Membership in the World Trade Organization for Developing Countries - Essay Example

Membership of the World Trade Organization and Developing Countries The World Trade Organization (WTO) is an organization that aims at supervising and liberalizing trade internationally. WTO is mainly concerned with how to regulate trade among member states by creating forums for negotiation and it formalizes trade agreements to make the whole process successful. The WTO is a powerful organization having the most influential states globally as members. Therefore, it has significant influence over trade policies and practices globally. This organization advocates a free trade model and mainly focuses on how to make trade flow as freely and smoothly as possible. About two thirds of WTO’s around 150 members are developing countries (Rena 2012, p.77). Doha Round was launched mainly to address the needs and interests of Third World countries. The Least Developed Countries (LDCs) significantly contribute to the growth of the global economy because trade is an important tool for their development strategies. There is need to determine whether WTO membership benefits the developing countries or it just undermines the development in these countries. This paper explores whether the universal rules and regulations governing trade established by the WTO on the basis of free trade principles assist the developing countries. Indeed, WTO membership has enabled many developing countries involved to improve trade and develop. Some of the benefits of WTO membership that this paper will discuss include peacekeeping, economic growth, and increase in income. Notably, the WTO started operating in 1995 under the Marrakech Agreement as a replacement of the General Agreement on Tariffs and Trade (GATT) that was developed in 1948 after the Second World War (Rena 2012, p.78). GATT was based on a series of trade negotiations with different themes known as rounds that aimed at reducing tariffs, non-tariff barriers (NTB) like quotas, embargoes and dumpling which were flooding foreign markets with commodities that cannot be sold domestically. Currently, the Doha Round launched in 2001 has been a long process with little progress because of differences of interests and perspectives between the developed and developing countries. This trade negotiation was developed to ensure that there is equitable participation of the developing countries (Dalal 2012, p.44). The WTO is focused on completing negotiations on the Doha Round to assist in addressing the concerns and interests of the Third World countries. For instance, the Doha Ministerial Declaration adopted in the same year stated that member countries commit themselves to developments in market accessibility, reductions of, in order to phase out all methods of export subsidies and considerable reductions in trade distorting domestic support (Rena 2012, p.79). Agreeably, special and differential treatment for developing countries is an important part of negotiation elements. The legal protection provided by the dispute settlement understanding can help in improving the position of developing countries in world trade (Keyzer, Merbis and Overbosch 2000, p.12). The major focus of WTO is to ensure that trade flows freely and smoothly by administering trade agreements, settling trade-related disputes, and reviewing trade policies among others. WTO’s key principles include the principle of non-discrimination, which is composed of the Most Favoured Nation rule and the National Treatment Policy. MNF has been the main feature of international trade policy prohibiting discrimination between like products destined for different countries. On the other hand, national treatment means that foreign imported goods after crossing the border should be treated no less favourably than domestically produced goods. Another principle is transparency where members of the WTO are expected to publish their trade regulations and ensure that other members are aware of any decisions affecting trade. In addition, there are certain policies supporting the WTO functions and these include specialized help for export promotion; cooperation in global economic policy-making among others. The establishment of Uruguay Round Agreement on Agriculture (URAA) helped in reforming the agricultural trade system. Under URAA, countries came into an agreement to minimize agricultural support and protection by setting disciplines and rules on market access, export competition, and towards domestic policies (Blouin et al 2002, p.75-76). India’s agricultural produce are for consumption and raw materials for the country. The liberalization of world trade in agriculture has enabled India to grow in agricultural sector (Blouin et al 2002, p.77-8). Membership of WTO benefits developing countries in many ways; for instance, it creates employment opportunities, promotes of peace and security, increases income, stimulates economic growth, encourages good governance, shields government from narrow interests, and gives consumers more choice among others (WTO 2008, p.1). To begin with, the WTO system helps in keeping peace and so it significantly contributes to international peace. Arguably, peace is very important in any negotiation process and so it forms part of the trading system. This system allows trade activities to be carried out and flow smoothly and it also provides member countries with a constructive and fair ways to deal with disputes arising from trade-related issues. There have been trade disputes that turn into war if not resolved accordingly. One of the trade wars was experienced in 1930 where countries were competing to raise trade barriers in order to protect their domestic products. This worsened the Great Depression and contributed to the occurrence of Second World War. Thereafter, the GATT was established to help prevent trade tensions worldwide and currently, the WTO is the one operating (WTO 2008, p.2). GATT was formulated to ensure that there is post-war stability and it enacted new basic set of rules and exceptions to regulate international trade between members (Bown 2009, p.11). In most cases, most developing countries face tensions and conflicts and this can be prevented especially when they become members of the WTO which plays a leading role in promoting peace and security in member countries. Secondly, trade stimulates economic growth, which will in turn create employment opportunities. Many individuals believe that fair trade boosts economic growth