World Trade Organization: Challenges of Membership - Research Paper Example

World Trade Organization: Challenges of Membership Introduction Under conditions of modern globalization, different countries are on their way of a constant development and cooperation. There is no doubt that creation and support of the organization, which is responsible for different trade activities around the world, is a perfect way out. Nevertheless, there are many pitfalls in this organization and very often it is criticized. The WTO was established in 1995 and currently there are 138 countries participants in this organization. The main goal of the organization is to promote a free trade. Transparency and reliability of trade transactions is guaranteed in the organization. The WTO develops rules for different types of trade and services. Special favors for countries members in WTO are possible and justified only in case of equal accessibility to them by other countries. There is an option to establish a free trade area (FTA). In order to make international trade easier, WTO is focused on the following relevant issues: “customs duties and restricted quantities, and more competition but also more beneficial for less developed countries, by giving them more time to adjust and greater privileges” (The regulation of state trading under the WTO system). WTO Is on the Way WTO prevents different countries from strong and severe limits of trade. In case there is a free flow of goods and services, the countries of the world would experience numerous benefits and advantages from cooperation with this organization. There are many challenges in the process of cooperation of different countries in WTO. Thus, some countries promote closer economic integration and try to reduce tariff barriers, while other countries are intimidating for trade interest of some countries. Tariffs There are many necessary steps in the section of “Trade Policy” of WTO. First of all, developed countries agree upon reduction of their tariffs on industrial products by 40% till 2000. In this case, almost 50% of exported products to developed countries would obtain duty-free treatment. Agricultural products are specially protected in terms of WTO’s agreements. Governments of different countries are involved in agricultural products control, development of environmental and food security programs and so on. All these steps are justified by protection of agricultural sector and a crucial importance of infrastructure and food security development. Farmers are supported by direct income support, as well as by environmental and regional assistance programs. Trade policy of WTO is known for its transparency and availability for countries members. Nevertheless, very often conditions of trade are not well known for the members of the organization. Consequently, it is relevant to focus on this issue in detail. In accordance with the Article XVII of the GATT 1994, enterprises “in their purchases or sales involving either imports or exports – are to act in accordance with the general principles of non-discrimination, and that commercial considerations only are to guide their decisions on imports and exports”(Washington Trade Report.). This Article is the principal one for WTO. Therefore, enterprises should not be involved into discrimination commercial activities. Only decisions about import and export are developed with respect to commercial considerations, regulated by WTO. The state trading enterprises should report to WTO annually. There is one and exact definition of a state trading enterprise, which is provided in the Interpretation of Article XVII. With respect to Paragraph 1 of this Article: “Governmental and non-governmental enterprises, including marketing boards, which have been granted exclusive or special rights or privileges, including statutory or constitutional powers, in the exercise of which they influence through their purchases or sales the level or direction of imports or exports" (Washington Trade Report). There is a special phrase in this definition, which shall be considered in detail: "in the exercise of which they influence … the level or direction of imports or exports", underlying a great power of WTO and ability of this organization to exert influence on trading affairs. From another perspective, the WTO does not intend to prevent the development or implementation of operations in the state trading enterprises. It is relevant to mention that the notification requirement cannot be applied for "government procurement”. In other words, this concerns imports of products for immediate consumption in a certain country. Moreover, it should be noted that the main issues of the Article XVII are focused on state trading. Throughout other articles, export or import restrictions are considered. Next to the Article XVII the rules for state trading enterprises are biased: on the one hand, they are developed for transparency increase and implementation of various trade policies, and to guarantee that the state trading enterprise is not developed for implementation of WTO-inconsistent measures (The regulation of state trading under the WTO system). The Members of WTO should follow their own obligations, such as (1) non-discrimination policy, also known as "most favored nation" or "MFN" treatment; (2) the