Law for International Business Research Paper


As the only multilateral organization dealing with global rules of trade between and among nations, the WTO is charged with the responsibility of ensuring that trade flows as smoothly, fairly, freely, and predictably as possible. After the fourth Ministerial Conference in Doha, Qatar, in November 2001, membership in the WTO stood at 143 nations of which about 110 were developing and transition economy members. More than three-quarters of the members are growing, or least-developed countries; special provisions for these members are included in all WTO agreements. While all members of the WTO may sleep in the same bed, they have different dreams. The trade, investment, and development dreams of developing countries and transition economies (including Ruralia) are significantly different both in content and context than those of the wealthy industrial nations or their trading blocks. Ruralia needs to develop the necessary capacity and take a strategic approach to trade and development that is goal-directed, focused, systemic, long-term, and national in scope to fully utilize the benefits associated with the GATT/WTO regime.

To understand the implications for Ruralia with regards to joining the WTO, it would be useful first to outline the structure and functions of this organization. Regarding structure and governance, WTO’s highest authority is the Ministerial Conference which is made up of one representative from each member state and meets about once every two years. The first conference took place in December 1996 in Singapore. The second was in 1998 in Geneva, and the third was the infamous meetings in Seattle, Washington, from November 30 to December 3, 1999. The fourth meeting took place in November 2001 in Doha, Qatar. (7) The conference acts as a governing council and sets the agenda and program of work for the organization.

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The administration of the organization is overseen by the General Council, which is headed by the director-general who is appointed for a six-year term. “The council performs two broad administrative tasks: dispute settlement and trade policy review.” (1) Consensus makes decisions, but when voting is required, each member has one vote. A two-thirds majority is required to amend provisions of the multilateral agreements and to admit new members.

The WTO represents mainstream countries of the world: big and small, rich and poor, from all continents, races, creeds, and cultures. Most of the nonmembers are former Communist states such as Russia, Vietnam, Cambodia, North Korea, and Yemen; Islamic countries such as Saudi Arabia, Libya, Iran, Iraq, and Syria; and post-conflict states such as Bhutan, Tuvalu, Micronesia, and East Timor. Overall, these countries make up a small fraction of the total global economy and world population.

As the world becomes more global and as trade becomes the driving force for growth, wealth creation, poverty alleviation, innovation, entrepreneurship, openness, and globalization, there is need for a credible multilateral system of regulation and enforcement to create, protect, and preserve a level playing field for all nations, big and small, rich and poor.

“The WTO is supposed to form the core of the global regulatory and enforcement system.” (10) It also provides a mechanism for settling disputes among trading nations, and if the recent experience is indicative of future challenges, dispute settlement and enforcement is becoming the most active and vital work of the organization as more and more members seek to settle their trade disputes using this multilateral system. As well, the WTO is expected to promote transparency, accountability, and respect for the rule of law, thus contributing both to global economic and global democratic/political development.

Benefits of the World Trade Organization:

  1. Making, interpreting, and enforcing rules for global trade. Supercedes regional trading blocks.
  2. Settles trade disputes between trading members.
  3. Helps to promote peace by providing a global forum for conflicting parties.
  4. Through free trade, it promotes economic development by raising incomes and standards of living.
  5. Free trade encourages innovation, contributes to competitiveness and efficiency, and cuts the cost of doing business and the cost of living.
  6. Trade stimulates economic growth and contributes to global poverty alleviation.
  7. Trade encourages more choice of goods and services at more competitive prices.
  8. Provides mechanisms for regulating the behavior of global corporations, especially advantageous for the smaller and weaker emerging markets.
  9. It provides a level playing field for big and small nations alike and harmonizes global trade, and with a broad-based membership, it can effectively bring more trade sectors under multilateral negotiations.
  10. It promotes transparency, accountability, and respect for the rule of law, thus contributing to good governance, economic management, and global integration under a single multilateral regulatory system.
  11. It helps with the enforcement of environmental regulations and labor standards.
  12. It helps the developing countries, especially the least-developed ones, to build human capital and institutional capacity to manage trade and development. (2)

Supporters of the WTO argue that at least the organization is a necessary evil because the world cannot continue to enjoy the fruits of growing free trade without a global regulatory system. There is a lot at stake because while the first GATT round dealt with goods worth about U.S.$10 billion, the Uruguay Round involved almost U.S.$7 trillion, and since the fall of Communism, global trade has been growing faster than the world economy. (9) Therefore, the WTO is needed as the core for the necessary global institutional infrastructure for managing global trade.

