International Business Challenges - Assignment Example

International Business Name: Tutor: Subject: Date: Introduction International companies carry out their business globally. These firms can sometimes meet various challenges when exploring new markets for their existing products or new products. Firms across the world utilize World Trade Organization (WTO) in conducting business. They prefer world trade organization because it is the only efficient global international organization that harmonizes the rules of trade between nations. The primary benefits of trading under world trade organization are that business organizations are able to predict the future of their products in the market. To ensure efficiency, multinational companies engage their government so that they can fight on their behalf. Governments consider essential to support their multinational companies because the effects of multinational companies affect the government in various ways. Multinational companies reflect the weaknesses and the strengths of their own country. Because of this, governments can go the extra mile of spending public funds with the aim of supporting individual companies (Becchetti, 2013). The main aim of government helping their multinational companies is to ensure that the business makes most use of the existing global trading opportunities. Government supports their local industries in various ways. Some of these ways include tax reliefs, various forms of grants, goods and services provided on preferential terms and guarantees. In some other cases, the government can provide assistance to small business that is facing difficulties in raising capital. The role of World Trade Organization The world trade organization plays a vital role in the international trade. Some of the core functions include the following: a) Trade negotiation They help in negotiating the terms of trade between countries. The organization ensures that the tariffs imposed are on the minimum wage. Furthermore, the institution ensures that the countries trading under world trade organization have no barriers that can interfere with free trade. They normally do this through an agreement which is reviewed yearly. b) Implementation and monitoring The world trade organization ensures that all the policies and regulations adopted by the members are transparent. The institution scrutinizes all the rules, laws and regulations adopted by its members. This will facilitate the smooth flow of business because members will know trade regulations that exist in certain countries which they intend to trade with. c) Dispute settlement There are cases when a member country feels that their rights are violated, especially when negotiating terms of trade. In such instances, the world trade organization settles such dispute by appointing independent experts. However, it is so hard for such cases to happen because the world trade organization have established procedures and guidelines to be followed when negotiating terms of trade that will guide the entire trading process. d) Building trade capacity The world trade organization has especially programs that focus on supporting developing countries. The organization has developed these programs so that they can assist 3rd world countries in improving skills and infrastructure requirements. This is beneficial to developing countries because it improves their capacity to access opportunities just like the developed countries (Lee andWilkinson, 2013). Firms and multinational companies can benefit from the above services provided by the world trade organization if they are represented by their countries. In this way, the government can fight for the firms’ right in case they are being violated by other members. However, world trade organization is currently facing various challenges from the most world trade powers. These super powers countries are looking to protect their infant industries under bleak economic conditions. Another challenge facing world trade organization is the rise in the bilateral and regional Free Trade Areas. Most of the countries are currently focusing on negotiating their own trade terms. Some of these are, in fact, doing this at the at the cost of exploiting the World Trade Organization. For example, the United State of America is currently pushing for the formation of the Trans-Pacific Partnership (TPP). The United State is doing this as a strategy of dominating the Asia-Pacific Region. Furthermore, the two world trade giants, that are the United States and European Union are now discussing establishing a Free Trade Agreements across the Atlantic (Haufler, 2013).  The world trade organization is currently facing a growing challenge because of the impact from this trade pact. Besides, there is a revival of the Doha Round of Trade talks. This will undermine the nature of world trade organization. Following the Above challenges facing the world trade organization, the management needs to strategies on how to maintain the institution. It is essential for the institutions to convince members that they are better, and they will deliver quality services to its members. How firms use the World Trade Organization and its rules to their advantage Various firms across the world utilize WTO and its rules to their own advantage in following ways. a) Stability in External Economic Relationships Most firms will be able to access international markets easily because the world trade organization will help in eliminating disruptions in foreign trade that are caused by the unpredictable policy shifts. In such situations, various firms will be able to attract foreign investors who can use the firms’ countries as their export