absence of quantitative restrictions; the option of preservation of the value of tariff concessions; and the importance of (3) transparency (The regulation of state trading under the WTO system). These are three basic pillars for operating in compliance with regulations of WTO. In case a Member of the organization refuses to follow these norms and regulations, further actions of WTO will be criticized. There are many cases of criticism concerning WTO, for sure. It is often claimed that WTO “has enormous power, and it uses that power to penalize countries that do anything that could be even remotely construed as standing in the way of free trade” (The Case Against the WTO, 2000). There is a huge scope of responsibilities and functions of WTO. At the same time, it is relevant to mention a global scope of activities of WTO, as well as the fundamental principles and regulations of the organization. There are vivid examples, when the Members of the organization had to change their laws or to follow costly laws and regulations of WTO. For example, in 1996, Venezuela opposed to the United States, claiming that the Clean Air Act was discriminating for Venezuelan gas imports to the U.S. In accordance with US demands, foreign gasoline sold in the United States should be no more contaminated with additives than the average 1990 level of harmful particles in U.S. gas. Venezuela underlined that “the law allowed a fraction of U.S. producers to sell gas with higher levels, and thus claimed it was being discriminated against. The WTO agreed” (The Case against the WTO, 2000). The Organization came to the following decision: the United States had either to dilute EPA standards or pay $150 million in trade sanctions and prevent Venezuelan oil with high levels of contaminants from occurrence in the country. Nevertheless, the gas was imported to America. There is another example, which also happened in America: the U.S. Endangered Species Act does not allow the sale of shrimp caught in nets, which can be hazardous for sea turtles. In this case, environmental law in the US was violated. WTO justifies its measures in the following way: “It was not our task to review generally the desirability or necessity of the environmental objectives of the U.S. policy on sea turtle conservation. In our opinion, members are free to set their own environmental objectives. However, they are bound to implement these objectives in such a way that is consistent with their WTO objectives” (The Case against the WTO, 2000). It is evident that WTO relies on their beliefs and acts in the most convenient way. WTO tariffs were of great importance for the US, because the US government did not see another option of forests’ preservation, but only stimulation of complex ecosystems preservation. Logging is being developed at a full pace in Indonesia and Malaysia and it is necessary to preserve virgin forests. Moreover, pricing policies of the WTO Members in the field of beef and biotech are focused on severe tariffs imposed on artificial-hormone-treated beef. Thus, the EU was fined for $116 million on its goods. Japan was warned by the WTO that in case it would sell some fruits with dangerous insects, involving harmful doses of pesticides, then WTO would ban selling of these fruits. On the one hand, these regulations of WTO cannot be criticized, because they are focused on health issues and health protection. There are many challenging aspects of WTO and the way this organization cooperates with other countries. For example, there is complex relation with the US. The US government claims that restrictions on trade imposed by WTO are interfering with foreign policy of the country. There are also proponents of free trade, such as Thomas Friedman of The New York Times, say that it's "a fool's errand" to pressure the WTO to impose sanctions on labor, environmental, or other non-economic issues (The regulation of state trading under the WTO system). Nevertheless, the opponents of free trade claim that there are perverted perspectives of it, especially in developing countries: "In almost all developing countries that have undertaken rapid trade liberalization, wage inequality has increased, most often in the context of declining industrial employment of unskilled workers and large absolute falls in their real wages, on the order of 20 to 30 percent in Latin American countries" (The Case Against the WTO, 2000). Thus, a crash in Asian economies, which happened several years ago led to investments and financial services leading to deregulations of WTO. In the result, there is a huge increase of poverty. There are many options for different countries in the ways of their development. Thus, they can help their people by development of their basic industries, such as food and fuel. WTO is looking for transformation of economies into export-oriented platforms (The regulation of state trading under the WTO system). In accordance with that theory, a low level of payments would lead to a cheaper workforce, which will be luring for other companies in hiring your workers. The risks of trade war are huge! Therefore, WTO is at risk, if its policies are not accepted by the international community. These challenging relations can be compared in terms of globalism comparison with isolationism. Nowadays