and economic growth is an implication of more job opportunities. However, there are some cases where some jobs are lost even if trade is expanding. For instance, advancement in technology leads to a significant increase in productivity and employment opportunities, however, it benefits certain jobs while at the same time hurt others. More so, the fact that trade boosts national income does not mean new employment for individuals especially for those whole lost their job due to stiff competition from imports. Since WTO is concerned with fair trade that benefits all member countries involved, it stimulated the economic growth in these countries and there is higher chance that this will lead to creation of more employment opportunities. Mostly, these jobs tend to be better paid with better security (WTO 2008, pp.9-10). Indeed, this will greatly benefit developing countries because unemployment is one of the major problems in these countries. Fair trade stimulates economic growth and this will result in poverty reduction. For instance, developing countries such as India are more focused on developing its economy and eliminating poverty (Bhagwati 2007, p.54). Another benefit associated with WTO membership is increase in incomes. Fair trade raises incomes, both national and personal, because fare trade assists in reducing trade. For instance, the WTO’s estimates for the impact of the Uruguay round trade deal were between $109 billion and $510 billion added to world income (WTO 2008, p.8). Therefore, trade clearly boosts incomes but it also poses some challenges as domestic producers face stiff competition from the imported goods. More so, the governments of developing countries do join the WTO because their exporters are likely to benefit from low tariffs negotiated by developed WTO member countries and extended to other members under MFN rule (Bown and Hoekman 2007, p.3). On the contrary, the critics claim that WTO membership hardly benefits developing countries with the view that WTO rules reduce the policy space available for countries to enact their own context-specific trade policies. These critics argue that universal policies are narrow and member countries should be able to control their policy space. The WTO rules are universal and are based on free trade principle but developing countries need to control their own trade policies and use protectionism where necessary to ensure that their infant industries develop successfully. According to critics, WTO rules are just a charter for multinationals as they prioritise commercial interests and pay little attention to other important interests such as human rights, health and safety, and environment among others. They argue further that WTO is undemocratic as it creates universal rules and regulations and denies member countries the ability to have national control and be sovereign. It is very unfair because the citizens of member countries are controlled by rules established by an organization, which they are unable to influence or vote for or against. Moreover, WTO’s opponents claim that it is hypocritical. For instance, developed countries continue to protect their economic sectors when they are vulnerable to competition from developing countries, yet, they force free trade on developing countries to meet their interests. Chang (2002, p.19) posits that the policies used by developed countries when they were developing are opposite of what is currently being recommended for developing countries to use. The developing countries protected their economy and so they did not trade freely. They successfully used the trade policies but now they are forcing the developing countries to do the opposite. Again, developing countries have less bargaining power as compared to the world powers, developed nations (Keyzer, Merbis and Overbosch 2000, p.12). Concisely, the World Trade Organization is the leading current organization supervising and liberalizing trade in the whole world. Many Third World countries are members of the WTO and this organization formalizes trade agreements and offers frameworks for any form of negotiation. The WTO membership benefits these Third World countries in many ways. Firstly, it stimulates economic growth and creates more employment opportunities. Secondly, it also plays a leading role in peacekeeping and stability in these developed nations. More so, it raises income, provides individuals with more choice, and encourages good governance among others. On the other hand, WTO critics argues that WTO membership hardly benefits developing countries in that, the rules set by WTO are universal and are based on free trade principle and this does not give developing countries an opportunity to control their own trade policies and may be use protectionism where necessary to protect their infant industries. WTO critics believe that WTO membership is not helpful to member countries more especially developing counties. Therefore, WTO should continue with minor technical changes in order to meet the interests of all its members. Developing countries should be allowed to at least establish and control their trade policies. Abolishing WTO is not the best solution because despite the challenges and disadvantages associated to it, there are many benefits that the member countries are entitled to. References Bhagwati, J., 2007, In Defense of Globalization: With a New Afterword, Oxford: Oxford University Press.  Blouin, C. et al., 2002, The Reality of Trade: The WTO and Developing Countries, p. 1-100. Bown, C. P. 2009, Self-enforcing trade developing countries and WTO dispute settlement, Washington, D.C., Brookings Institution Press. Bown, C.P. and Hoekman, B.M. 2007, Developing Countries and Enforcement of Trade Agreements: Why Dispute Settlement Is Not Enough. Policy Research Working Paper 4450, p.1-30. Chang, H.-J. 2002, Kicking away the ladder development strategy in historical perspective, London, Anthem. Dalal, N., 2012, World Trade Organization: Its Impact On Indian Economy, International Journal of Research in IT & Management, Volume 2, Issue 6, p.42-48. Keyzer, M., Merbis, M., and Overbosch, G. 2000, WTO, agriculture, and developing countries: the case of Ethiopia, Rome, Food and Agriculture Organization of the United Nations Rena, R. 2012, Impact of WTO Policies on Developing Countries: Issues and Perspectives, Transnational Corporations Review (Canada), 4(3):77-88. World Trade Organization (WTO), 2008, 10 Benefits of the WTO Trading System, p.1-15. Read More