International business - WTO

Published:

(A) INTRODUCTION

As markets globalize and an increasing proportion of business activity goes national borders, institutions are needed to help regulate, manage and police the global market place so as to promote the establishment of multinational treaties that can govern the global business system and the organisation that does these in the current business is the World Trade Organisation (WTO).

WTO currently has 153 member states that follow the policies that are laid down by them out of which 117 are developing nations .As we will proceed on we will tend to realize that WTO offers a lot of benefits to its member states and concerning these we would look at Kenya since it is also a developing nation and look at the benefits Kenya receives being a member state of WTO.

(B) BACKGROUND

Over the past few centuries a number of important global institutions have been created to manage, regulate these functions including General Agreement on Tariffs and Trade (GATT) and its successor World Trade Organisation (WTO).One of the main important round was the Uruguay round which lasted from 1986 to 1994 and led to the WTO'S creation

Lady using a tablet
Lady using a tablet

Professional

Essay Writers

Lady Using Tablet

Get your grade
or your money back

using our Essay Writing Service!

Essay Writing Service

The WTO began life on 1 January 1995. But since 1948 GATT had provided the rules for the system.

During the years of 1991-1993 it was said that Kenya was experiencing a terrible economic performance since the years of the independence

Kenya's growth in GDP had stagnated while production of agricultural goods had fallen and inflation was high and not forgetting the governments had a budget deficit due to these reasons many countries suspended aid with Kenya

(C) AIMS & OBJECTIVES

The main objectives of this case study are as follows:

  • Kenya's Trading activities
  • Policies of WTO for International Trade and good practise
  • How WTO has affected peoples live in Kenya and the economy

(D) KENYA'S TRADING ACTIVITIES

According to (Hill 2009) International Trade is the exchange of goods and services across national borders.

Kenya is said to be one of the largest exporting country for agricultural products whereby the major agricultural exports are tea, coffee and also horticultural products whereby agricultural products account up to 27% of Kenya's GDP and that Kenya's herd of livestock is also vey diversified not forgetting that fishing is also a activity that is normally done around the major lakes.

NB: Kenya is the world's leading supplier in tea, pyrethrum.

Pyrethrum is widely used as an insecticide. Tea accounts for 17% of the world's export market and coffee follows closely to around 10%. Tea and coffee are grown in highlands around Mt. Kenya regions

The service sector is the major foreign exchange earner and represents around 54% of the GDP which is dominated by tourism and financial and communication services.

The tourism industry provided Kenya with approximately Ksh 65.2 billion in 2007 and Ksh 52.7 billion the reduction in earnings was because of the post election violence and that tourism normally accounts for the bulk of its foreign exchange reserves

Visitors Arrivals by Purpose of Visit, 2003-2007 ('000s)

Purpose

2003

2004

2005

2006

2007

2008*

Holiday

684

885.6

1,063.10

1,087.40

1,278.50

936.10

Business

182.1

246.4

206.1

226.2

242.2

109.40

Transit

219.1

162.2

79.8

137.1

130.9

62.00

Other

61

66.5

129.9

149.9

165.2

95.80

TOTAL

1,146.2

1,360.7

1,478.9

1,600.6

1,816.8

1,203.3

(www.tourism.go.ke/ministry.nsf/pages/facts_figures)

A wide variety of crops are grown in Kenya and they include;

  • Maize
  • Rice
  • Wheat
  • Tea -the leading export crop (one third of the value of agricultural products)
  • Coffee
  • Sugar cane
  • Fibres
Lady using a tablet
Lady using a tablet

Comprehensive

Writing Services

Lady Using Tablet

Plagiarism-free
Always on Time

Marked to Standard

Order Now

Kenya's main imports include:

  • Machinery
  • Transport equipment
  • Crude oil and petroleum
  • Motor vehicles
  • Iron and steel
  • Plastics

Kenya's largest trading partner for both imports and exports has always been European Union (EU) and other countries include India, Japan, South Africa, United Arab Emirates, and Pakistan.

NOTE: All figures are in millions of U.S dollars, and not seasonally adjusted unless otherwise specified.

Year

Exports

Imports

Balance

2009

654.4

280.6

373.8

2008

442.4

343.5

98.5

2007

520.4

325.4

194.9

2006

430.7

353.7

77.0

2005

573.4

348.0

225.3

2004

347.5

353.2

-4.7

2003

196.5

249.3

-52.8

2002

271.3

188.6

82.7

2001

577.6

128.1

449.5

2000

237.5

110.2

127.3

1999

189.0

106.4

82.6

1998

198.9

98.5

100.4

TOTAL

4639.6

2885.5

1754.1

(http://www.census.gov/foreign-trade/balance/c7790.html)

(E) POLICIES OF WTO FOR INTERNATIONAL BUSINESS AND GOOD PRACTISE

According to ( Rugman and Collinson 2006) WTO's main function is to act as a dispute settlement mechanism. The last trading round was the Doha Round which collapsed in July 2009

The WTO agreements are complex and lengthy because they are legal texts that cover a wide range of activities. They deal with: agriculture , sanitation, food , product safety ,intellectual property, agriculture, industrial regulation and standards, , ,clothing, banking, textiles, telecommunications, agriculture, textiles and clothing, banking, telecommunications, and much more that help to promote international trade and good practice and they are :

