Logistics and Operations Management - The World Trade Organization - Assignment Example

Logistics and Operations Management - The World Trade Organization Introduction: The WTO or World Trade Organization is an organization responsible for opening of trades across the world. Governments of different countries are part of this organization and are responsible to make negotiations on agreements of trade. Thus disputes related to trades are also settled through this organization. It is actually a platform enabling trade parties to solve any problems that they encounter in relation to trade. The primary function of the organization is dealing with negotiations in trades and agreements. The organization was initiated with the Uruguay Round negotiations during 1986-94. These negotiations were held under GATT or General Agreement on Tariffs and Trade. In the present times, there are new negotiations that the WTO is involved into under the ‘Doha Development Agenda’ instigated in the year 2001 (Understanding the WTO - Who we are, 2012). Countries in general encounter several challenges and problems while performing activities of trade across different countries. Thus negotiations and effective rules are required that are maintained by the WTO. Also, trade barriers are maintained by the rules that are set by the WTO, helping to protect consumers of such trade activities (Understanding the WTO - Who we are, 2012). The present study focuses on the work of the WTO and to analyze the impact that it has on world trade. Thus the study would analyze the outcomes of the various summits that have taken place since the end of the Second World War and consider the impact they have had on world trade. Methodology: For this particular study, interpretivism research philosophy has been found to be applicable for this particular research study as it combines diverse approaches together and tries to understand the world as it is experienced (Collins, 2010, pp.38-39). The study has been based on qualitative research technique that involves description of the types and qualities of people or events without expressing them in the form of numerical figures (Thomas, 2003, pp.1-2). The collection of data for the study has been dependent on secondary sources, thus involving sources that present studies and findings of earlier researchers and information that are already available concerning the topic of study (Malhotra, 2008, p.106). Thus books and authenticated internet articles, the website of WTO have been included in this study to learn about the works of the WTO, and their effects on world trade. While including such study materials, ethical factors have also been kept significantly under focus and the credibility of the sources have also been checked. Origins: The origins of the WTO date back to 1947 when the GATT was initiated. The knowledge and understanding of GATT is necessary in this regard since the rules and procedures of GATT guide the activities of the WTO even in the present times. GATT was incorporated as a result of the associates of the United States being called for negotiations involving “multilateral agreement for the reciprocal reduction of tariffs on trade in goods” (Bossche, 2008, pp.77-78). Since there has been no international organization to manage the trade policies and issues across different countries, thus countries approached to GATT for solutions to any problems associated with trade and activities. However, with the passage of years, several modifications have been incorporated in the organization that included several experiments and trials and errors. GATT proved to be successful in achieving several steps like the reduction in tariffs. “The Agreement Establishing the World Trade Organization, commonly referred to as the WTO Agreement, was signed in Marrakesh in April 1994, and entered into force on 1 January 1995” (Bossche, 2008, pp.80-84). Context: As the functions of GATT are concerned, it had been obtained that the organization lacked institutional structure during its initial years or performance and activities. Thus there was a gap in the performance of the organization that the WTO was considered to fill up. However WTO required a lot of time to open up and create its structure and functions to be effective on the trade relations across countries in the world. The objectives of the organization can be realized from the listing in the Preamble of the GATT 1947 that includes “raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, developing the full use of the resources of the world and expanding the production and exchange of goods” (Hoekman & Mavroidis, 2007, p.14). The present study focuses on the work of the WTO and their significant effects on world trade. Thus it is necessary to understand in this context that the WTO is a sole enterprise. All its requirements are functional to all members of the organization. Earlier with the GATT, countries would decide on the signing of agreements. However the WTO reflects differences with the GATT in this regard as well as in the area of dispute settlement. With the WTO, it is not possible practically to restrict the formation of any panels that are considered for settlement of disputes. Also, the WTO has a stronger authorization for persuasion of precision and functions related to supervision (Hoekman & Mavroidis, 2007, p.14). Globalization: Globalization reflects the spread of business and trade activities across different countries in the world thus making the trade activities global or international. Thus it involves “increase in international transactions in markets for goods, services, and some factors of production, plus the growth and expanded scope of institutions that straddle national borders – including firms, governments, international institutions, and nongovernmental organizations” (Deardorff & Stern, 2002, p.405). Thus globalization means the integration of the international markets. Such integration of the global markets is significant factors of studies in the international trade theory and the economy of the world