Government-Business Relations - the World Trade Organization and OECD - Case Study Example

Government-Business Relations Name: Institution: Date: 3. Do international institutions such as the WTO and the OECD help or hinder economic development in developing nations? Discuss, incorporating or countering the “democratic deficit” argument. Introduction The international production fragmentation in the global value chains challenges in the manner in which the global economy is perceived. It is important to comprehend how global value chains how they influence economic performance and what policies assist in deriving greater benefits from them. Institutions like OECD has great influence on global value chains including investment policies, trade policies, innovation policies, and structural and framework policies that influence how and to what level developing and emerging economies can gain from participating in global value chains (Li, 2003, p.653). The World Trade Organization and OECD joined forces in producing new estimates of international trade. The two international organizations will continue to persistently update the database to improve its reliability and quality and expand the geographical and industrial. International institutions have played a big role in enhancing economic development in developing nations despite the challenges encountered from one country to another. The institutions have facilitated growth of trade and achievement of integrated of global environment (Milner & Keiko, 2005, p.108). Developing nations have benefited from the roles of international institutions like WTO and OECD. Development goals set for developing countries by institutions like the World Bank and IMF has helped them to grow. International institutions impact on developing countries The global market is not a level playing ground for all countries in the world. The least developed and developing countries face competition from developed countries that have better technology and produce high quality products. Policies crafted by international institutions like OECD and the WTO are used to protect the emerging and least developed economies (Granovetter, 2005, p.37). Despite the claim of democratic deficit, international organization or institutions have played a crucial role to the attainment of a level playing ground. Practically many domestic and external factors dictate a country’s export performance and generally the pace of integration into the global economy since no country operates independently. Trade liberalization enhanced by international institutions has resulted in the elimination of trade barriers especially for tariffs and has led to further costs’ reduction (Aoki, 2007, p. 3). Investment liberalization has allowed companies to differentiate their activities and liberalization in developing and emerging economies has assisted in extending global value chains beyond industrialized countries. Costs have also been brought down by regulatory reforms in key infrastructure and transport sectors like air transport. International institutions have promoted the adopting of market-friendly policies in the developing nations to boost economic development. Some conditions for eligibility of financial aid have been liberalization of policies towards foreign direct investment (FDI) and trade. FDIs have thrived owing to the functions of international institutions in the global economy. The OECD is a special forum where the governments of thirty four democracies work together to deal with social, economic, and environmental challenges brought about by globalization. The OECD group has leading role in efforts to comprehend and to assist governments to deal with new developments as well as concerns like corporate governance, the problems an ageing pupation, and the information economy (Mukherjee, 2008, p.125). OECD offers a context where member countries are able to compared policy experiences, look for solutions to common problems, point out good practice, and work in the coordination of international and domestic policies. Member countries of OECD rely on its Secretariat in Paris to monitor trends, collect data; forecast and analyze economic developments; and research patterns and social changes in trade, agriculture, environment, innovation, society, public and corporate governance, taxation and sustainable development (Caney, 2001, p. 984). In the course of the financial crisis OECD played a crucial role by offering analysis of cross-country market reforms as well as programs for stimulation of growth of economy. The United Nations Conference on Trade and Development (UNCTAD) together with other international organizations reaffirm their support to developing economies for the purpose of implementing the WTO Trade Facilitation Agreement. International organizations have supported economic development in developing nations (Jensen, 2004, p.194). UNCTAD has a long history and experience of about four decades in the implementation and design of trade facilitation solutions in many developing nations. An important example is the gains of a more efficient and effective trade administration which had assisted numerous developing countries and those that are least developed to increase their revenues and allow licit trade whereas dealing with illegal traffic of goods and fraud (Grant & Keohane, 2005, p.31). UNCTAD has assisted developing countries particularly in Africa to deal with institutional and technical challenges as a result of compliance with the discipline of the WTO Trade Facilitation Agreement. The function of WTO has been relevant in the attainment of several Millennium Development Goals (MDGs) but MDG 8 has been important in achievement of a global partnership to foster development. The aim of MDG focuses on the need to cater to poor, disadvantaged and least-developed countries within the multilateral trading system. Least developed countries see the essence of trade in the support of economic growth, reducing