The World Trade Organization - Case Study Example

The World Trade Organization Trade is very essential to every nation. In fact, history can prove it that no nation was developed without engaging intrade. However, trade does not only work within the nation, it reaches to the point wherein every nation can interact with each other while the bottom line is to conduct business and trade. The international trade happens when goods or services are exported by a firm to another country (Hill 2003, p. 8). Moreover, Hill (2003) added that a foreign direct investment happens when a firm invests resources in business activities in the other country. These are just some of important concepts in international business. These concepts are very essential in understanding international business so as to know how it works in the international arena. Furthermore, it is important to understand these concepts so as to understand international business and other activities related to it. There are many issues surrounding international business. Understanding them is as important as learning and becoming a part of the international business ground. Over the years since international business began, every nation has learned to protect itself against foreign competition. High tariffs on imports of manufactured goods were imposed to protect domestic industries from foreign competition (Hill 2003, p. 8). This stands as one of the most significant barriers to international trade. This significant barrier is one of the most controversial issues which ignited agreement among nations working out in the elimination of tariffs on international trade. This has something to do with globalization which aims to unify the world as one whole single market which further is aiming to target and alleviate poverty. The bottom line of this is a fair economy as a stepping stone towards increased level of equality among nations. In fact, these good promises of globalization are just among of the reasons for the penetration of globalization in international trading. On the other hand, globalization of the business environment has been made possible because of a number of developments (Palmer & Hartley 2002, p. 332): 1. There has been a tendency for barriers to international trade to be removed, facilitated by the efforts of the World Trade Organization. 2. A tendency towards cultural convergence has reduced the differences between national market characteristics, thereby reducing the cost of adapting products to those specific markets. 3. Improve communications (e.g. the telephone, air travel and the Internet) have reduced the cost of dealing with far-away places. 4. The emergence of large multinational corporations (MNCs) has facilitated the process of seeing the world as one global market. The power of globalization is indeed good and inevitable. On the other hand, it also means risk. According to Rosenberg (2002), in the opening of a nation's economy, a nation makes itself susceptible to contamination from abroad. In fact, a nation might probably be subjected to footprints of special interests. This is now then the reason that in the development of world trading system, international policies have to be implemented. Its implementation can just be significantly realized through the aid of the business environment. In business environment, the political environment has a great influence in shaping the general nature of the external environment as well as being responsible for passing legislation that affects specific types of organization (Palmer & Hartley 2002). The political environment has the capacity to impose multilateral agreement between governments. This agreement has made it possible for the implementation of World Trade Organization to have a significant influence to access overseas markets for a number of industries. World Trade Organization (2008) simply tries to present itself as a negotiating forum, set of rules and to provide help to settle disputes arising from conflicting interests among nations participating in international business. The present round of global trade talks was done in Doha, Qatar, in November 2001 (New York Times 2009). Moreover, it does the following functions: 1. Directing trade agreements 2. Acting as the veneu for trade negotiations 3. Resolving trade disputes 4. Reviewing national trade policies 5. Assisting developing countries in trade policy issues, through technical assistance and training programs 6. Cooperating with other international organizations In addition, the following are its underlying principles: 1. Trade without discrimination 2. Freer trade: gradually, through negotiation 3. Predictability: through binding and transparency 4. Promoting fair competition 5. Encouraging development and economic reform The World Trade Organization is the only international organization handling the global rules of trade between nations. Its primary function is to make sure that the trade flows as smoothly, predictably and freely as possible (World Trade Organization 2008). The result of performing its function and achieving its goal is assurance. It is promoting to every nation that consumers and producers know that they can benefit from the security of supplies and wide array of choices of the finished products, components, raw materials and services that they use. At the heart of its multilateral trading system, WTO consists of agreements, negotiated and signed by a large majority of the world's trading nations and ratified in their parliaments that will stand as legal ground-rules for international commerce (World Trade