as a whole (Deardorff & Stern, 2002, p.409). As the static effects of trade are concerned, it is the consumers who gain from the activities of trade. With comparative advantage, economies of scale, and rising competition, and access to large variety of products, consumers have been proved to be benefitted more than without these. However depending on scares resources or restricting factors, there may be gainers as well as losers in trade. Nonetheless such gains and losses are reflected only in the short term period of the trades. In the long run, people and businesses tend to adjust to the changing needs and environments of the markets. International flows of capital also have effects on the activities of trade. “Financial capital often takes very short-term forms, and it is highly liquid – able to move quickly into and out of a country or a currency in response to speculative expectations” (Deardorff & Stern, 2002, pp.409-412). In association with globalization, the role of WTO can be understood more with its institutional role trying to constrain countries from using trade policies that might hurt themselves as well as each other. These constraints are necessary without which countries would be capable of using trade policies for purposes of achieving small gains, and governments may misguide and use these policies for their interests and benefits (Deardorff & Stern, 2002, p.415). Strategic Role of WTO: The WTO, contributing to globalization, has four major objectives: “to set and enforce rules for international trade, to provide a forum to negotiate and monitor trade liberalization, to improve policy transparency, and to resolve trade disputes” (Anderson, 2001, p.10). The WTO has proved to be more complete than the GATT, where it includes all goods, services, capital to some extent, and ideas. With the permanent WTO Secretariat being in position a new role is also played by the organization: “cooperating with the IMF and World Bank with a view to achieving greater coherence in global economic policy making” (Anderson, 2001, p.10). The international trade is governed by the GATT/WTO serving three major strategic objectives. First, the interests and benefits of small and weak nations are protected by them in opposition to biased activities of trade policy of strong and influential nations. Second, the WTO has incorporated the rule not to raise standard barriers in trade and instead to combine them in a tariff program at particular maximum levels. Thus, members of the WTO are likely to restrict trade only with tariffs and are compelled to carry on providing access to markets that are not less approving than that settled according to the tariff schedules. The third most significant role of multilateral rules maintaining trade policy is that they can assist governments “ward off domestic interest groups seeking special favors” (Anderson, 2001, pp.10-11). Enforcements: Non tariff measures are employed by governments with purpose to increase wellbeing of the nations as well as trying to benefit the political and economic state of the nations. These include measures like TBT or SPS, as well as taxes and subsidies. However these non tariff measures are also proved to have significant effect on trades. While in some situations, trades may be promoted through these measures, on the other hand, there may be cases where trade activities may be restricted as well. Generally market failures are tried to be corrected through these measures but many times the terms of trade are manipulated as a result of such acts. When governments are unable to get hold of trade measures, TBT or SPS measures may be utilized in order to influence the activities of trade. Non tariff measures have been largely welcome in the present times with the need to overcome and balance the climatic changes as well as situations of economic crises. However, transparency is maintained completely, but when incorporated more by the developed countries, may lead to concerns in association with trade (World Trade Report, 2012, pp.6-8). Principles: The WTO sets up an outline for trade policies. It does not describe or indicate any consequences. Five principles are specifically significant in understanding the WTO: nondiscrimination, reciprocity, enforceable commitments, transparency, and safety valves. There are two key elements of nondiscrimination: the most-favored-nation (MFN) rule, and the national treatment principle. These are fixed in the major rules of WTO associated with goods, services, and intellectual property, although their specific scale and characteristics vary across these three concerns. Reciprocity is a sign of both an aspiration to restrict the opportunity for free-riding and a wish to get hold of imbursement for trade liberalization in the form of improved admittance to foreign markets. Once the commitments of tariff are set, it is essential that there be no alternative to other, nontariff, measures that might affect, invalidate or damage the significance of the tariff recognition which is considered under binding and enforceable commitments. Transparency is a fundamental support of the WTO, and it is a lawful responsibility, entrenched in Article X of the GATT and Article III of the GATS. An ultimate principle personified in the WTO is that, in particular situations, governments should be able to limit trade (Hoekman, n.d., pp.42-44). Negotiations: The negotiations in relation to trade under the WTO are mostly achieved under the influence of the Doha Round. The particular objective in such trade negotiations involves “major reform of the international trading system through the introduction of lower trade barriers and revised trade rules” (The Doha Round, 2012). There are twenty areas of trade that are covered under these measures and program of negotiations. It is also referred as the Doha Developmental Agenda. The basic purpose of these negotiations is to improve the trading outlooks of developing countries across the world. The official launch of the Doha Round was conducted in November 2001 when the Fourth