Academic essay Help WTO Role democracy assignment define The World Trade Organization (WTO) it was formed on 15th April, 1994 in Marrakesh, Morocco. The primary reason for forming the WTO was to develop a unilateral trading system across the world and govern the countries involved in trade and commerce with each other. It ensures that trade flows between nations flow as smoothly, as freely, and as predictably as possible. Trading and globalisation countries signs agreement with each other to determine trading rules of both goods and services exchange, imports and exports, and all businesses conduct who are involved in the trade.
The Organization for Economic Co-operation and Development (OECD) was formed in 1948. Its primary objective is to promote policies which are fruitful to all nations and their decisions are based upon creating more jobs, equality among all, and building trust between countries. The members periodically meet to review the progress in specific policies and suggest their opinions for better progress.
WTO and OECD were both formed to sustain economic progress in a sustainable manner but following many years of their governance, instead of developing, many countries have incurred huge amount of budget deficit on themselves, while others who were also members of OECD have not incurred debts on them (Alesina & Perotti 1994). Hence OECD is seen as a deteriorating the economy by transferring debt from powerful countries to weaker developing countries. The underlying question here is the imbalance in debt allocation between countries with high per capita income and countries with low per capita income.
Taking the case of the European Union (EU), it is seen that the European Parliament is the only one which is directly elected. There are a small number of voters who select the parliament with certain issues of importance according to them (Moravcsik 2004). These elections are decentralized and apathetic. This group does not think of broader issues in the European Union, let alone building a transnational democracy with equal opportunity. Thus there has been a democratic deficit, which is created in the EU resulting from the powerful role of the European Commission, which decided on major policies and coordinates regulation on sectors.
The WTO runs by the member states and decision making is being processed depending on the finance contribution program of each member state. Thus the US having the majority contribution in the WTO, often tries to modify policies and offer suggestions based on their personal gain rather than an overall outlook of all countries involved. However, the WTO follows a distinct method of taking decisions in bilateral trade negotiations by involving all countries in it. Hence the decisions of the WTO are more dependable and manages to consider all countries concerns in it, and not just its major contributors. So WTO is seen to help democracy in a way by involving all partners to consider them equal in their rights of trade and finance. In contrast, the Economist in 1999 declared that, world trade and its multilateral governing authority has done more to attack advanced living standards and global poverty on the entire planet than any other man-made device (Rose 2003). Rose (2003) is of the belief that there has been substantial growth in economy, as there has been an increase in trade of 6% annually for the past fifty years, and trade was 22 times in 2000 compared to that of 1950.
Taking the case of China, when it opened up for inbound investment since 15 years back, it has been growing phenomenally in its exports. Its accession to the WTO and removing trade tariffs in many sectors have helped it to gain a major share in the export market in the world. It has become the 10th largest trading nation in the world and its domestic market has reached huge proportions (Bach et.al 1996). Adhikari & Yang (2002), however believes that this accession of China into the WTO and removing of trade barriers, there is a deep fear among many countries that China’s unlimited labor supply will flood their markets with huge exports. What happens in a WTO agreement is that when one country initiates in removing tariffs in certain sectors, it needs and expects the same from its trading partners. This is because it needs to balance its current account deficit. Sylvia Ostry (1998) analysis that there could be conflicts in the WTO compliance and Chinese businesses. This is mainly because of the embedded cultural and historical traditions of China which could create conflicts in adhering to WTO trade rules. The author also recognises that the past track record of Chinese legislative system is not used to follow such transparency based decision making in resolving disputes and conflicts and hence, it could create a burden for the WTO and halt the support for constant reforms in China.
