International Trade Reforms - Essay Example

INTERNATIONAL TRADE REFORMS Introduction International trade is the exchange of goods and services across the international boundaries and territories. It is a trade that has social economical and political advantages to any country. It is determined by the way the economy of a country is opened to the outside world. International trade is one of the most important aspects of economic system of the world as it has far reaching effects on the live of the citizens. International trade has been one of the sensations of the business world and all countries are moving toward embracing the spirit of international trade. There has been greatest movement of resource to other countries and most of the companies have gone international. This has been a positive development in the business world as more and more companies in the world embrace e the concept of global operation. (Cancun 2003, p. 3) International trade can be described as trade between nations. This can be described as trade between national in different continents or it can mean trade between one neighbouring nations. International trade is the trade that happens beyond the boundaries of a continents and which in particular involves the subjects of that country. Unlike domestic trade that it controlled by the government, International trade is subject to the control of world and it comes with more regulation than the domestic trade International trade has been used as a yard stick for measuring the transparency and governance of a nation by the international community. In the recent past the wave of globalization has made it difficult for one a country to live as an island and the economic systems are moving more towards a dependency market structure. Globalization has brought about a cycle of dependency in which a country is depending on other for as structured by the world economic systems. This has been one of the reasons why international trade has become very important to the whole world. globalization has opened countries to the scrutiny of the international community and the world trade system has been used to force nations hat have been seen as deviating from the world economic system in order to force them to conform to world policies. One of the most important way in which world trade has been used to streamline the operation of nations is on mater that concerning respect of human rights. As we said earlier globalization has been characterized by opening of national police to the whole world and hence there is a scrutiny on how a nation is respecting issue of human rights and other. Economic sanctions have been used to force these rebel countries to respect such international accords. Hence world trade is important in a way as it helps to free people from an oppressive regime. It helps the authorities in power to observe and respect the rights of each and every citizen. It is a vocal way that is used to achieve standard of governance in fight for the rights of those who are oppressed. Unfair trade system in the world One of the most important issues that have been subject of debate in the world forums has been the issue of ensuring that adequate reforms are implemented in the world trade agreements in order to streamline the trade between nations. This is because globalization has brought the world to a dependant village and there is no any country which can live in isolation in the modern world. Trade has been one of the of most important tool that has helped nations to depend on each other and therefore calls for fair trade between nations has been supported by the need to have equal participation by all nations in the world economy. This is because world trade has become like the only avenue that most of countries can rely on in order to raise the livelihood of its people. (Trade Policy Monitor 2002, p. 3) World Trade Organization is the body that is entrusted with the role of ensuring that there is fair trade in the world. It is given the role of a prefect to makes sure that all countries in the world play by the rule of the game. In this regard it has given a special duty of mediator between countries which are in trade conflicts and coming up with amicable solution that can be enforced to conform to the trade agreement after such a conflict. But with time this body is losing its relevance to the world as it has not lived up to the expectation of the world. In particular it has not been able to ensure fair trade in the world. But this failure can be attributed to the rising relevance that is being given to the emerging bodies or regional bloc which has become the new prefects in the world. Apparently the rise of these blocs has been attributed to the failure of the WTO to negotiate free trade agreements for all countries in the world. In the recent past, these trade blocks have been gaining momentum. For example in Europe the European Union which remains the largest trade bloc in the world has been engaged in a recruitment exercise to admit new counties to the bloc. Apparently, the strength of these blocs is likely to lie in their number and hence they are likely to gown larger and large. This is because the large the bloc the more power it will have to negotiate on behalf of its members. (Chadwick 2006, p. 75) Therefore any time there are world forums especially on social and economic matters the issue of fair trade doesn’t escape their menu. The root cause of this is that there has been skewed application of world trade rules which has seen some countries become richer and rich while other countries have remained more and poorer. This level of unequal distribution of opportunities has been the recipe why the debate on reforms on international trade is very important. (Yasuchi 2000, p. 