State trading is often associated with canalisation. Canalisation means estaolishment of state monomply in foreign trade. In other words, an item that is canalised can be imported or exported~ as the case may be, only the designated state trading agencies.

"'The emphasis is on the control of foreign trade flows rather than on the ownership of the organisation or the agency conducting it.

State trading agencies may also trade in products which are not canalised, ir addition to the canalised items, Thus while canalisation essentially means state: trading, there may also be state trading without canalisation.

Canalisation is widespread in the world. It is not confined to the centrally planned economies and other developing countries. It is also common with the developed countries. "In the period immediately after World War II, canalising enterprises sprang up in almost all OECD countries for trade in agricultural commodities, minerals and some industrial goods. Many of these enterprises subsequently grew in size, increased in relative importance and diversified their activities. Other than in commodities noted above, canalisation has existed at one point or other in products like petroleum, coal and iron. "After the oil crisis of 1973, several advanced countries canalised oil imports to ensure stable supply of oil. Almost all the industrialised countries have used this policy instruments in one form or other although the extent of canalisation is generally much lower than that in the developing economies.