Opposition to the World Trade Organization:

  1. It is a tool for globalization for powerful nations and their global corporations.
  2. It is undemocratic, secretive, unaccountable, and colonial.
  3. It promotes free trade at any cost.
  4. It destroys jobs and worsens poverty, especially for developing countries and transition economies.
  5. It dictates its policies, especially for the small and weak developing countries that have little or no voice or representation.
  6. It puts pressure on weak countries to join before they are ready. Weaker economies feel that strengthening enforcement mechanisms and opening markets rapidly hurt the infant economies.
  7. It allows trade and investment interests to take priority over indigenous development.
  8. It is forced by the industrial countries to deal with nontrade issues such as the environment and the social consequences of development.
  9. It does not protect workers’ rights, health, safety, and wages.
  10. It encourages emerging countries to get into debt by borrowing from the international capital markets to develop export commodities.
  11. It perpetuates developing countries’ dependence and marginalization inherited from the GATT era. (8)

Supporters of free global trade must also learn from Seattle. For example, it became clear after Seattle that public awareness and reactions to the events in Seattle were different in industrial and developing countries. In the developing countries, there was only limited discussion and appreciation of the significance and long-term consequences of the Seattle outcomes. The broader implication for this is that trade negotiations do not take place just in Geneva, where the WTO has its headquarters; instead, they take place first and foremost in every constituency of every country.

Most developing countries, especially the least developed, have not started or championed the process of discussing and debating the merits of global trade in their domestic constituencies. It is as if they have no mandate to negotiate on behalf of their people. It must change. There must be active and informed trade discussions and debates within each of the developing countries to develop the necessary domestic support for international engagement and negotiations. Once again, “the international community has a role to play in helping these emerging weak countries develop a trade-positive, enabling domestic environment.” (3) Seattle has taught us all that trade is too significant to be left only to the experts.

The private sectors of the developing countries must also draw instructive lessons from both the hotel conference rooms where the delegates of the failed Ministerial Conference were meeting and the city streets where the demonstrators and the uninvited representatives of the northern private sectors were promoting their respective alternative interests. By private industry, it is meant all the different civil society groupings including NGOs, labor and trade unions, the media, environmental activists, traditional chiefs, academics, youths, professional associations, reformists, the business community, and so on.

From the streets of Seattle, the private sector from the developing countries learns at least two things: One, is that they, too, have a role to play in shaping trade policy and implementation in their respective countries and regions; and two, their interests are not necessarily identical to the benefits of the northern protestors. Therefore, they must develop their strategies and responses to the WTO and global trade based on an informed assessment of the economic, political, social, and cultural realities on the ground. While northern counterparts can and should provide technical support and advice, they should never dictate the agenda for how the civil society in the developing countries responds to the WTO and global trade.

Two examples—labor and the environment—help to explain the different policy interests between northern and southern opposition to the two issues and global trade. North trade unions are opposed to universal trade because they fear that jobs will be exported to low-cost developing countries. (6) The natural extension of this logic is that the trade union movement in developing countries should support trade-positive public policies because of the opportunities to create well-paying jobs in the private sector.

Likewise, some northern environmental activists are opposed to global trade because industry destroys the natural environment and pollutes the air, water, and soil. While southern ecological activists are also opposed to pollution, they see much more the relationship between poverty and environmental degradation. Therefore, to the extent that trade and industrialization help to alleviate poverty, southern environmentalists should be supportive of trade-positive public policies.

