The World Without WTO - Coursework Example

Will the world be better if the WTO did not exist? The World Trade Organization (WTO) has been created to supervise and liberalize international trade. It is an international organization which came into being on January 1, 1995. WTO is actually the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1948, and operated for almost five decades. The major aim of the WTO is to promote free trade and stimulate economic growth of its member countries. It negotiates and implements new trade agreements among its member countries. WTO has also the responsibility of policing member countries adherence to all the WTO agreements. WTO has 150 members, Vietnam being the 150th. WTO derives its strength from the commitment of its member nations to managing trade with a common set of values including honesty, sincerity, transparency, predictability, nondiscrimination and a rule-based dispute resolution. WTO contains a basic set of rules that all its member states have to comply with. These rules basically put some obligation on the member nations. Some of the general obligation faced by the member countries are as follows: each member nation (i) must apply the same trade policies to all WTO members (with exceptions for regional agreements), (ii) must treat foreign goods equally with domestically produced ones when applying trade-related regulations, (iii) must not use quotas or export subsidies, (iv) should impose tariffs which are more transparent. Apart from this a member nation has to promise not to augment the level of ordinary customs duties above levels negotiated with other WTO members. (Das, 1999; Bossche, 2005) Joining the WTO is basically a commitment to enter the world market which is governed by a set of transparent and strict rules and regulations, to access to the large and open market of 150 countries. Once a country joins the WTO, it is granted with benefits and responsibilities, advantages and disadvantages, and great opportunities and big challenges at the same time. When a nation joins the WTO, it gets an access to huge international market. Joining the WTO also sends a strong signal to the nation’s trade and investment partners about that country’s future direction in respect of trade. Not only in respect of trade , joining the WTO could be considered as a spanking new start of a comprehensive reform in economy, law, administration, education, training, and culture. Once a country joins the WTO, its economy starts to adjust to market changes that lead to labor and training changes. Joining the WTO apparently provides the signal of huge economic development in near future, but these developments not only comes with a lot of favorable opportunities but also with high risks. Since a member country requires to undertake a substantial set of reform programs for leveraging the benefits of market access requires, domestic producers face a number of impediments including tariffs that tend to undermine the benefits of improved market access. The risks in business and investment become very high. Therefore, it can be said that membership of WTO brings about a large set of disadvantages along with benefits. (Bora et al, 2000) Very often, the risks joining this international organization outweigh the benefits that could d be attained by joining it, especially in case of developing countries. Very often WTO is accused of being a tool of enhancing the interests of developed nations only. Critiques say that WTO is benefiting richer nations to the detriment of poorer ones. Whether world would be better of without WTO is a very critical question. For answering this question one need to find out whether the WTO treaties are working against the interest of poorer nations, whether the condition of less developed countries have really deteriorated further after joining the WTO, and whether whole blame can be put on WTO if such deterioration in fact have occurred. Critiques have pointed out several disadvantages that a less developed country has to face if it joins WTO. These disadvantages are as follows- After a country enters into WTO, it has to meet some adjustment costs as it opens its markets to firms who hail from more competitive atmospheres. If the country is underdeveloped, or developing, it generally suffers from lack of commercial credit, legal infrastructure, a well-knit net work of market information, industry associations, and skill development institutions. Adding to these, high costs of doing business ensure that many domestic firms of a developing or underdeveloped country cannot be immediately competitive. As imports displace some domestic production, a huge number of jobs are also lost in short run. Joining WTO puts a set of Obligations on a country. These obligations require the member states to spend substantial human and financial resources on reform. For instance, implementing TRIPS requires extensive review and possibly rewriting of laws in many member states (e.g. Cambodia). In certain areas the government may feel it necessary to set up new agencies or reorganize existing ones, acquire specialized equipment, and augment skill of government officials. These reforms are found to compete with other public policy priorities for scarce government resources in many countries, particularly in less developed member states. By joining a large international organization like WTO with established rules and regulation, there takes place an inevitable tradeoff in terms of freedoms to set policies of a country, particularly those policies that might contradict the core values and rules of WTO. For