3) World economy as one system As we have said the world has been moving close and close to a global village with globalization. This has crated a system of the world economy which has become more and more centralized. As the Greek philosopher said, civilization does not work on the well being of man but it works to create a homogenized close world where acquisition and consumption is not controlled. This has been evidenced by the current trend in which the world has adopted one economic system and countries have become more and more dependant. With the support of specialize theory, we can argue that the more a countries become specialized in one commodity, the more it becomes disadvantaged in eth modern economy simply because the rule of specialization has not been very well observed by all countries. As globalization brings us to a one world economic system, the level of competition in the world has been rising and there has been a danger of exposing some of the countries to pressure they cannot cope with in terms of their production capacity. International trade has been supported by theories of specialization which are supposed to make the world become more dependants on each other. But these theories are supported by the diversity in natural resource that each and every country is endowed with. As such a country with high agricultural potential will be best producing that particular agricultural product than engage in another industry where it is import the raw materials. Specialization has been advanced in the sense that it is likely to lower the cost of products in the world since each and every country will be producing what it can produce best which will reduce the cost of production and hence the price of the product in the market. But this spirit has not worked due to the ideologies of capitalist that the world has embraced. Capitalist entails ensuring that we get the maximum profit from production process regardless of the procedures that are used. That is why some countries like china have been concentrating on unethical trade of producing counterfeit products simply because they are interested in the profit that will be derived from the product rather than the rights of other traders who have strived to take that particular product to the market. Our main issue on discussing the world as the same economy has been that the more we embrace the sprit of globalization, the more the countries in the world are becoming reliant on each other for various products and services. Under this paradigm a country that is in the tropical region and produces the best tea and coffee would maximize on the production of the two while a counter that is in the western world and not endowed in agricultural resource but excellent in technological products would concentrate on that and in the world trade arrangement the two countries would engage in an exchange process for the products that they are best in. therefore the economics of the two countries will end up depending on each other. (Adrian 1997, p. 9) Under such kind of arrangement, there must be agreements that each of the country will then concentrate on what it is best suited to produce. If it is agricultural product it would concentrate on that and leave technological industry to the other one. But in our present world trade agreements this has not being the case and we have seen countries that have engaged in more than one economic activity. As a result we have some countries that have not been endowed very well in their natural resources in order to fight for their position in the market. This has continued to weigh heavily on the third world countries which are still developing their economies. The developed countries have engaged in all kinds of trade and the developing world have been left with no specialized area that they can engage in order to built their economies. The developed would have continued to dominate all areas of agriculture production and industrial production. (Cantillo 2001, p. 29) It has been observed that the developing world can as well compete with the developed countries in all areas. Though the wrester world has dominated the agricultural and industries economies, the developing world have shown that they can offer competition in those areas and as well emerge as strong player in the economy. But their efforts have dried up due to some of the current international trade agreements. In particular the spirit of specialization has been killed by the notion of opening up the market of a country in the liberalized trade arguments. Let us look at the notion of opening the market and the reason why there must be a review of the arrangement. Opening the market The big trade debate on fair trade took root the debatable issue had been that of opening the market. Apparently it was ironical that it was the developed countries that were supporting the issue of having the developing world open their market for their products. Liberalizing the market is removing government control on the market and letting the forces of demand and supply rule the market. In this regard there are no quotas or bans or any tariff that is put on the market by the government. Closed market has been there for long time now and the motive behind the idea of closing the market or putting some kind of control on the market had been that there is need to protect the growing industry from competition with the developed countries. As such many developing nations have resulted to imposing tariffs and burns in order to protect their industries and let them grow. The same issue goes back to our earlier argument about specializing in what a country can produce best. The basic idea here is that once the market is open to the outside countries, the home industries are