platform. This will improve competitiveness of such firms because it will be known internationally. Also, the firm will access other benefits such a more capital, technology, management and foreign market information. Multinational companies will also benefit from the world trade organization because they will be able to eliminate trade and investment friction that might arise while trading in the international market. Such issues are always solving through the WTO's trade rules and the organization's dispute settlement mechanism. This is a great improvement because it will automatically replace the existing traditional method whereby the dispute is settled by mutual threats and brinkmanship. b) Firmer and Speedier Economic Reform Firms benefit a lot by being members of world trade organization. This is because the organization will regulate the operation in the market. The existing mechanism designed by the world trade organization will ensure that the infant industries will be protected from exploitation by firms from countries that are developed. The WTO’s policies ensure that the local firms that are participating in the international trade undergo large scale re-structuring so that they can be inefficient in serving its customers. Finally, the world trade organization members will speed the implementation and enforcement of existing laws on the books. This is very important because it will protect the honest firms from poor ethical standard and outright cheaters. c) Long term growth Firms that enter into world trade organizations will face competition that will improve their efficiency. The increased competition in the market will reward innovation and efficient firms in the country. In addition, the competition is essential because all inefficient firms and those with technological laggards are likely to terminate their business. d) Short term cost versus short term benefits Firms benefited a lot because it could possibly access the markets for its products. The world trade organization provides essential information concerning the markets for the firms. Furthermore, the firms could easily know the right quality for the international market and also the relevant regulation to comply with before entering foreign markets. It cannot be denied that there would benefit for firms that have accession to the world trade organization. The institution solves various problems that can arise while forming a trade agreement in the market (Chaisse and Matsushita, 2013). Advantages and disadvantages of national firms in engaging their governments on their behalf in WTO The rules and regulations of the world trade organizations do not allow firms to participate in dispute settlement. Firms must be represented by their government in participating in dispute settlement. This is essential because the interest of the firm is well taken cared-for by the government. Secondly, the government will ensure that they control the actions of foreign-owned firms from exploiting the local firms that are still growing. This is another reason why the government should represent its firm in the world trade organizations. Besides, smaller firms might find it expensive to comply with the terms and regulations of the world trade organization. It is, therefore, essential to be represented by their government. World trade organizations can pass some issues that must handle by the government. For example, lowering tariffs or doing away with them requires the government to implement them and not the firm. In such cases, the firm needs to represent by the government so the government itself can implement them. The government should also ensure that the firms in their countries are benefiting from the world trade organization just like other firms from countries that are developed. There are cases whereby the conditions passed in the world trade organization favors only firms that are from developed countries (Hajnal, 2013).  However, there are various problems that can arise when a government represents its firm in the world trade organization. Some of these issues include the following: a) The government can expose infant industries by allowing foreign-owned companies to carry out business. These companies will import cheap products making the local companies inefficient. b) The government might fail to represent the essential issues that can affect the infant industries in the country. In conclusion, it is vital for a company to be a member of WTO because it will benefit in various issues such as expand market for its products and services. Furthermore, the company will be exposed to healthy competition. Free trade will encourage comparative advantage because companies will focus on what they product at a lower opportunity cost. Finally, the free trade will encourage competitiveness in the company. All monopolistic companies will definitely improve on their quality because they will face competition from external companies. References Becchetti, L. (2013). 14. Fair trade. Handbook on the Economics of Philanthropy, Reciprocity and Social Enterprise, 144. Lee, D., & Wilkinson, R. (Eds.). (2013). The WTO after Hong Kong: progress in, and prospects for, the Doha Development Agenda. Routledge. Haufler, V. (2013). A public role for the private sector: Industry self-regulation in a global economy. Carnegie Endowment. Hajnal, P. I. (2013). The G8 System and the G20: Evolution Role and Documentation. Ashgate Publishing, Ltd.. Chaisse, J., & Matsushita, M. (2013). Maintaining the WTO's Supremacy in the International Trade Order: A Proposal to Refine and Revise the Role of the Trade Policy Review Mechanism. Journal of International Economic Law, 16(1), 9-36. Read More