How the World Trade Organization Impacts Intellectual Property Rights - Essay Example

? How the World Trade Organization (WTO) impacts intellectual Property Rights Global economics affects the decisions of firms, governments and individuals across the world. This is because economics is an essential function of society, which is interdependent on both the social and political functions of society (Kroll, 1999). Economics affects individuals living in the United States by influencing their standards of living. On the other hand, it affects the firms by determining the scope of their jurisdiction; economics influences whether a firm will engage in domestic, international or both trades (Kroll, 1999). Finally, economics affects the governments by determining a nation’s financial resources needed in the sustenance of the country’s requirements. The World Trade Organization (WTO) is an international body charged with the responsibility of regulating trade between the different countries engaged in trading activities. For example, the WTO standardizes trading policies by finding a common ground between the different domestic policies in existent, in the different nations (Kroll, 1999). Intellectual property rights are a crucial issue of contention between countries engaged in trading activities on an international level (Kroll, 1999). This is because of the differences in policies regarding the ownership and transference of this right from one person to another. The WTO continues to resolve disputes arising with regard to intellectual property rights by providing a standardized set of rules used in the judgment of these cases (Kroll, 1999). •Compare and contrast free trade and protectionist theories Free trade is a product of capitalism which replaced the once popular mercantilism (Craig, 1994). Through the recognition of individual rights to own and dispose of property, capitalism thrived. Capitalism allows for privatization of wealth and the subsequent reduction of restrictions on trade thus free trade (Craig, 1994). Free trade is an economic provision for exchange of goods and services without the intervention of the government especially in view of foreign trade. In this scenario, the traders utilize the principle of comparative advantage meaning both parties benefit from the trade interactions (Craig, 1994). Matters of guiding policies dictate that free trade ought to rely on supply and demand which governs the prices and availability of the goods and services (Craig, 1994). However, comparative advantage, demand and supply do not guarantee fair trade. Nonetheless, free trade is a charitable foundation on which competitive markets thrive. It is easy for states and individuals to accumulate wealth and gunner profits from exporting and importing when they practice free trade (Craig, 1994). Protectionist theorists, on the other hand, criticize capitalism and the principle of free trade. Like mercantilism, protectionist theories hold that the government’s control on the importation, exportation and other forms of foreign trade is imperative and extremely beneficial to the nation and individuals (Craig, 1994). Through policies such as tariffs, import quotas export subsidies and exchange rates; the government controls the processes of importation and exportation. Some states even impose embargoes on individuals and firms (Craig, 1994). These protectionist principles have one significant benefit. They favor domestic trade through increased domestic demand and expansion of domestic industries. Elements of protectionism also protect a state against predatory pricing and may subsequently lower the chances of inflation in an economy (Craig, 1994). In view of international trade, firms, individuals and governments prefer the distributional effect to the aggregate effect of a policy or strategy (Craig, 1994). When it comes to free trade, the result will be a net gain. On the other hand, restricted trade encompasses net loss. Therefore, most economies prefer designer strategies to a strictly outlined one. Free trade is the “best” option for states individuals and firms (Craig, 1994). However, there are no societies that embrace free trade to the core because of its distributional shortcomings in regard to free trade. At the same time, economies do not embrace outright protectionism because of its aggregate shortcomings. As such, most states are a blend of free trade and protectionism (Craig, 1994). •Analyze, within the context of the WTO, how the global environment functions on a micro and macro level. WTO plays an integral role in the functioning of the global environment on a micro and macro level (Arnold, 2008). Companies opting to employ a global strategy in their operations ensure that the allocation of their company resources occurs in a manner that will benefit from the profit opportunities outside of their domestic markets jurisdiction. Therefore, these companies engage themselves in different activities, for example, foreign investing, overseas manufacturing and importation and exportation of goods and services (Arnold, 2008). Microeconomics focuses on aspects of an economy while macroeconomics focuses on the larger picture (Arnold, 2008). In the wake of criticisms on capitalism and free trade, the world trade organization acts as a watchdog to ensure that free plus fair trade exists within nations. However, the functioning of WTO in leveling out the playing field is always under scrutiny. Arnold (2008) reflects that, in more than one instance, the WTO has undermined the sovereignty of nations just to uphold the principle of free trade (Arnold, 2008). On the macro level, the accomplishment of broad economic objectives occurs through the institution of a global strategy (Slavin, 2006). Global strategies help companies address issues relating to foreign trade and competition posed by other companies in the international scene. Companies benefit from indicators such as the Gross Domestic Production (GDP) and price indices when making substantive analysis of the international trade scene (Slavin, 2006). The WTO remains vigilant on all the global strategies adopted by the companies operating within the international scene through the monitoring of trade restrictions; for example, quotas and tariffs. In addition, WTO monitors the trade agreements formed between nations. This ensures nations do not exploit each other when engaged in trading activities (Slavin, 2006). As a result, trading in the international scene remains a free and fair to all nations willing to engage in it. It is crucial to note that the macro-level global strategies influence strategies at a micro-level (Slavin, 2006). Macroeconomic conditions are necessary, however; they are not sufficient on their own to create wealth (Slavin, 2006). This is because these conditions compliment microeconomic conditions. The microeconomic foundations of a company’s economy play an n integral role in wealth creation. Rooted in the company’s operating strategies and practices, infrastructure and regulatory policies, these microeconomic foundations constitute the business environment where the firms operating in a nation compete (Slavin, 2006). The WTO is responsible for ensuring that countries' microeconomic foundations do not conflict with the macroeconomic conditions present internationally (Slavin, 2006). •Analyze, using the theory of two-level games, how organizations make financial decisions in a globalized environment. First