exposed to competition where some may not be able to sustain their operation anymore. (Davies 2006, p. 41) For example, even the industries in the developed world had been feeling the pinch of products from china because they are not able to compete effectively with the prices of products from china. This is because china has been able to utilize well its labour abundance and hence their production chains ahs ensured that they can produce and sell their product at a much lower cost than other countries. As a result china has been able to attract many companies in the country due to the reduced production cost. Since the products from china can retail in low cost than others, there has been san issue of competition between producers of the same producers in the country as they see their market being more and more endangered. Although china has been accused of producing cheap products that sell at cheap prices, the country has been able to acquire itself a chunk in the export market. (Pascose 2007, p. 59) The issue of opening the market and exposing the home industry to competition with the established industries in other countries has been one of the reasons whey there have been calls for reforms in the international trade. Each and every country needs to protect its infant industry in order to mature and become of age to competent whit others in the global arena. As a result the current policies on operating the market have been misdirected especially when it comes to the issue of competition. Opening the market is quite important to all nations as it puts them in a position to participate in the international trade. It is a catalyst for growth an in this era of one economic world system, countries cannot afford to stay with closed economies. For example a country like china had a stagnant economy for along time not until it accepted to open its economy in 1979 that it was able to compete effectively in the global arena. Therefore we can say the opening the market helps to challenge the home industry in order to make them work to compete with others. But there are other thorny issues that come with opening the market. One of the thorny issues in the opening of the market has been the issue of fair trade in the global arena. Fair trade has been discussed on many fronts from agricultural to industrial sector. For example though there has been enactment of the African Growth Opportunities Act which has increased tread between America and the African countries there are issues that continue to challenge the way African countries can compete in this arrangement. It has been shown that this has been an arrangement of scrap my back I scrap your since the African countries have been forced to open their markets to products from the United States as well. But the through issue has remained the internal polices of the American government. For example when it comes to export of agricultural products, African countries cannot compete effectively because the US framers are highly subsidized and hence their cost of production is likely to be much lower. Even if African countries have been presented with an opportunity to export agricultural products to the US market duty free, still they cannot benefit from such an arrangement because their cost of production is still higher compared to that of US farmers. It has also been shown that the cost of such an opportunity is usually transferred to other sectors of the economy. The issue of subsidization of farmers by the western countries has been a thorny issue in the world trade forum since they are always at an advantage compared to those in the developing nations. Currently the WTO rules cap some annual budget an outlay on all export subsides and the quantities of the subsidies exports usually on a product-specific base. They have been derived form export subsidy activity in the period of 1969-1990. However it has been observed that European Union and USA have been able to position themselves under the umbrella of such subsidy and have enabled their farmer to produce at much lower cost. EU has been reported to be extending export subsides of more that $2 billion every year while the US has been reported to be extending export subsidies of more than $20 billion every year. (WTO, 2002) It has also been shown that some of these subsidized have been a way of indirect monopoly of the concerned product. These products that have been extended such subsidies have been shown to be the sole market products in their respective countries. For example it has been shown that it is difficult for nay other country to export corn to USA since government subsidies have lowered the cost of production such that exported products cannot compete in price with them. Therefore we can say that there is need to have reforms in the international trade systems in the sense that they have been oppressive of the emerging markets. If there has to be fair trade in the world, the policy of opening the market has to be followed by a same policy of ensuring that the imported products are able to compete with the locally produced products. Therefore the developing or emerging markets must be given some kind of flexibility in the way they open their markets to make sure that they are able protect their infant industries. This would be in the same spirit of ensuring that we don’t open our market and at the same time exert monopoly on the market through the trade policies like subsidies and others. Special and differential treatment It has been shown that World Trade Organization (WTO) has tradition recognized the fact that developing countries and with special attention to the least developed countries must be given special and differential treatment on the trade arena in the way they are likely to company