders in quality maintainance. Pakistan Journal of nutrition , 915-919. Researchmoz., 2012. Gobal Sry bulk shipping industry report:2011 edition. Retrieved from http://www.businesswirenews.com/global-dry-bulk-shipping-industry-report-2011-edition/. Williams, B., 1999. e how money. Retrieved May 7th, 2012, from http://www.ehow.com/list_6656801_risks-trading-commodities.html. Read More