Global Business Strategy - Coursework Example

Topic: Global Business Strategy The world is driven by the movement of international and domestic economiesof nations. In liberalized nation doing international trade relations, economic decisions are often with resultant impact to politics and policies to host countries. Such was developed and shaped by influential mechanisms and frameworks which swerve world economy and social changes. This paper discusses the theories of liberalism, economic nationalism and structuralism with anent critical application to World Trade Organization (WTO). This further asserts that liberalism and structuralism dominates and applies to WTO system as an organization that is weaving global influence in world political economy. Liberalism, National Protectionism and Structuralism Liberalism theory is etymologically derived from individual’s love of freedom and democratic principles. Applied to governance, liberalism adheres to liberal democracy which is inclined to more peaceful administration of government. Pluralist liberalism contends that the inequitable distribution of power cause gaps and may result to international conflict while economic liberalism rest on economic interdependence of states to establish peace and cooperation (WTO, 2011). In regulatory processes, liberal policies and foreign relations are driven by the principle of accommodation. Under liberalism, individuals and private groups seek to promote their independent interests within the context of differentiation, individual autonomy and an unlimited competition by seizing either absolute or comparative advantage (Roy, 2011). It seeks to limit the role of the state in the economic activities. Economic nationalism, on the other hand, refers to the set of policies which regulate the capital generation, economic control, labor management. Capital generation also deals with tariff imposition and some restriction on the movement of labor, goods and capital (The Economist, 2009). It is contrary to globalization, liberalization and unrestricted free trading. It seeks to assert the role of the state in managing national economy. Cross-national trading is consistent to economic protectionism and import substitution. As a consequence of this, economic protectionism extols the imposition of tariff trade to control national involvement in international trading and encourage their local industries to cultivate their business, unions and market for domestic competitiveness (Economist, 2009). Roy (2011) pointed that a country barring economic liberalization would confront problem on decreasing trade relations and poor strategy in trade management. Under mercantile operations, protectionist economy prefer the exclusive trading within a region or country, hence, their raw materials and resources are not exported but are utilized for its own populace. Developing internal competitiveness proved advantageous for them to nourish their independence, inventiveness and innovation in managing domestic markets (Economist, 2009). It’s likewise aimed at stimulating its economy, free from external compulsion and to revolve their finances within. It is against foreign acquisition of national resource for multinational-sourced developments. Structuralism is a theory which focuses on framework or models about how an institution or organization coordinate and interrelate for the full completion of their tasks Structuralism relates to the ties of government and its people in an interrelated social fabric and operation of governance (Balaam & Dilham, 2010). In trading, this points to the relation of investing countries to host nations in international trading relations. Since structure binds people, the political and economic relations are likewise sensitive to system of social behavior, culture, economic dynamism or political processes. It illustrates some frameworks and policies that are maybe extensive, diverse and sometimes complicated, especially on international market relations between less developed countries and the industrial or advanced nations (Balaam et. al., 2010). To cite an example, advocate of liberalism has a structural expression of international free trading and organized themselves into a group of nations involved in multinational and global business operations (WTO, 2011). Those who are opposed to it have structurally mapped our labor issues, ecological problems and human rights-related issues (Roy, 2011). It likewise focused on the need for global security management and structure as economic expansion cross-boundaries amongst nations who subscribed to liberalized global relations. Under this theory, class analysis is significant to understand how dominant class controlled and govern the political and economic structures of the society. The dominant class may vary in ways but they agree to work to achieve their intentions. WTO: feature and economic liberation World Trade Organization (WTO) shares these theories in its establishment and formation, although