example, after entering into WTO, a country no longer enjoys the freedom of selectively offering access to its markets to a narrow set of countries at the cost of all other WTO members, or offering high tariff protection beyond what was negotiated. Since entering into WTO causes further opening up of the domestic market to huge international market, a large number of domestic products, firms and industries face more intense competition. The expansion in market access is also accompanied by the reduction of tariffs and the abolition of non-tariff measures, more foreign products, services and investments possibly enter domestic markets. As a result domestic enterprises will face fiercer competition from very competitive international firms. In developing nations the domestic products’ quality is far less than that of their foreign counterpart. As a result domestic products find it very difficult to survive in the fierce competition. Many domestic firms stop their production, and as a result many people loose their livelihood. Once a country joins WTO, foreign economic and trade management, to a large extent, becomes subject to the restriction of WTO rules. The country’s foreign-related economic laws, regulations and policies have to completely conform to the stipulations of WTO regulations. It becomes a huge and complicated task for a nation to restructure its foreign economic and trade related laws so as to conform to WTO rules and regulation. For developing nations this task seems to be more complicated The adjudication on the solution of multilateral disputes among member states may also possibly produce results unfavorable to a certain country. (Bhagwati, 2005) Therefore, a less developed country, after joining WTO, has to face the challenges of competing with stronger competitors even in the domestic market, complying with the stricter and fiercer regulations. It is not that the above kind of problem exists only for developing nations. Rich countries also faces similar disadvantages, but since they have a strong economy, and they are dominating in nature the extent to which they have to face these problems are far less than under-developed nations. Although Promoters of the WTO often argues that it provides developing countries with extended access to industrialized country markets, critiques point out that trade liberalization undermines less developed nations’ long-term development prospects. As mentioned earlier, small-scale, locally owned firms face huge difficulty when they compete with international firms. This is mainly because these small domestic firms lack adequate access to capital, economies of scale, or advanced technology. This concern is particularly acute in agriculture, where WTO rules on trade and domestic policy reform undermine national strategies to ensure food security. New WTO rules have also reduced protections for local firms in the services sector. For example, now member nations have to allow foreign banks to open branches in small towns, threatening locally owned banks with deeper ties to the community. Many economists also fears that the proposed Multilateral Investment Agreement would further diminish developing countries’ power to protect local industries and cultures from being completely driven out of the market by foreign firms. (Bhagwati, 2005; Anderson, 2000) There is also another strong criticism against WTO that it encourages the corporations and the governments to gain unfair advantages in trade by even violating core worker rights and environmental standards except those which are recognized by ILO( UN affiliated International labour organization) conventions and international environmental treaties. Under the WTO regime , no nation is allowed to discriminate against products on the basis of how they are produced—be it by child labor or with environmentally destructive technologies. In some countries, imports of some particular products from some particular countries are banned for the reason that those products are produces by using child labour or some environmentally degradable techniques. For example, U.S. law, has banned tuna imports from countries that allow long circular nets designed to catch tuna, but which also trapped and killed numerous dolphins. However, to the WTO, it does not matter whether in the production process of a can of Tuna, Dolphins were killed or not. (Bagwell and Staiger, 2001) It has thus become quite clear that in a number of areas the working of WTO can not be supported by any thoughtful person. On the basis of the above discussion, one can argue that the World would have been better without WTO. But here arises one vital question: if the working of the WTO is detrimental to the interest of so many countries, then why so many countries are joining WTO? Critiques very often explain how the developmental prospects of developing or underdeveloped nations are getting damaged by the operation of the WTO. But the interesting thing is that being very well aware of what critiques say, increasing number of developing nations are joining the WTO. Every coin has two sides. While the working of the WTO is detrimental to the interest of developing nations, it also provided a number benefits to its each member nation- be it s developed nation or a developing nation. These benefits can be listed as follows: By joining WTO, a country would no longer be discriminated against in an unjust way by other countries according to the rules and regulation underlying the trading system implemented by WTO. This provides improved market access in a wide range of products and a wide range of