Organization 2008). The agreements cover goods, services, intellectual property, dispute settlement and trade policy review. The agreements also aim at helping developing countries through development programs and trade, technical assistance and training. Despite of its good intention presented on its policies, World Trade Organization (2008) insisted that it is commonly misunderstood as the following: 1. The WTO dictates policy 2. The WTO is for free trade at any cost 3. Commercial interests take priority over development 4. Commercial interests take priority over the environment 5. Commercial interests take priority over health and safety 6. The WTO destroys jobs, worsens poverty 7. Small countries are powerless in the WTO 8. The WTO is the tool of powerful lobbies 9. Weaker countries are forced to join the WTO 10. The WTO is undemocratic Moreover, the World Trade Organization (2008) continues to promote itself by making everyone understands the following that it does: 1. The system of WTO helps promote peace 2. Disputes are handled constructively by the WTO 3. Rules make life easier for all because of the WTO's influence. 4. Freer trade cuts the costs of living through the initiative of WTO 5. WTO provides more choice of products and qualities 6. Trade raises income as being ensured by the WTO 7. Trade stimulates economic growth as in line with the policy of WTO 8. The basic principles make life more efficient 9. Governments are shielded from lobbying 10. The system encourages good government Since transparency is one of its underlying principles, the World Trade Organization (2008) presented the following trade liberalization statistics which the bottom line is continued increase of poverty, inequality and erosion of democratic principles in poorest countries. 1. The numbers of people living life on less than $2 per day have risen around 50% dating back from 1980, to 2.8 billion today. 2. The 80% of the world's income goes to the richest fifth and the world's poorest fifth have 1%. This variance has been twice basing from the figures between 1960 and 2000. 3. The wage inequality in almost all countries that have undertaken rapid trade liberalization. The figure shows that 20-30% fall in wages in some Latin American countries. 4. There is a negative correlation with income growth and trade liberalization among the poorest 40 per cent of the population. On the other hand, there is a positive correlation with income growth among higher income groups. To make it short, this situation helps the rich get richer and the poor get poorer. 5. A decline of share for about 0.4 percent share since 1980 was remarkable among the world's poorest countries. 6. In the study conducted by World Bank, it was found that the implementation of Uruguay Round agreements on various aspects can mean more than a year's development budget for the poorest countries. 7. The top five richest people have 80% of the world's income and the top five poorest people have 1%. This variance has moved twice between 1960 and 2000. 8. In all of the countries that have embraced rapid trade liberalisation, wage inequality has increased there. For instance, about 20-30% fall in wages in some Latin American countries. 9. Only 33 out of 130 developing countries in 1980-1996 have increased growth by more than 3% per capita, while the GNP per capita of 59 countries declined. In short, around 1.6 billion people are becoming more financially challenged today than 15 years ago. These are just some of the basic facts according to the liberalization statistic reported by the World Trade Organization. The question of interest now is to know if these have to be blamed on the World Trade Organization. The Global Exchange Organization (20008) being one of the critics of World Trade Organization, simply tries to convince the world by presenting top ten reasons to oppose the World Trade Organization. These are the following: 1. The WTO is basically undemocratic 2. The WTO will not make the poor safer 3. The WTO walk over labor and human rights 4. The WTO would privatize essential services 5. The WTO is destroying the environment 6. The WTO is killing people 7. The WTO is increasing Inequality 8. The WTO is increasing hunger 9. The WTO hurts poor, small countries in favor of rich powerful nations 10. The WTO undermines local level decision-making and national sovereignty These are just some of the great accusations against the World Trade Organization and the list goes on and on. Rosenberg (2002) pointed out that the WTO has become an unfair institution largely controlled by the United States and the nations of Europe, and especially the industries of agribusiness, pharmaceutical and financial-services of these countries. Furthermore, Rosenberg (2002) added that powerful nations hammered out the negotiations while poor nations only wait for results. This claim was supported further by another claim of him that every free trade negotiations put the trade ministers under pressure from powerful business groups. This is in fact a great accusation and most importantly requires some basis. Lijia and McLeod (2000) in their article stressed out that China is not yet ready for WTO. For instance, they presented in their article that American textile workers do not want Chinese goods, as in line of their fear of losing their jobs. This alone ignites the idea of not be open to the United States. Then what can the World Trade Organization do about this' Lijia and McLeod (2000) documented in their article that the WTO will just give a lot of pain to the Chinese society. This implies that