is the epoch of a corporate globalism but corporate globalism. Everything that happens in the world is in the name of the multinational companies. In the modern age of multinationals, people should be looking forward to finding alternative solutions. For example, WTO represents the Institutionalist perspective, when they are focused on e labor rights, human rights, and environmental protections in their rule-making (The regulation of state trading under the WTO system). WTO wants to regulate the world. On the one hand, a regulated trade is more responsive and effective and there is no doubt that WTO works hard to reach this level of international cooperation in trade. On the other hand, it is difficult to imagine that WTO is unable to meet all the requirements and these demands. Some Members of this organization claim: "many environmentalists pushed for an environmental working group in the WTO. They got one, and after five years, many of its most energetic proponents are now saying that this working group has turned into a trade-dominated entity where environmental laws are studied not to safeguard them but rather to figure how to get rid of them" (The Case Against the WTO, 2000). Thus, WTO implements different methods and strategies in its operations around the world. In accordance with some critics, WTO is focused not so much on building a global movement, but rather on the sustainability of local economies. The countries of the Third World would benefit much from this type of plans, because these will improve development of healthy and largely self-sufficient communities (The regulation of state trading under the WTO system). WTO is often accused of turning a free trade into a golden calf. There are many important things in the modern society except free trade options, such as environmental concerns, legitimate or social issues et cetera. Membership in WTO is rather challenging. Members do not establish trading barriers. All their actions concerning some new policies are negotiated with WTO. The escalation of trade restrictions is often helpful for individual countries for a short period of time. The results of a global trade indicate that it is necessary for the countries to protect domestic industries. A local trade shall be promoted and there are severe penalties imposed on the countries, which are breaking the rules. Unfortunately, the rules of global trade are often violated. There are a lot of members in WTO nowadays. The entire world experiences pros and cons of WTO and free trade. For the countries Members of WTO it is favorable to receive the Most Favored Nation Status. It is relevant to promote equal attitude to all members of WTO. There are favorable conditions for cooperation for the members of WTO. For example, they have an opportunity to establish lower trade barriers between them, such as tariffs, import quotas and excessive regulations (Amadeo, 2012). More than 75% of WTO members are developing countries. With respect to WTO membership it should be noted that these countries are able to access developed markets at the lower tariff rate (Amadeo, 2012). Membership provides them with time required for reciprocal tariffs removal in their own markets. Therefore, these countries can have an opportunity to catch up to complex multinational corporations and their developed industries “before opening the developing countries' markets to overwhelming competitive pressure” (Amadeo, 2012). Conclusion Unfortunately, these conditions have seldom been met. WTO claims: everyone should benefit, but in sober fact, these benefits are suggested for developed countries… “Benefits can be withdrawn without the possibility of effective recourse to the WTO. Further, as the general levels of tariffs in major markets fall, the competitive advantage of preferences becomes less” (The regulation of state trading under the WTO system). The main challenge for WTO Members is agricultural trade. Some members of WTO violate benefits of other members. Regional trade agreements are not favorable at all for local trade. For example, some markets will not open their markets to goods or services from a developing country. The strongest and the most powerful markets of the United States and the European Union operate with respect to preferential access through GSP (Generalized System of Preferences) schemes (The regulation of state trading under the WTO system). It is more usual for developing countries to offer their trade and services to other developing countries. In such a way, they do not exceed any global limits and stay open for other markets from developing countries. Works cited Amadeo, K. Why Is WTO Membership So Important? March 20, 2012. Web. 11 July, 2012. http://useconomy.about.com/od/wtofaq/f/WTO_membership.htm WTO Origin and Principles. Chapter 4. Web. 11 July, 2012. http://www.ifc.org/ifcext/mekongpsdf.nsf/attachmentsbytitle/wto-eng-chapter4/$file/wto-eng-chapter4.pdf The Case Against the WTO. Jan., 2000. Web. 11 July, 2012. http://findarticles.com/p/articles/mi_m1295/is_1_64/ai_58726424/?tag=content;col1 Washington Trade Report. Web. 11 July, 2012. http://www.washingtontradereport.com/ArtXVII.htm The regulation of state trading under the WTO system. Web. 11 July, 2012. http://www.wto.org/english/tratop_e/statra_e/statrad.htm Read More