This said northern anti-globalization groups are beginning to link up with their like-minded southern counterparts. For example, in January 2001, the first meeting of the newly formed Global Social Forum, representing more than one hundred countries, took place in Brazil’s southern city of Pôrto Alegre. The timing and location were deliberately chosen by the organizers to show solidarity between northern and southern anti-globalization forces and to demonstrate against the meeting of the Global Economic Forum that was taking place in Davos, Switzerland. The demonstrations in the summer of 2001 in Quebec City against the Free Trade Area of the Americas also included many NGOs from the south. (10)

The private sector business community in each of the developing countries must become more actively involved in promoting trade and investment in their respective countries or regions. Global trade is good for business, even for those firms that are not yet been actively engaged in the export-import sector. In every globalizing developing country, business leaders should take up the challenge to explain to the public, mainly the rest of the business community, the relationships between the WTO and global trade and the practical implications for their respective countries.

Following the successful conclusion of the Uruguay Round and the establishment of the WTO, concern has been expressed that the issues and needs of developing countries and transition economies have not been given serious consideration, let alone finding practical solutions to problems. (9) As a result, in preparation for the third Ministerial Conference that took place toward the end of 1999, various publications came out identifying trade and development issues most important to developing countries and transition economies.

Some of these publications focused on single sectors such as agriculture or financial services, others looked at specific regions such as Latin America and Central and Eastern Europe, others looked at particular topics such as participation and commitment, and others talked about all developing countries in general. This section highlights the most critical trade investment and development issues for developing countries.

Developing countries are not a homogeneous group, and globalization is making them even less so as some countries seem to adjust to global competition faster and more successfully than others. (1) The periphery is divided between the advanced developing countries (P1) and the least developed countries (P2). In the discussion of foreign direct investment (FDI), a subgrouping of prosperous developing countries—the BEMs—was also identified. P1 and BEMs are almost identical groups, and their issues and concerns regarding the WTO, global trade, investment, and development are different than the P2 or least-developed countries. The problems and concerns I will discuss apply to all developing countries, but they are more serious, severe, and limiting for the P2 least-developed nations than for the P1 countries or the BEMs.

Agriculture is a significant economic sector in developing countries because this is traditionally the area in which these countries have enjoyed competitive trade advantages. (like Ruralia with its sugarcane industry) There are serious issues associated with market access, export subsidies, and domestic support, all resulting from the protectionist behavior of developed countries.

“Agriculture also illustrates the differences among developing countries regarding their trade policies and interests.” (6) Three groups can be identified among developing countries: exporters of tropical products, exporters of temperate products in direct competition with Europe and North America, and importers of foodstuffs and grains who are also the ones least likely to have the capacity to produce for export any agricultural commodities.

One of the critical differences in interest among developing countries lies between those who are net importers of food grains (P2 nations) and those who are net exporters such as the BEMs. Exporters are interested in opening up more market access for their commodities and devising rules to prohibit export taxes, quotas, and other forms of trade protectionism. Therefore, they are, at least in principle, in support of the WTO and the resulting agreements and rulings.

These are mainly the twenty to twenty-five countries that grated in the multilateral trading system. (9) They participate actively in the WTO, abide by are mostly BEMs, middle income from Asia and Latin America, and are almost entirely in to the rules, use similar types of trade remedies, such as antidumping, as the industrial countries do, and take full advantage of the opportunities offered by the WTO’s trade DSM.

Then there are the fifty to sixty least-developed countries members of the WTO who are net importers of food. They are mostly concerned with increases in the price of imported food, the negative impact on their limited foreign exchange earnings, and the net impact on their impoverished populations. They want to keep the option to support domestic agriculture with export subsidies in the future should they then have developed the capacity to export.

Most of these countries are not yet integrated efficiently in the multilateral trading system. They have only minimal participation in the WTO and little or no national capacity to implement the Uruguay Round commitments, WTO rulings, or the preparation of future negotiations. They tend to focus on the S&D aspects of trade negotiations. Although they enjoy exemptions under the support of the aggregate measure for agriculture as provided for the urban and rural poor and a ten-year grace period for full implementation of commitment, they still resist trade liberalization because they are not ready.

It is now clear that most developing countries, especially the least developed ones (P2), cannot take full advantage of the opportunities offered by a liberalized global trading system as well as their membership in the WTO. Without building the necessary national capacity, the majority of P2 countries will continue to focus on maintaining S&D treatment as their protective negotiating strategy instead of moving toward openness, liberalization, and gainful participation in trade and globalization. These countries need to develop the necessary capacity and take a strategic approach to business and development that is goal-directed, focused, systemic, long-term, and national in scope.

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