the institution thrive more with the theories of liberalism and structuralism, albeit some degree of protectionism are evident in the pursuit of their interests and goals. It’s supposedly guided with the principles of non-discrimination, multilateral negotiations, fair competition, flexibility, and transparency (Roy, 2011). WTO (2011) is an institution which encourage global capital markets, economic co-operation, and to supervise the liberalization of international economy. The organization formally came into existence on January 1, 1995 following the Marrakech Agreement which replaced the General Agreement on Tariffs and Trade (GATT) in 1948. In the exercise of its power, member states of WTO use consensus in deciding conflict situation under the Dispute Settlement Panels which cannot be overturned except by consensual reversion too (Roy, 2011). It also deals with the regulation of trade among participating countries and accord the necessary framework in the process of negotiating and formalizing trade agreements. It has also its system of dispute settlement process to ensure that member states adhere to WTO agreements that are signed and ratified by member countries. Experts posit that common problems and issues confronted by the institution came from previous trade negotiations like those matters derived from the Uruguay Round (1986–1994) WTO (2011) is presently working to systematize and gain from trade negotiations done from Doha Development Agenda (or Doha Round) to generate more participation from developing and emerging economy where most economically challenged people are living (Dinu, 2005). These agenda however confront the challenges of disagreements in import and export relation of commodities and it’s anent necessary safeguard or measures aimed at protecting the surges of imports. WTO (2011) has 157 member countries or about 97% of the world’s nations while there are still 26 countries as observers in status. It is governed by the ministerial conference which gathers and meets every two years. Structurally, it has a general council which enforces conference policy decisions and administration. It has a director general that is appointed by the ministerial conference. The organization is The WTO's headquarters is at the Centre William Rappard, Geneva. Switzerland (WTO, 2011). Member states here work to come up with agreements, draw negotiations and develop policies for international commerce. These agreements are basically contracts which bind governments to keep trading relations within agreed limits toward facilitating the production of goods and services, reinvigorating import and export business, and encouraging government to protect or uphold social and environmental causes (Schoenbaum., 2005). The mechanism and system’s underlying purposes are to smoothens the progress of trade flow and reduce potential social impact in order to balance development with social and economic well-being. Such meant that multinational corporations who would be bringing in investments seek the removal of protectionist policies against trade rules. Since trade relations would encourage the emergence of conflict between investors and host country, WTO (2011) developed measures to settle disputes or conflicting interests. Member states involved in trade relations would have wanted that trade rules will also have measures to harmonize conflicts through neutral procedures based on legal causes. In resolving conflicts, WTO have provided dispute settlement frameworks. So far, they have decided over cases on disputes on beef hormones between EU-US; banana dispute between EU-US/Latin America; and, about US Foreign Sales Corporations between EU and US (Roy, 2011). WTO not beneficial Economists believe that with WTO (2011), governments lift their protectionist measures in the most non-traditional way of economic means of economic expansion, not through invasion, but by encouraging nations for economic liberalization. For experts, they call this an alternative for world peace. They further contend that through this system they handle dispute constructively using policies and thought of decreasing tariff rates to lower the cost of living via free trade. They further argued that free trade offer variety of choices over quality products and raises income of workers and revenue for government (McGee & Yoon, 1998; Bello, 2011). They likewise contend that government are protected from lobbying, promotes efficiency, and encourages transparency of government. However, while economic liberalism extols its positive contribution to emerging economies, there remain some critical issues that need to be addressed. Bello (2000) contends that WTO made it appear that US and its allies are necessary for emerging economy. Bello (2000) asserted that WTO is not necessary for third world economies because it has not benefited them, instead, it has served the interests of dominant first world nation, such as United States of America. Bello (2000) further asserted that