with trade rules. This is in order to give them time to adjust to the competition in the market and allowed them to have a mechanism that is likely to address their needs in economic development. Therefore there has been an argument in the trade arena that some of these countries especially in the developing world need to be given special and differential treatment in all trade negotiation. (Trevor and Kevin 2006, p. 4) Therefore any effort to negotiation on these countries must take in some consideration on aspects of the nature of production in these countries and the way they can be helped to ascend to competition. As has been proposed by the united states, there is need to put in place measures like elimination of export subsides, putting in place export credit and food aid programs, reduced tariffs on most of their exports and harmonization of domestic trade police with the international trade agreements. These are some of the most important proposals that the United States and other major players in the international trade have proposed in order to help the developing nations come up of age to face the competition in the market. Therefore we would say that there are much needed reforms that WTO has not been able to implement being at the helm of international trade. One of the most important issues that WTO needs to address is fair representation of all countries in the organization. Since it has been given the mandate of negotiating in favour of all nations in the world, there should be representatives of all nations to its decisions making bodies. This will help even the developing nation to own the organization and change their perception of the organization as “their WTO” which means they don’t identify with it. WTO has been accused by the developing world of playing to eth tune of the big boys who have say in the market. It is time it woke up to play its role effectively in the market by ensuring that all countries are represented in the organization. This will help even the countries in the developing world to feel appreciated and well developed in the world trade issues. It should play the role of a fair judge who does not favour any side of the divide. (Robbin, 2006, p. 49) Another area of reforms that WTO needs to take root on is to ensure that there is fair trade in the world. This will involve trying to harmonize the policies of the world trade with that of the individual countries in order to ensure that they also feel safe in the global arena trade. This means that there is need to review the policies of the organization to make it more relevant to the changing world and play a crucial role in ensuring that there is fair trade in the world. We cannot afford to spend another half century debating on how to achieve fair trade in the world while the organization is just playing the role of a mediator and taking no action. (Tim 2005, p. 81) Reasons against change in international trade system At the same time there are a number of reasons that can be advanced against implementing changes in the international trade systems. Although this is seen as a view of the conservatives, it has its place in the argument. The current trade system is held in balance by some important forces that need to be maintained. In this regard there would be an argument of natural evolution taking place in the sense that there is need to have the system change naturally. In any market the force of demand and supply always are the precedent that dictates a health market. Therefore if we take the global market to be a normal market, there will be a need to let the forces of supply and demand rule the market. (Hufner, 2005, p. 53) This is seen as one of the natural way that will at the end bring equilibrium in the international trade arena. There are some argument at that the concept of free and fair trade will never take root in the world due to the diverse interact of many nation and the diverse need of each and every nation. As such letting the market take a natural course will help it to come to equilibrium even if it will take the next one century. One of the supports for this argument has been that, the concept of free trade has been nothing but a subject of political speculation. It is seen more as a way of ensuring that there is political security of the nations. For example it has been argued that the AGOA initiative by American has not been so much leaned towards benefiting African countries but rather it has been leaned towards ensuring that Africa countries follow America and its policies especially a time like this when there are other emerging powerful bloc likes EU and China. Therefore if trade reforms are to be carried out, they should be led by genuine desire of the world to achieve fair trade. Reference: Adrian, W 1997, Trade reforms and demand in skills, oxford University Press Cancun, B 2003, Key issues facing the multilateral trading system, Oxford University Press Cantillo, S 2001, Trade reform and comparative advantage, Wiley, New York Chadwick, A. (2006): The future of UN and world trade, Global Governance, Issue 2 Davies, R 2006, Trade Liberalization and income distribution, NBER Working Papers 5693 http://www.fas.usda.gov/itp/wto/proposal.htm on 12th April 2008 Hufner, K. (2005): The agenda for change, Bundrich June 2005 Pascose, M 2007, Trade Reforms, ABARE Outlook Conference Robbin, D. (2006): Trade wages in developing world, OECD Development working paper 119 Tim, A. (2005): Reforming the WTO, McGraw, London Trade Policy Monitor, 2002, Recent Trade Issues, Seattle Trevor, D. & Kevin, H 2006, Potential WTO reforms, CEPS Working Papers 16, June 2006 WTO, (2002): The US WTO Agriculture Proposal, Retrieved from Yasuchi, A 2000, WTO and world trade conflicts, IISS Quarterly 45 Read More