countries. Joining WTO is very conducive to increasing export and attracting foreign capital. After entering the WTO, a country not only enjoys the advantages offered by other countries and regions opening their markets, but the WTO membership status also enable it’s products to possess more favorable competitive conditions than before, thereby promoting the countries export trade. Joining WTO also produces favorable conditions for accelerating the readjustment and upgradation of the domestic industrial structure. For any country, particularly for developing nations, the readjustment and upgradation of the industrial structure appears to be an important and pressing task. Joining the WTO, however, creates a favorable international environment for the completion of this huge and complicated task. By opening its markets to other member countries, a country can extensively use foreign capital and technology to do a make over of its traditional industries and accelerate the development of high-tech industries and service trades, and raise the overall levels of its industrial development. It is also conducive to a country’s participation in the world economic globalization process. In this process it can better pursue benefits and avoid harms and protect and expand itself. Entry into WTO helps a nation to participate in international competition and international cooperation. It also helps a nation to build its own transnational companies, set up enterprises in other counties and enhance the international competitiveness of its economy. It also provides an opportunity to all the people of the member state as being the consumers, i.e. to access to a wide variety of the goods and services, enjoy the low prices as a result of tariff reduction and competitiveness, and the growth of the information technology. People of the member nations get the opportunity of expanding their vision towards other civilizations and cultures, learning from the achievements of others, and at the same time developing their own national cultural values. (Bhagwati, 2005; Bora et al, 2000) Many people while pointing out the nagative sides of WTO suggest that the WTO should be abolished for the betterment of the world, but thye completely ignore all those benefits that it provides. It is true that abolition of the WTO would not destroy the process of globalization. But it would definitely wipe out a forum for governments to negotiate multilateral trade rules and a mechanism for holding them to those rules. That would make every country worse off, but the biggest losers would be the poor and the weak. One important benefit of the rules of the WTO is that these rules are applied to apply to big, rich countries as well as small, poor ones. Every nation, no matter whether it is small or big, poor or rich, makes an appeal to the WTO of it faces any difficulty in the process of free trade. When America put a ban on the imports of Costa Rican underwear, Costa Rica appealed to the WTO against these ban. It won, and America had to lift its restrictions. However, it would not have been possible for a small country like Costa Rica to force U.S to lift the ban, had there not been an international trade organization like the WTO. (Bronckers, 2001; Korten, D. 1995) Therefore, world would bot be better in the absence of The WTO. To make the world better what is needed is to make certain changes in the rules of WTO, and in the way of its operation. To create a more just and sustainable trade and investment environment, it is essential for the WTO to make itself more open and transparent, more democratic. It has to bring significant changes in the set of rules it is built upon. The main principles of WTO —national treatment and nondiscrimination—work well only when all nations’ level of development is equal. In today’s world this principle would not work well since today we have an unequal world. In this unequal world, nations must be given freedom to protect domestic industries and laws. The WTO should allow governments of low income countries to subsidize, favor, and protect local industries. Countries should be able to set domestic content levels to encourage local production, a practice now prohibited by the WTO. (Jackson, 2006) References 1. Anderson, K. 2000. Agricultures Multifunctionality and the WTO. Australian Journal of Agricultural and Resource Economics, 44(3) : 475-494. 2. Bagwell, K. and Stager, R. W. 2001. The WTO as a Mechanism for Securing Market Access Property Rights: Implications for Global Labor and Environmental Issues. Journal of Economic Perspectives, 15(3): 69-88. 3. Bhagwati, J. 2005. Reshaping the WTO. Far Eastern Economic Review ,162 (22): 28 4. Bassche, P. 2005. The Origins of the WTO, The Law and Policy of the World Trade Organization: Text, Cases and Materials. Cambridge: Cambridge University Press. 5. Bronckers, M. C. E. J. 2001. More Power to the WTO? Journal of International Economic Law 4(1) : 41-65. 6. Bora, B., Lloyd, P. J. and Pangestu, M. 2000. Industrial Policy and the WTO. World Economy ,23(4): 543-559 7. Das, B. L. 1999. The World Trade Organisation: A Guide to the Framework for International Trade. Penang, Malaysia: Third World Network. 8. Klein, N. 2000. No Space, No Choice, No Jobs, No Logo: Standing Up to the Brand Bullies. NY: Picador USA. 9. Korten, D. 1995. When Corporations Rule the World . San Francisco: Berrett-Koehler. 10. Jackson, J. H. 2006. The World Trade Organization: Structure of the Treaty and the Institution, Sovereignty, the WTO and Changing Fundamentals of International Law. Cambridge: Cambridge University Press. Read More