emerging nations did not become a member of the organization in voluntary context and in freewill. It was out of pressure that made the agricultural economies are integrated into the GATT-WTO in 1995 during the Uruguay Round negotiations in 1986 by instilling precept that food security can only be secured by US agricultural products which can be availed at lower costs. Bello (2000) contended that such was asserted by first world countries which believed that with the burgeoning of international and financial services, third world needs to succumb to their global strategies. Bello (2000) pointed that it was not the third world country who were eager to integrate the poor nations to this organization but its US who pushed to bring services under WTO coverage and who expanded WTO jurisdiction under that Trade-Related Investment Measures (TRIMs) and Trade-Related Intellectual Property Rights (TRIPs). TRIMs aim to remove the protectionist policies to improve the transnational and multinational movement of cross-border product trading. Through WTO, advance nations gather the advantages to consolidate the cutting-edge knowledge-intensive industries (Bello, 2000). It was also criticized that most of the rulings made to disputes are decided in favor to United States. As such, the dispute settlement mechanisms and it’s anent institutional structures has served the political and economic interests of America in a similar tone as how they enjoyed such international machinery that lifts and removed trade barriers. However, in a case involving United States and Costa Rica on the restrictions on imports of cotton and man-made fiber underwear, the panel cited ATC Art 6.10, that on the bases of issues relating to prescription period, such must be clearly expressed otherwise it will create a presumption of prospective application. The panel pointed that USA failed to comply it s obligations “to examine causality” (WTO, 2010; p. 1). The panel argued that some country specific measures have general application and must reflect the significance of transparency and due process (WTO, 2010) Conclusion WTO clearly rest on the theoretical model of economic liberalism. Its structures and mechanisms, albeit it’s pronounced causes, for Bello (2000), are merely serving the interests of advance nation’s corporations. Under the free market perspective, the rules and agreements made, fortify a system of global hegemony that essentially provide profit for America and other leading first countries. While they are leveraging to advance their economic interests under free market economy, there is however a need to develop and strengthen protectionist policies for emerging economies so that they will not suffer grave plunder of resources and finances for the interest of multinational corporations who sipped the economic blood of a developing nation by offering cheap tariff and caused the elimination of trade barriers for their favors. However, for those who have embraced economic liberal policies, the challenge rest on crafting a comprehensive development framework to reduce poverty by nurturing anti-corruption practices, efficiency of legal and financial systems, making the safety nets, and engaging the community for participation. References David Balaam, Bradford Dillman (2010). Introduction to International Political Economydav, 5th International Edition, Pearson Education, Canada. pp.1-576. The Economist. The Return of economic nationalism. The world Economy, The Economist Newspaper Limited, UK,, London. 2009. Mark Glazer, Structuralism. University of Texas-Pan-American. McAllen, Texas, USA. December 14, 1994 World Trade Organization. Ten Benefits of World Trading System. Geneva,Switzerland. 2011. World Trade Organisation WTO, "World Trade Report 2011- The WTO and Preferential Trade Agreements & From Co-existence to Coherence," Working Papers id:4335, eSocialSciences. 2011. WTO, (2010). United States — Restrictions on Imports of Cotton and Man-Made Fibre Underwear. Costa Rica versus USA with India as third party. http://www.wto.org/english/tratop_e/dispu_e/cases_e/1pagesum_e/ds24sum_e.pdf Accessed: January 6, 2012. Robert W. McGee & Yeomin Yoon, "Korea and the World Trade Organization: Problems and Prospects," International Trade 9805006, EconWPA. 1998. Thomas J. Schoenbaum, "The World Trade Organisation and agricultural trade reform," International Journal of Agricultural Resources, Governance and Ecology, Inderscience Enterprises Ltd, 2005, vol. 4(3), pages 255-261. Vasile Dinu. "The World Trade Organization Exigences Concerning the International Trade Liberalization," The AMFITEATRU Economic Journal, Academy of Economic Studies - Bucharest, Romania, 2005, vol. 7(17), pages 21-26, April. Bello, Walden, WTO: The Serving The Wealthy, Not The Poor. The Ecologist, 2000; pp. 1-3. Nelson Roy. Managing Global Trade Relations: GATT/WTO. A Powerpoint Presentation in an Academic Course, Geneva Graduate Institute and Thunderbird, Geneve, Switzerland, December 5-10, 2011. Read More