Impact of the World Trade Organization on Intellectual Property Rights - Essay Example

 Introduction Economics have been considered to have an important role at the global level due to their implications for firms, governments and individuals across the world. Economics remain an essential function of society, interdependent with the social and political functions (Kroll, 1999). Implications of economics can be seen at three levels. As regards individuals, economics influence their standards of living. As regards firms, economics determine the scope of their jurisdiction, i.e. whether a firm will engage in domestic, international or both trades (Kroll, 1999). Finally, economics affect the governments by determining nation’s financial resources needed in the sustenance of the country’s requirements. The World Trade Organization (WTO) is an international body which has the main responsibility of regulating trade between different countries engaged in commercial activities. For example, the WTO standardizes trading policies by finding a common ground between different domestic policies (Kroll, 1999). Recent years have proved to be challenging for trading activities, especially in what concerns the intellectual property rights. Due to differences in policies regarding the ownership and transference of intellectual rights from one person to another, these rights are a crucial issue of contention between countries engaged in trading activities at the international level (Kroll, 1999). The WTO continues to resolve disputes arising with regard to intellectual property rights by providing a standardized set of rules used in the judgment of these cases (Kroll, 1999). Compare and contrast free trade and protectionist theories Free trade recognizes individual rights to own and dispose of property and is a result of capitalism, which replaced the once popular mercantilism. Capitalism allows for privatization of wealth and the subsequent reduction of restrictions on trade, namely free trade (Craig, 1994). Free trade is considered an economic provision for exchange of goods and services without the intervention of the government, especially in view of foreign trade. In this scenario, the traders utilize the principle of comparative advantage, i.e. both parties benefit from the trade interactions. Ricardo (1817) demonstrated the gains from free trade by an example between two countries, which can use comparative advantage. Matters of guiding policies dictate that free trade ought to rely on supply and demand governing the prices and availability of the goods and services. However, comparative advantage, demand and supply do not guarantee fair trade. Nonetheless, free trade is a charitable foundation on which competitive markets thrive. It is more accessible for states and individuals to accumulate wealth and make profits from exporting and importing when they practice free trade. Like mercantilism, protectionist theories criticize capitalism and the principle of free trade and sustain that the government’s control over the importation, exportation and other forms of foreign trade is imperative and extremely beneficial to the nation and individuals. Craig (1994) emphasized that through policies (e.g. tariffs, import quotas, export subsidies and exchange rates), the government controls the processes of importation and exportation. Moreover, some states even impose embargoes on individuals and firms. Although protectionism is costly, there are arguments which favor this theory and restrict trade. One of them is referring to national defense and states that import barriers are necessary to ensure the capacity to produce necessary goods in a national emergency. Moreover, the protectionists’ barriers for trade are explained by the need to equalize the balance of trade by eliminating a balance of trade deficit or increasing a balance of trade surplus. An argument closer to this one is related to protection of jobs. A domestic industry which faces increasing imports from its foreign competition is forced to lower costs, making employees change jobs and, in some cases, leave for other cities (Coughlin, Chrystal, & Wood, 1988). Analyze, within the context of the WTO how the global environment functions on a micro and macro level WTO plays an integral role in the functioning of the global environment on a micro and macro level. Companies opting to employ a global strategy in their operations ensure that the allocation of their company resources occurs in a manner that will have as benefit the profit opportunities outside of their domestic markets jurisdiction. Therefore, these companies engage themselves in different activities, e.g. foreign investing, overseas manufacturing, and importation and exportation of goods and services (Arnold, 2008). Two levels of economics can be considered – microeconomics and macroeconomics – and this will be explained further (Gravelle & Rees, 2004). Microeconomics considers particular aspects of the economy and is related with the behavior of individual economic units (e.g. consumers, workers, and investors), whereas macroeconomics looks upon the larger picture and is related with aggregate economic quantities (Gravelle & Rees, 2004). In the wake of criticisms on capitalism and free trade, WTO acts as a watchdog to ensure that free and fair trade exists within nations. However, the functioning of this organization in leveling out the playing field is always under scrutiny. Arnold (2008) sustains that in more than one instance the WTO has undermined the sovereignty of nations just to uphold the principle of free trade. At the macro level, the accomplishment of broad economic objectives occurs through the institution of a global strategy (Slavin, 2006). Global strategies help companies address issues relating to foreign trade and competition posed by other companies in the international scene. Companies benefit from indicators such as the Gross Domestic Production (GDP) and price indices when making substantive analysis of the international trade scene. The WTO remains vigilant in