Ministerial Conference of the WTO was taken place in Doha in Qatar. The mandate for the negotiations was provided by the Doha Ministerial Declaration and includes trade negotiations on agriculture, services, as well as on intellectual property (The Doha Round, 2012). In the context of agriculture, the purpose of the negotiations is to achieve more access to markets, do away with export subsidies, reduce deformed domestic support, sort out a variety of developing country issues, and deal with non-trade issues such as food security and rural development. For non agricultural market access, the aim is to appropriate the tariffs, include reduction or elimination of high tariffs, as well as non tariff barriers. In services the negotiations aim for better market access, providing governments the power to decide on opening of foreign opportunities. In trade facilitation, the aim is to ease the procedures of the customs and facilitate easy movement, release and clearance of products. For dispute settlements, the negotiations aim to “improve and clarify the Dispute Settlement Understanding, the WTO agreement dealing with legal disputes” (Doha Round: what are they negotiating?, 2012). Examples: Oil and Gas Industry: There are no specific rules or policies implied by the WTO as far as oil and energy are concerned. However, the general rules of the organization are bound to affect the oil and gas industry as well. The current policies and agreements of the WTO try to handle several challenges and trade issues involving access to markets, however there is not enough discussion or consideration of the issues like investment protection that might have significant effects on this industry. Also, there are other issues like the limited practices of oil and energy, and the situations of monopoly positions influencing the rights and privileges that are not considered effectively under the WTO or its trade practices and negotiations. Moreover, issues related to transport costs, power of electricity and other related factors prove to bring out several challenges for the oil and gas industry that are not covered under the considerations of the WTO (Trade in Energy: Challenges for International Trade Regulation, 2010). Conclusion: From the above study, it can be realized that the WTO has a significant role to play as far as the world trade is concerned. The major rules and policies are taken concern of by the organization. This includes the major issues as well that different countries encounter while dealing with trades and practices across borders. There are major challenges in terms of gaining market access as well as delivering goods and services to different countries. These incur severe problems particularly when climatic changes and issues like economic crises are parts of the business world. Thus negotiating with the tariffs and non tariff measures, as well as discussing on the problems encountered by different countries, the WTO provides a platform to try for easy trade practices for all countries across the globe. However the negative aspects of the rules and policies also need to be kept focused in this regard since certain policies may not prove to be beneficial for all trade practices as well. Recommendations: While on one hand the effectiveness of the WTO has been proved particularly in terms of its approach and objectives to assist countries perform trade activities without problems, however, there are certain issues with the organization as well that needs to be considered as well. For example, as discussed in the study, there are significant issues and challenges in association with the oil and gas industry that are not completely addressed by the WTO. However, these are issues that may prove to be severely challenging while the countries try to opt for global trade practices in these industries. Likewise, there may be several other industries as well that may encounter such challenges that WTO should also consider while preparing their rules, policies and involving in negotiations. References Anderson, K. (2001), Globalization, WTO and ASEAN, Adelaide, available at: https://www.adelaide.edu.au/cies/papers/0104.pdf (accessed on December 17, 2012) Bossche, P.V. (2008). The Law and Policy of the World Trade Organization: Text, Cases and Materials, Cambridge: Cambridge University Press Collins, H. (2010), Creative Research: The Theory and Practice of Research for the Creative Industries, West Sussex: AVA Publishing Deardorff, A.V. & R.M. Stern (2002), What Should You Know About Globalization and the World Trade Organization, Review of International Economics, Vol.10, No.3, pp. 404-423, available at: http://weber.ucsd.edu/~jlbroz/Courses/Lund/syllabus/deardorff_stern_WTO.pdf (accessed on December 17, 2012) Doha Round: what are they negotiating? (2012), WTO, available at: http://www.wto.org/english/tratop_e/dda_e/update_e.htm (accessed on December 18, 2012) Hoekman, B. (n.d.), The WTO: Functions and Basic Principles, UGA, available at: http://www.terry.uga.edu/~eornelas/Econ4040/WTO-basics.pdf (accessed on December 17, 2012) Hoekman, B.M. & P.C. Mavroidis (2007), The World Trade Organization: Law, Economics and Polity, London: Routledge Malhotra, N.K. (2008), Marketing Research: An Applied Orientation, 5/E, India: Pearson Education India The Doha Round (2012), WTO, available at: http://www.wto.org/english/tratop_e/dda_e/dda_e.htm (accessed on December 18, 2012) Thomas, R.M. (2003), Blending qualitative & quantitative research methods in theses and dissertations, London: Corwin Press Trade in Energy: Challenges for International Trade Regulation (2010), WTO, available at: http://www.wto.org/english/res_e/publications_e/wtr10_forum_e/wtr10_11june10_e.htm (accessed on December 18, 2012) Understanding the WTO - Who we are (2012), WTO, available at: http://www.wto.org/english/thewto_e/whatis_e/who_we_are_e.htm (accessed on December 16, 2012) World Trade Report (2012), WTO, available at: http://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_report12_e.pdf (accessed on December 18, 2012) Read More