poverty and attainment of MDGs (Milner & Keiko, 2005, p.108). The work of OECD in trade supports rule-based, strong multilateral trading system for maintaining the momentum for trade liberalization while contributing to sustainable development. OECD has strengthened the trade policy dialogue with emerging and developing economies, enhances the understanding of the impacts of trade liberalization, and enhances mutually beneficial integration of the economies in the multilateral trading system. Opening the economy for global trade is not adequate. The gains of a liberalized trade regime will be achieved in an economy that has efficient infrastructure connecting local producers to regional, domestic and global markets and a regulatory environment which enhances a private sector that is vibrant. Developing countries require aid in building their trade-related capacity with regard to policies, information, procedures, infrastructure and institutions to integrate as well as compete effectively in the global markets (Bacchetta & Jansen, 2003). The effects of trade expansion and reform on the poor are context-specific with regard to consumption pattern of the poor. The concept of a global partnership is part of the WTO mandate describing the pursuit of global coherence in economic policy making. The core previous mandate particularly advised cooperation with the International Monetary Fund (IMF) as well as the World Bank. The mandate of WTO has expanded over the years and it is scope comprise of cooperation with OECD, the UN system and other financial institutions on a variety of issues. Whereas the level of the cooperation can vary, the coordination enhances the creation of a comprehensive approach in dealing with multi-faceted global challenges and to have positive effect for the attainment of MDG 8. MDG 8 acknowledges that the capacity of developing countries to attain sustainable levels of growth in many circumstances depends on the global environment within which they operate (Li, 2003, p.653). The contribution of WTO in the attainment of a more favorable global environment in the part of developing countries is crucial. The WTO is playing a significant role in partnership with other organizations internationally in assisting developing countries to increase their share in the world trade and hence move closer to fulfillment of their development aspirations (Grant & Keohane, 2005, p.31). The world trade organization serves as a forum for the functions of a huge number of actors like regional development banks, civil society, donors, and international organizations. The global economic crisis demonstrated the vulnerability of least developed and developing countries to trade shocks in the global environment. Help to developing and emerging economies is very important to strengthen trading and expansion polices. Financial globalization can assist developing countries in the better management in of output and consumption volatility (Bacchetta & Jansen, 2003). The importance of global financial diversification is that an economy is able to shift from its income risk to world markets. Majority of developing countries are specialized in their output as well as factor endowment structures and they can get larger gains as compared to developed countries by international consumption risk sharing. Overlapping policies and regulations by international institutions have led to confusion in nth world global market where other traders are crying fail. The issue of democratic deficit points to the lack of independence in decision in developing countries to design what is best for them. Sometime the developing countries do not have the company to deal with the challenges faced in the global market requiring support from international institutions (Granovetter, 2005, p.37). Democratic deficit argument cannot hold so much since no nation can exist independently without the global economy. Trade liberalization is important for developing countries. Conclusion International institutions have played a major role in liberalization of trade and facilitating structural reforms through review of policies. Developing countries have benefited from structural reforms advocated for by international institutions like the World Bank and IMF. OECD and WTO have encouraged trade through elimination of barriers and provision of information about markets. The impact of international institutions to the economic development of developing countries has been tremendous. Despite the claim of democratic deficit some of the policies recommended for developing countries are helpful. Integration of different regimes of economies has been facilitated by international institutions. References Aoki, M. (2007), Endogenizing Institutions and Institutional Change, Journal of Institutional Economics, 3 (1), 1-31. Bacchetta, M. & Jansen, M. (2003). Adjusting to Trade Liberalization: The Role of Policy Institutions and WTO Disciplines, Special Studies No. 7, World Trade Organization, Geneva. Caney, S. (2001). International distributive justice, Political Studies 49 (4): 974–97. Granovetter, M. (2005), The Impact of Social Structure on Economic Outcomes, Journal of Economic Perspectives, 19 (1), 33-50. Grant, R.W., & Keohane, R.O., (2005). Accountability and abuses of power in world politics, American Political Science Review 99 (1): 29-43. Jensen, N. (2004). Crisis, Conditions, and Capital: The Effect of the IMF on Direct Foreign Investment, Journal of Conflict Resolution 48 (48): 194. Li, J. S. (2003), Relation-based versus Rule-based governance: an explanation of the East Asian Miracle and Asian Crisis, Review of International Economics, 111 (4), p. 651-673. Milner, H.V. & Keiko, K. (2005). Why the move to free trade? Democracy and trade policy in the developing countries, 1970–1999, International Organization 59 (1): 107–43 Mukherjee, B. (2008). International Economic Organizations and Economic Development, SAIS Review of International Affairs 28 (2): 123–137. Read More