The Politics of Global Trade - Case Study Example

Thе Politics of Global Trade: To What Extent is the World Trade Orgаnizаtiоn Undermining Pооr Countries' Dеvеlорmеnt Oрроrtunitiеs? Name: Institution: The Politics of Global Trade: To What Extent is the World Trade Orgаnizаtiоn Undermining Pооr Countries' Dеvеlорmеnt Oрроrtunitiеs? Introduction The purpose of this paper is to introduce the reader to the politics of global trade including the benefits and setbacks and identify the major influencers of this organisation. It will systematically explore and understand the reason behind the formation of the world trade organization and what it has achieved since it was founded in 1995. Finally the paper will explore the various ways that the World trade organization has hindered the growth and development of developing nations using. The basis of information for this paper will be well documented and researched articles on the various pertinent issues as highlighted above as well as texts from books related to the issues above. But first let us examine the history of World Trade Organisation. The Formation of World Trade Organisation – WTO In this sub-topic we look at how WTO came to be and the reasons behind its establishment. We review various articles written about how WTO was founded and deduce from it a logical consistent explanation on the subject matter (Wade 2003). The General Agreement on Tariffs and Trade (GATT) was founded in 1947 during a multilateral tariff negotiation which provided for a provisional agreement on fair trade rules; reduce trade tariffs, duties, and intellectual properties for goods and services in the world trade front (Blaikie et al. 2014). It became recognised as an international treaty though this was never the intention in the first place. The agreement provision on the GATT treaty was constantly amended throughout its existence. GATT helped to gradually but continually reduce trade tariffs worldwide which spur the increase in world trade growth by 8% annually in 1950s through 1960s (Bhagwati 2014). During this era, different countries traded on the global market successfully (Burnell, Randall and Rakner 2014). After the Second World War 15 countries began talks to amend trade tariffs. The talks continued and in September 1986, in Punta Del Este, a negotiating agenda was agreed on by 123 countries and it would cover every outstanding trade policy issue including trade in services, intellectual property, reform trade in the agricultural sector, textiles sector and the general review of all the original GATT articles (Bustos 2011). This negotiation is also referred to us the Uruguay round negotiations and ended in December 1993. From the various article reviews it’s clear that during the Uruguay round negotiations, major participating countries could not agree on the reforms on agricultural sector, services, market access, anti-dumping rules, and the proposed creation of a new institution (Winham 2005). In the end WTO was formed to replace GATT as an international organization (Chatterjee and Finger 2014). The Uruguay Round agreements forms the basis of the present WTO rules and procedures. The Uruguay Round also included the General agreement on Tariffs and trade which incorporate the 1947 GATT into WTO system. The world Trade Organisations rules and agreements and how they affect the Developing countries; The task of this subtopic would be to fully discuss some of the agreements making up the WTO and explain how they influence the trade and other aspects of development in developing nations across the globe. The Agreement on Trade-related Aspects of International Property Rights-TRIPS This agreement became operational in 1994 following its drafting during the Uruguay Round negotiations. It provide regulation on areas such as trademarks, data secrets, patents, industrial designs and copy right protection of drugs, mechanical and electrical devices (Djankov, Freund and Pham 2010). The TRIPS agreement major focus is on copyright and trademark protection of goods and services. The patent policies forces members to introduce minimum protection standards for intellectual property by putting a restrictions on the states powers to deny patents to some products for up to a period of 20 years for new , useful and non-obvious inventions effective from the first date of application for the patent. This is to protect the product from being exploited by others during that time frame. The patented rule also reduces countries abilities to insist on compulsory licensing and use of product patented in their jurisdiction (Egger et al. 2011). TRIPS agreements have both economic and political implications on the developing countries. We shall now look at these implications. The implication for the patent law in developing countries has more to do with the fact that these countries relies on the developing countries for the patentable knowledge. Develop nations are patent holders while developing countries are basically patent consumers Developed countries like the U.S records more patent applications by their residence as compared by the applications made by residents in developing nations (Eicher and Henn 2011). Further the World Bank agreed that the U.S has ownership in numerous patent companies in many developing countries, a move that is aimed at further tightening of the intellectual property protection in these countries. This means that U.S alone accrues substantial amounts of revenues from TRIPS alone if its share in the patent market is anything to go by. This creates a situation where the developing world relies on the U.s for the provision of patentable knowledge and in the process loose huge amounts of revenue that would have otherwise been gained within its territory. When it comes to the issue of copyright, there is very tight copyright protection of products. This will increase the cost of publication for scientific materials which eventually widens the gap between the developed and developing nations in accessed to scientific knowledge (Held 2013). Another issue would be that the TRIPS agreement provides obligations and right to the member states. The developing nations have the obligations to allow for patent for certain types of products while and the developed nations to provide technology to the developing nations. The unfairness comes in when TRIPS provides for the developed countries to take actions against the developing nations if they do not meet their obligations through Dispute Resolution Mechanism-DSM while the same TRIPS agreement does not