for some Chinese, WTO is making nothing at all for their interest in the global trade. Walker (2001) reported that developing countries were not satisfied with the benefits they get from the Uruguay Round since it was not entirely materialized. Walker added that these countries were claiming for their benefits on cheap medicines, access for textiles and agriculture. These groups of developing nations according to Walker want to compete against the subsidized and protected farmers of Japan and South Korea. These groups want to retain their right to subsidize their own farmers to ensure their capacity to produce their own foods. In a specific example, the subsidized American corn makes up almost half of the world's stock making the world price so low that local small farmers in Mexico for instance can no longer survive (Rosenberg 2002). This can be awakening scenario in considering the affectivity of the World Trade Organization's rules and functions in international trade. Everyone who knows about it basically cares about World Trade Organization. However, caring can be in both extreme by either being negative or positive about the system implemented by the World Trade Organization. However, over the years, the talks involved in World Trade Organization focus on violent mass protests (BBC News 2003). According to the report, the World Trade Organization is not officially part of the United Nation and this makes it not required to put in force UN environmental which is mandated and recommended in its formulation of trade policy (Leibowicz 2009). This situation puts the World Trade Center on the spotlight as nuisance in considering its goal of promoting free trade and considerations in environmental concerns. Another thing, it is good to hear that many disputes were brought to World Trade Organization for specific action but most of them were stranded against the wall of noncompliance (Pauwelyn 2000). This adds to negative speculations about the capacity of World Trade Organization to handle issues and solve problems. In his news article, Bradsher (2006) reported that China has again ignored another World Trade Organization ruling. This again poses another negative publicity for the World Trade Center with its fair trade rulings unenforceable. So many negative feedbacks were faced by the World Trade Organization and this simply implies that it fails to satisfy those who were making violent protests against it. In other words, it cannot be guaranteed that the World Trade Organization got a very high satisfactory rating when it comes to its offered services. For as long as it promises to ward off poverty and inequality but still many continue to be poor and poorer than ever and will continue to feel inferior, the World Trade Organization will just remain to be a puppet of influential and powerful economies in the world. Then equality will always remain a dream for developing countries and this concept will continue to be a stepping stone for the first world countries to continuously advance farther over the other. List of References BBC News 2003, Why we should care about the WTO', Available at: http://newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/2/hi/programmes/breakfast/3095722.stm Bradsher, K 2009, 'WTO Rules Against China's Limits on Imports', New York Times, [Online] Available at: http://community.nytimes.com/comments/www.nytimes.com/2009/08/13/business/global/13trade.html'scp=2&sq=issues%20about%20wto&st=cse Global Exchange 2008, Top Ten Reasons to Oppose the World Trade Organization, Available at: http://www.globalexchange.org/campaigns/wto/toptenwto2008.pdf Hill, C 2003, International Business, International edn, Mc Graw-Hill Companies, United States. Leibowicz 2009, 'WTO Trade and the Environment Update', Harvard Model Congress Europe 2009, [Online] Available at: http://www.hmceurope.org/2010/docs/updates/WTO_trade_environment_update.pdf Lijia & MacLeod 2000, 'We Are Not Ready For WTO', China Online, [Online] Available at: http://www.globalpolicy.org/component/content/article/209-bwi-wto/42732.pdf New York Times 2009, WTO, Available at: http://topics.nytimes.com/top/reference/timestopics/organizations/w/world_trade_organization/index.html'scp=1-spot&sq=wto&st=cse Palmer A., B Hartley 2002, The Business Environment, 4th edn, Mc Graw-Hill Companies, New York. Pauwelyn, J. 2000, 'Enforcement and Countermeasures in the WTO: Rules are Rules-Toward a More Collective Approach', The American Journal of International law, vol. 94, no. 2, pp. 335-347. Rosenberg, T 2002, 'Globalization', New York Times, [Online] Available at: http://www.nytimes.com/2002/08/18/magazine/globalization.html'pagewanted=all&pagewanted=print Walker, A 2001, 'Trade talks and the poor', BBC News, [Online] Available at: http://news.bbc.co.uk/2/hi/business/1640681.stm World Trade Organization 2008, 10 benefits of the WTO trading system, Available at: http://www.wto.org/english/res_e/doload_e/10b_e.pdf World Trade Organization 2008, 10 common misunderstandings about the WTO, Available at: http://www.wto.org/english/res_e/doload_e/10mis_e.pdf World Trade Organization 2008, The WTO in Brief, Available at: http://www.wto.org/english/res_e/doload_e/inbr_e.pdf World Trade Organization 2008, Trade Liberalization statistics, Available at: http://www.gatt.org/trastat_e.html World Trade Organization 2008, Understanding the WTO, Available at: http://www.wto.org/english/thewto_e/whatis_e/tif_e/understanding_e.pdf World Trade Organization 2008, WTO Mission Statement, Available at: http://www.wto.org/english/thewto_e/whatis_e/wto_dg_stat_e.htm Read More