In cases of respondents and complainants in the WTO, Africa is the major respondent with many countries having challenged disputes like anti-dumping of steel waste, anti-dumping of certain pharmaceutical products from India, etc. (Mosoti 2006). There have been many dispute complaints from participating countries and Africa has a miniscule part to play in such negotiations. This exclusion of Africa in participating resolutions in seen as a diversity creator by the WTO. Because of its less financial contribution and slow pace of increasing trade with others, it is merely seen as a spectator than a participator (Mosoti 2006). Africa has mostly been active in the third parties discussions and negotiations with less number of its internal issues being addressed in the WTO talks. With rapidly increasing globalization among different democracies, there is also seen an increase in the marginalization of some small countries like Africa, and especially the Sub-Sahara African regions (Blackhurst et.al 1999).
Rose (1990) has analyses that there is a faster increase in trade than income in OECD nations. According to him, on an average the OECD member countries grew by about 1% every year from 1950 through 1985. During the same period, there was a decrease in tariffs by 4%, relative price of tradable to non-tradable goods by 1% per annum, and a decline by 1% per annum in transportation costs. The results of Rose’s research was divided into two groups of countries, one containing seven small open economics which were Denmark, Finland, Netherlands, Canada, Sweden, Norway, and Switzerland, and the other containing five large economies which were Italy, Japan, UK, USA, and Germany. The larger economics experienced enhanced trade relations with many other countries and saw a substantial rise in workforce income levels, since trade ratio was seen to be directly related to personal income rise though major corporations participation’s. Small open economics have not seen much increase in their workforce income compared to the larger economies, and tariff removal is the only factor that has helped the smaller economies in realizing a marginal increase in their income. Thus trade growing faster is not directly proportional to income increase of the countries citizens. In addition, there has been a behavioural difference in trade ratios of larger and smaller economies.
The relation between labor standards and international trade consists of two parts to it (Beers 1998). First, there is a loss of combativeness in production and exports of labor intensive products being felt by countries with higher labor standard than countries with lower labor standards. Second, whether there must be rigid import barriers in countries with high labor standards for products coming from countries with low labor standards. This would mean that the countries with higher standards, would reduce their quality and efficiency in order to improve competiveness. Hence the role of OECD countries in trade is much debated on the issues of labor standards. Since OECD is concerned with providing policy frameworks for participating countries, it generally fails to address the internal issues of each country in the sustenance of quality of trade. This issue of labor standards is again subject to each country’s internal policy of offering the best quality products to its citizens. OECD becomes helpless in such conflicts and the issue then goes to the International Labor Organization. Thus OECD, though positive in international promoting trade and commerce is unable to resolve specific issues which are central to a single country.
Thus WTO and OECD, both being international autonomous bodies of global governance, are equipped with many powers to resolve conflicts and issues but are not able to reach out to each and every country and address its problems. The WTO keeps governing the global trade and address complaints and tries to resolve them, but is stuck at certain issues which again is governed by other international bodies. So a country with a WTO complaint cannot clearly solve issues in the environment policy, and it eventually goes to the global environment regulating authorities to move further. The OECD is a promoter of sustainable policies between countries for enhanced trade exchange, but it is limited in its approach to address regional problems of social environment study and financial issues. A country with heavy regional debt may not agree with certain policies which would increase its debt further, and though a global governance body, it is limited in its powers to create a harmoniously trading world.
Adhikari, R. and Yang, Y., 2002. What will WTO membership mean for China and its trading partners? Finance and Development, 39(3), pp.22–25.
Alesina, A. and Perotti, R., 1994. The political economy of budget deficits.
Bach, C., Martin, W. and Stevens, J., 1996. China and the WTO: tariff offers, exemptions, and welfare implications. Weltwirtschaftliches Archiv, 132(3), pp.409–431.
Blackhurst, R., Lyakurwa, B. and Oyejide, A., 1999. Improving African participation in the WTO. pp.20–21.
Moravcsik, A., 2004. Is there a ‘democratic deficit’in world politics? A framework for analysis. Government and opposition, 39(2), pp.336–363.
Mosoti, V., 2006. Africa in the first decade of WTO dispute settlement. Journal of International Economic Law, 9(2), pp.427–453.
Ostry, S., 1998. China and the WTO: The transparency issue. UCLA J. Int’l L. & Foreign Aff., 3, p.1.