articulated by Putnam Robert, the two-level games theory metaphorically portrays two individuals charged with the responsibility of making policies simultaneously playing two ‘tables’ (Cowles, 1995). The first represents international politics whereas the other represents domestic politics. Putnam’s views his theory as a political model that could prove useful in the resolution of conflicts between liberal or independent democracies (Cowles, 1995). The embedding of the two-level game theory occurs both implicitly and explicitly in the formation of an international regime. Stephen Krasner defines a regime as rule, norm or decision making procedures in a given issue area (Cowles, 1995). For example, the United States is an international regime whereby the government officials’ motivations remain targeted towards economic interdependence in policy coordination (Cowles, 19950. Companies operating within an international environment must take both domestic and international policies into consideration before making a decision with regard to business operations (Cowles, 1995). This prevents disputes from arising between different firms engaged in trading activities. In addition, it prevents companies from impinging on the domestic policies of foreign countries. The diverse domestic policies might create a trade barrier for countries engaged in trade and have disputed views with regard to a policy (Cowles, 1995). Therefore, it is the responsibility if the WTO to create a standardized set of policies for all the trading nations. The WTO also advises governments to amend their policies in order to accommodate the standardized international ones, hence, avoid the conflicting of domestic and international policies (Cowles, 1995). The resolving of conflicts between countries with regard to trading activities is also a responsibility of the WTO (Cowles, 1995). •Formulate an argument using economic theories that analyzes which parties would benefit from either increasing or decreasing trade restrictions. An analysis into the history of the development of economic theories provides insightful information regarding the growth of international trade (Porter, 1994). As a result, one can use these theories to evaluate the consequences of increasing or decreasing trade restrictions would have on the involved parties (Porter, 1994). The European mercantilist era, a period which lasted between the 1500 and 1750s provided the basis for the practice of contemporary international trade. Mercantilism was an era that gave rise to the philosophy of nationalism, which played an integral role in the diminishing of regional and tribal rivalry (Porter, 1994). People recognized the pivotal role played by trade in the development and sustenance of national interest. As a result, people charged their local governments with the responsibility of controlling trade. The Mercantilism era perceived foreign trade as a form of rivalry between nations because of the disparities in gaining and losing; some nations gained at the expense of others (Porter, 1994). Mercantilism promoted different ideologies, for example, silver and gold became the standard of measurement used to determine the wealth of a country; this implied that inflow of bullion into a country proved to be of more value than its outflow (Porter, 1994). This mercantilist ideology provided a foundation for modern trade theory, whereby it became clear that the establishment of a favorable trade balance relied on the export levels exceeding the import levels. However, the onset of the 20th century brought about a change in the core principles of the modern trade theory (Porter, 1994). The Nazi and Soviet regimes were of the opinion that an increase in the aggregate national wealth would only be subject to the import levels exceeding the exportation ones. The contradiction of modern theory by Adam's advancements paved way for the development of other theories (Porter, 1994). For example, the Quantity theory, which advanced that an increase in prices, would result from a country’s trade balance improvement. The development of these theories triggered the abandonment of the previously advanced ideologies by many countries, for example, United States in the 20th century (Porter, 1994). Adam Smith provided an alternative theory referred to as the “invisible hand” theory. He postulated in his theory that governmental control of foreign trade ought to be reduced in order to create a trade climate with limited confrontations (Porter, 1994). The advancement of technology in fields such as communication and transportation fostered the progress of foreign trade. This allowed for the minimization of political and cultural differences between different countries engaged in trading activities (Porter, 1994). The development of the Global trade theory occurred later in the 20th century. An analysis of the sub-theories modeled to explain macro-level global strategies provide insightful information on the parties that would stand to benefit from increasing or decreasing trade restrictions (Porter, 1994). Firstly, the classical theory of international trade suggests that countries engage themselves in the foreign sale of goods that can be produced cheaply within them (Porter, 1994). Concurrently, these countries only import services and goods that they have the least advantage in producing. Three advantages; comparativeness, absoluteness and equality result from this theory (Porter, 1994). These advantages demonstrate the exchange rates’ role, determine the price differences and influence the occurrence of international trade. The second sub-theory is the Factor Production theory which posits that a country exports goods it has an abundant supply of from the natural resources. Thirdly, the last sub-theory is the Product Life-cycle theory which takes into account the role played by innovation and technology among other factors in explaining trade forces (Porter, 1994). Shortages might later result in the inflation of prices, if an increase in trade restrictions occurs on a nation dependent on the importation of certain goods. On the other hand, a decrease in trade restriction might result in the lowering of prices in countries because of the excess supply of imports (Porter, 1994). Conclusion In conclusion, it is evident that the WTO plays a crucial role in the regulation of trading policies, in the international arena (Kroll, 1999). This allows for the development of trade between countries despite the differences in domestic policies. For example, the WTO helped with the standardization of polices with regard to intellectual property rights, which had been an unresolved issue for a long duration (Kroll, 1999). As a result, there is a significant improvement in international trade. The role played by the WTO in streamlining the macro and micro economies of different countries also attest to the significance of this institution (Kroll, 1999). References Arnold, R. A. (2008). Microeconomics. New York: Cengage Learning. Cowles, M. G. (1995). Big Business and Two-level Games. Carlifornia: MacMillan . Craig, S. (1994). Developing a Global Marketing Strategy. New York: Chemtech. Kroll, S. (1999). International environmental agreements in two-level games. Carlifornia: University of Wyoming. Porter, M. E. (1994). Enhancing the Microeconomic Foundations Of Prosperity. Massachuesetts: Harvard Business School. Slavin, S. L. (2006). Macroeconomics. New York: McGraw-Hill. Read More