relation to all the global strategies through the monitoring of trade restrictions – quotas and tariffs, for example. In addition, WTO monitors trade agreements formed between nations, which ensures that nations do not exploit each other when engaged in trading activities (Slavin, 2006). As a result, trading in the international scene remains free and fair to all nations willing to engage in it. It is crucial to note that the macroeconomic global strategies influence microeconomic strategies. Macroeconomic conditions are necessary but not sufficient on their own to create wealth. This can be explained by the conditionality between macroeconomic and microeconomic conditions. The microeconomic foundations of the company’s economy play an integral role in wealth creation because the company’s operating strategies and practices, infrastructure and regulatory policies constitute the business environment and contribute to the country’s economy. The WTO is responsible for ensuring that countries' microeconomic foundations do not conflict with the macroeconomic conditions accepted internationally (Slavin, 2006). Analyze, using the theory of two-level games, how organizations make financial decisions in a globalized environment The two-level games theory metaphorically portrays two individuals charged with the responsibility of making policies simultaneously playing two ‘tables’ (Cowles, 1995). The first represents international politics, whereas the other represents domestic politics. This theory is viewed as a political model that could prove useful in the resolution of conflicts between liberal or independent democracies. The embedding of the two-level game theory occurs both implicitly and explicitly in the formation of an international regime, which can be defined as a rule, norm or decision-making procedures in a given issue area (Cowles, 1995). For example, the United States is an international regime whereby the government officials’ motivations remain targeted at economic interdependence in policy coordination. Domestic policies might create a trade barrier for countries engaged in trade and have disputed views with regard to a policy (Cowles, 1995). Therefore, it is the responsibility of the WTO to create a standardized set of policies for all the trading nations. The WTO also advises governments to amend their policies and to accommodate the standardized international ones in order to avoid the conflict between domestic and international policies. Moreover, resolving conflicts between countries with regard to trading activities is also a responsibility of the WTO. Formulate an argument using economic theories that analyzes which parties would benefit from either increasing or decreasing trade restrictions Analysis into the history of the development of economic theories provides insightful information regarding the growth of international trade (Porter, 1994). As a result, one can use these theories to evaluate the consequences of increasing or decreasing trade restrictions on the involved parties. The European mercantilist era, a period which lasted between the 1500 and 1750s, provided the basis for the practice of contemporary international trade and gave rise to the philosophy of nationalism, which played an integral role in the diminishing of regional and tribal rivalry. People recognized the pivotal role played by trade in the development and sustenance of national interest. As a result, people charged their local governments with the responsibility of controlling trade. The Mercantilism Era perceived foreign trade as a form of rivalry between nations because of the disparities in gaining and losing, i.e. some nations gained at the expense of others (Porter, 1994). Mercantilism promoted different ideologies, e.g. silver and gold became the standard of measurement used to determine the wealth of a country; this implied that inflow of bullion into a country proved to be of more value than its outflow (Porter, 1994). This mercantilist ideology provided a foundation for modern trade theory, whereby it became clear that the establishment of a favorable trade balance relied on the export levels exceeding the import levels. However, the onset of the 20th century brought about a change in the core principles of the modern trade theory. The Nazi and Soviet regimes were of the opinion that an increase in the aggregate national wealth would only be subject to the import levels exceeding the exportation ones. The contradiction of modern theory paved way for the development of other theories, e.g. the quantity theory, which advanced that an increase in prices would result from a country’s trade balance improvement. The development of these theories triggered the abandonment of the previously advanced ideologies by many countries, e.g. the United States in the 20th century (Porter, 1994). The “invisible hand” theory of Smith suggested that governmental control of foreign trade should be reduced in order to create a trade climate with limited confrontations. The advancement of technology in fields such as communication and transportation fostered the progress of foreign trade and allowed for the minimization of political and cultural differences between different countries engaged in trading activities. The development of the global trade theory occurred later in the 20th century. An analysis of the sub-theories modeled to explain macro-level global strategies provides useful information about the parties that would stand to benefit from increasing or decreasing trade restrictions. Firstly, the classical theory of international trade suggests that countries engage in the foreign sale of goods that can be produced cheaply within them. Concurrently, these countries only import services and goods that they have the least advantage in producing. This theory presents three advantages of trade: comparativeness, absoluteness and equality, which demonstrate the exchange rates’ role, determine the price differences, and influence the occurrence of international trade. The second sub-theory is the factor