provide for a way forward in the event that the developed countries fails to meet their obligations to the developing countries (Green 2012). Thus TRIPS in this sense becomes a one way agreement meant to facilitate the west in their trade operations and undermines the development of the poor developing countries. It would be costly even for a developing country to take developed nations to the DSM; the developed countries can easily mount pressure on the poor countries by dropping their donor aids and financial support as well political support. The European Union and the U.S are also adamant to enter into negotiations with the developing countries representatives in order to revise the TRIPS agreement (Hoekman and Nicita 2011). There is fear that there will be a significant change in their obligations to the developing nations, because currently they are favoured by the TRIPS agreements. Developing nations on the other hand wish to further tighten the provision in the TRIPS agreement to their favour. The Agreement on Trade-Related Investment Measures- the TRIMS Agreement The sub-topic take a look into the TRIMS agreements and examines the reasons behind its formulation and subsequent adoption during the Uruguay round negotiations. This agreement was put in place to replace the most Favoured Nations (MFN) Principle of the GATT agreement which extended to all signatories the benefits within any agreement that it may reach within any other country in the GATT agreement (Kaplinsky 2013). TRIMS ban performance requirements on public agencies to procure gods from local suppliers, local contents export and trade balancing requirement. Violation of such rules by any countries warranties ten to be sued in DSM. Wade further cites that the EU and the U.S have the intention to ban all performance requirement including research and development, joint ventures and technology transfer (Knox, Agnew and McCarthy 2014). This could have happen in the 2001 Doha ministerial meeting of the WTO had it not been for the intervention of India and Brazil who prevented the approval to ban the performance requirements. TRIMS seek to ban trade and investment distortions on all performance requirements on foreign companies The General Agreements of Trade in Services GATT’s Agreement This sub-topic will aim to define the GATT’s agreement and identify it major principles and their applicability in the global trade market. It will look at the implication of these trade agreements to the developing nations and what it means to the developed nations. It is an extension of the general agreements of trade in products (Lee, Gereffi and Beauvais 2012). The service here encompasses every service you can think of from medical care, to banking and other service sectors. GATT’s generally advocates for market liberalization for Foreign Service companies setting up their operations in WTO member states. Rhagavan, Sinclair, and world trade development all agree that the GATT’s agreement provides for ways in which governments should not interfere with the liberalised market, it also encourages them not to interfere with the way multinational cooperation’s operates in their countries as well not to interfere with service trade between countries (Malik 2013). This agreement makes it hard for the developing nations to protect the local service industry from the competition posed by the multinational corporations from the developed market. It causes a threat of domestic market underdevelopment all efforts to develop in are opposed to by the GATT’s agreement. The developed nations therefore have all the upper advantage to expand their markets beyond their territories and explore the undeveloped markets reaping huge benefits which eventually are remitted back home to the mother countries (Mander 2014). The developing nations loose in this sense, not to mention the environmental degradation and pollution that some of these so called multinational companies pause on the developing countries. To put it simply, they add more into their long term suffering while influencing short term benefits like employment and increasing consumer choice and preference list. TRIMS ,TRIPS & GATTS agreements poses an enormous challenges to developing governments in formulating and implementing domestic policies which are geared towards the development of domestic market through technological and service improvement (Pugh 2013). The developing countries are forced to rely on developed nations for technology as a violation for the agreements would mean tougher measure for these countries. The fear of being taken to the DSM if they fail to meet their obligations to the U.S and EU is shattering. First developing nations lack the financial aid as mostly they rely on donor aid from the very countries that imposes unfavourable trade regulations on them and secondly the perceived political affiliation between the developed governments and the developing governments makes any efforts of taking the developed nations to the EU the last options (Rajan and Subramanian 2008). The developing countries fear that the developed government may side with their political rivals in disputes as a way to manipulate them further. These agreements are bad for developing nations for two reasons. The first on he mentions that the agreements provide for the developed countries to raise a certain level of threat to developing countries which warranties the countries to be taken to the Dispute solving mechanism and take other justifiable means as outlined in the WTO agreement. Secondly, there is the view that the agreements create a gap between the public policies in developing nations and public policies in developed nations. Most developed countries adopted the protectionist trade policies before they adopted international trade policies and market liberalisation policies, the same cannot be said for developing nations as the opposite is true in their case (Rajan and Subramanian 2008). Wade (2003), cites that Economies like Africa trade in the world trade who are natural commodity supplies relies on their abilities to penetrate the global markets to prosper and are most likely to remain commodity suppliers in the world trade arena. The bilateral investment agreements between the developed countries and developing countries imposes on the host countries the responsibilities of providing favourable trading environment by removing trade obstacles in the hosting countries territory( mostly developing country hosts) in exchange for wider accessed of either the U.S or EU markets for their