production theory, which starts from the idea that a country exports goods the production of which is supported by the abundance of corresponding natural resources. The last sub-theory is the product life-cycle theory, which considers the role played by innovation and technology among other factors in explaining trade forces (Porter, 1994). Shortages might later result in the inflation of prices, in the case of an increase in trade restrictions, which occurs in nations dependent on the importation of certain goods. On the other hand, a decrease in trade restrictions might result in the lowering of prices in countries due to the excess supply of imports. Evaluate the influences of economic theory and economic performance measurement on the theory and practice of global and local business decision making Stronger intellectual property protection can lead to more innovation, dissemination of knowledge, or the transfer of technology. To date, economic studies (Yu, 2007) have demonstrated the relationship between intellectual property protection and economic development, technology transfer, and foreign direct investment (FDI). Countries which want to attract inward FDI and decide to strengthen the patent regime sharply will improve in this way the overall investment climate and business infrastructure. Improving these features will have consequences at the microeconomic level. Factors of decision will move their interest to these changing conditions, which will lead eventually to a development in the country’s economic perspective. Companies operating internationally must take both domestic and international policies into consideration before making a decision which regards the business operations. This prevents disputes from arising between different firms engaged in trading activities and prevents companies from impinging on the domestic policies of foreign countries. Synthesize scholarly economic theory and literature into conceptual models and theoretical frameworks that may have significant influence on business theory and practice The Ricardian model of trade (Ricardo, 1817) considers only one factor of production – labor – and differences in production costs come from differences in labor productivity due to differences in technology. This model of international trade explains the results related to comparative advantages by starting with technological advances in different countries. Unlike other theories which sustain that trade is advantageous only for some countries, this model emphasizes the idea that trade is advantageous for all the countries involved in international commerce and suggests that even a weaker economy that uses inferior technology will have a better economic performance due to being part of international trade (Coughlin, Chrystal, & Wood, 1988). A different model, Hecksher-Ohlin model, considers two factors of production, i.e. capital and labor and the differences in the relative amounts each country possesses. According to this model, wealth is redistributed within each country between laboring men and the owners of capital. Analyze emerging trends, technological influences, and social influences and their implications in the relationship between economic theory and practice Since the beginning of the twenty-first century, international economy has been the scene of changes, determined by the advance of globalization, technological influences and the emergence of new and powerful competitors such as China, India and, more generally, the countries of the Asia-Pacific region. As regards the business practice, specifically in the production sphere, the latest advances in information and communications technologies, telecommunications and transportation are redrawing the border between tradable and non-tradable goods and between manufacturing and services. This leads to the creation of global value chains, which are very popular for the organization of production and the vast majority of the world’s enterprises are structured along these lines at the moment (Yu, 2007). The international trade system has taken a second place as regards both the technological changes and the unilateral initiatives taking shape within the new structure emerging in the corporate world, which, as far as trade is concerned, is considered more relevant or influential than the governments of industrialized countries themselves. The relation between these two elements, namely technological and business development, on the one hand, and the emergence of new issues and institutions, on the other, is highly complex. This happens because of the requirements arising from technological changes, e.g. quality certification, and business models that take advantage of technological progress in order to limit competitors’ power and protect private business interests, as, for example, occurs in the case of the requirement to obtain certification from certain laboratories or companies. Conclusion WTO plays a crucial role in the regulation of trading policies in the international arena. This allows for the development of trade between countries despite the differences in domestic policies. The role played by the WTO in streamlining the macro and micro economies of different countries also attests to the significance of this institution (Kroll, 1999) At the base of the international system remain the organizations-related agreements, negotiated and signed by a large majority of the world’s trading countries and considered as the legal-ground rules for international commerce and the guarantee for free and fair trade. References Arnold, R. A. (2008). Microeconomics. New York: Cengage Learning. Coughlin, C. C., Chrystal, K. A., & Wood, G. E. (1988). Protectionist trade policies: A survey of theory, evidence and rationale. St. Louis: Federal Reserve Bank of St. Louis. Cowles, M. G. (1995). Big business and two-level games. Carlifornia: MacMillan. Craig, S. (1994). Developing a global marketing strategy. New York: Chemtech. Gravelle, H., & Rees, R. (2004). 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