commodity supply. Recommendations for the WTO Agreements to Enhance Development in Poor Countries Using the above discussions as our basis of recommendations, these segments will attempt to summarise the discussion and point out possible recommendations that could solved the problem faced by poor nations in implementing WTO agreements (Sabel and Zeitlin 2012). The paper will draw from various sources to build an argumentative and support the recommendations written herein. This paper have relied heavily on the three Uruguay Round negotiations; the General Agreements of Trade Tariffs in Services (GATTs), Agreement on Trade-related Aspects of International Property Rights (TRIPS) &Agreement on Trade-Related Investment Measures(TRIMS) agreements, in exploring how the World Trade Organisation, WTO has hindered economic growth and development in developing countries and continually encouraged the developed nations to impose strict trade conditions for developing nations in their favour (Wade 2003). We looked at how TRIMS and GATTS have limited the authority of the developing country governments to control the operations of developed countries multinational companies operating in their countries. These two agreements makes unacceptable many of the industrial policy principles in the developing countries and which are acceptable and applicable in the developed countries. The TRIMS AND GATTS agreements inhibits the developing nations from formulating and using many industrial policies which can be used to revamp the local industries by improving technological; advancement capacities. The TRIPS agreement on the other hand seeks to enforce strict property rights of the western firms. These three options make it easier for the developed firms to easily enter and exit the market with minimal restrictions and consequences. The U.S and the U.K in particular are behind the global market liberalisation treaties and regulations and technology rent regulations through multilateral international organisations, bilateral agreement and international treaties (Winham 2005). The global trade system is such that the international agreements formulates and impose rules on the participating members aimed at reducing protectionisms of national regulations and the unpredictable environment of international trade relations while the national governments seeks to restrict those movements though on a limited font. In the past the purpose of the trade tariffs on imports and exports goods was to protect the domestic producers from the international markets as well as to generate additional revenues for the domestic market, however the trend has changed and today trade tariffs are used by the developed nations in international treaties to reduce protectionisms by the developing countries, the developed countries are less concerned about the tariffs for increasing revenues because they have discovered other numerous and beneficial ways of generating revenues for the smooth running of their affairs. The WTO is also seen as one whose agreements does not provide dispute solving mechanisms for the developed countries when in err. Even though disputes are solved through unanimous voting, the developed nations have the upper leverage, when developing countries lose disputes at the DSM the government is blamed for having allowed un-authorised foreign policies in interfering with domestic policies measures which warranties the loss. This forces these countries to conform to the unfavourable laws of the WTO in their subsequent operations, and dealing with member states of the WTO. WTO Is compelled to provide for a forum on the negotiation to review its policy on bilateral trade agreements and treaties. The WTO has led many negotiations, however the most crucial negations on the review on TRIPS, GATS & TRIMS terms of agreement has constantly met rejection by the developed worlds .where they agree to discuss on this the terms are always favourable to the west but unfavourable to the developing world (Winham 2005). The developing nations wants some of their obligations to the west reduced and trade bans requirements lifted to better their domestic market, however the developed world would not agree to the change of the rights and obligation article in the agreements as this would mean that they would be obligated to a certain degree to provide technologies to the developing nations. In conclusions the WTO agreements makes it hard for the developing nations to grow as they are in constant competition by the developed nations, the win I this scenario always favour the developed nations. To be able t o effectively use the WTO agreement to benefit the developing nations in global markets, the agreements need to be reviewed to allow for the formulation of the industrial trade policies to encourage the development of technologies in developing countries to increase the service sector. The developed nations also need to impose fewer restrictions on the copyright and patent protection regulations to encourage more research and development on relevant field of interest to the developed nations as well as to provide patentable knowledge and technology to the developing world at a fearer cost. The WTO also needs to implement standard set rules to all members and set clear guidelines and rules for the countries wishing to join the WTO. There have been concerns in the past about the more strict rules and restrictions for new members wishing to join the organisation. This has discouraged many from joining the organisation (Wade 2003). WTO should be an all level playing grounds with all members enjoying certain benefits but not to the expense of others. The agreements should not be used merely as a starting point for negotiations in international treaties between the west and poor countries but should be followed and adhered to as governing laws for the member countries trade interests and policies. Conclusion The entire WTO agreement is not biased or bad for the developing nations but rather the omission and or inclusion for certain fundamental aspects undermined the productive outcome of the WTO agreements. If the organisation itself can lobby for negotiation and change of major clause to stop itself from further inflecting injuries on the developing nations, then WTO can transform into a useful tool of development for the developing nations and even improve the operations of developed nations. References Bhagwati, J.N., 2014. The world trading system at risk. Princeton University Press. 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