  • Anti - dumping: When products are dumped it normally results to unfair competition and so as to have fair competition WTO developed the “Anti-Dumping Agreement” which states that if a country is facing dumping of goods what it should do is charge extra import duty on the particular product from the particular exporting country in order to bring its price closer to the “normal value”. And that's what exactly Kenya did to the Chinese products that were coming into the country with a price less than the of cost of production
  • The agreement on trade in services; which concerns tourism, telecommunications, banking g, professional services and many more .Some of the rules in this agreement are; 1)if a country allows foreign competition in a sector, equal opportunities in that sector should be given to service providers from all other WTO members. 2) GATS say governments must publish all relevant laws and regulations, and set up enquiry points within their bureaucracy the main aim of agreement is to take the liberalization process further by increasing the level of commitments in schedules.
  • Tariffs: what the Uruguay round did is that On 26 March 1997, 40 countries accounting for more than 92% of world trade in information technology products, agreed to eliminate import duties and other charges on these products by 2000 (by 2005 in a handful of cases) and so as to facilitate international trade with all WTO member
  • The Agricultural Agreement: The objective of theAgriculture Agreementis to reform trade in the sector and to make policies more market-oriented and it would improve security and predictability for exporting and importing countries and security for importing and exporting countries alike. This policy made Kenya to adapt to an agricultural policy that is aimed to ensure food safety.
  • Non tariff barriers: TheAgreement on Import Licensing Proceduressays import licensing should be simple, transparent and predictable
Lady using a tablet
Lady using a tablet

This Essay is

a Student's Work

Lady Using Tablet

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Examples of our work

The world is increasingly divided into trade blocs who play a central role in international trade negotiations.

(F) HOW WTO HAS AFFECTED PEOPLES' LIVE IN KENYA & THE ECONOMY

As Kenya became a member of WTO what happened was that it availed a lot of market opportunities for Kenya which ended up changing lives of residents and having major influences on the economy.

  • Employment- as Kenya opened up it attracted joint ventures, international franchising, exportation, foreign direct investment (FDI) and as people saw Kenya as a growing market they started investing in it which ended up leading to local employment of workforce and as the companies got returns from their investments it lead increase in wages and salaries.

'000

1995

2007

Modern Establishments - Urban and Rural Areas:

Wage Employees

1,557

1,907.30

Self-employed and unpaid family workers...

61.1

67.4

Informal Sector

1,141

7,475.60

TOTAL

3,859

9,450.30

(www.knbs.or.ke)

Clearly as soon as Kenya joined WTO it increased the employment level

  • Poverty-it refers to the condition of not having the means to afford basic human needssuch asclean water,nutrition,health care, clothing and shelter. Poverty rate inKenyahas dropped in the last decade by 10 percentage points to 46 percent from 56 percent in 1997 mainly due to improved economic environment,
  • Lifestyle- Kenyan lifestyle has really improved because of new cultures fashions. trends, coming in some of the lifestyle indicators are

Lifestyle indicators

2006

2007

2008

2009

2010

Internet Users ('000)

2,770.30

3,000.00

3,359.55

3,766.22

4,204.10

New Registrations of Passenger Cars ('000)

6.00

5.80

5.60

6.03

(www.euromonitor.com/FactFile.aspx?country=KY)

  • Infrastructure - most parts of the country are connected with the road network which stretches out to around 95,000 miles. The road network accounts to around 80% of Kenya's total passenger and freight transport. The government is planning has made up plans to open up the railways to private - sector. Because of WTO the port of Mombasa has become the country's main seaport and serves east and central Africa which has an annual freight throughput of about 8.1 million tons which has lead to local employment as well
  • Corporate social responsibility- it refers to the liability to be called to account for conduct that affects communities or societies at large. Whereby an all companies should behave like a good citizen. Big companies like Kenya airways, Safaricom, Barclays engage in CSR a lot recently Kenya airways launched a US$90,000 charity programme to improve the lives of Africans
  • Standards of living has improved that can be said because the human development index rose from 0.522 to 0.541

(G) RECOMMENDATIONS

World Trade Organisation is trying 2 liberalise trade across all countries which is something difficult as well since it has complex functions my recommendations concerning promoting free trade would be;

  • Non-Member States to take up initiates to stand up and join the WTO so as to have a free market in the world
  • Consumers are normally passes down the extra cost in terms of taxes n levies laid down that is not fair because consumers would have to pay a higher price for the same product ; therefore countries should try as much as possible to reduce the amount of customs and duties.
  • I believe if countries could stop forming trade blocs and stop trading within a specific country rather than trade in the world as under one nation no tariffs no customs that would promote consumer efficiency and allow consumers to access a wider range of products.
  • It is said whatever a great man does the rest would follow let's hope that can be applied to countries because success of practising free market is only evident with the growth of USA, Germany, France and so let's hope other countries do try to adopt to a free market economy as well.

(H) CONCLUSION

Trade has played an important role in the country's economic performance through the World Trade Organisation and it will continue to do so.

We can conclude by saying that WTO is solely responsible for policing the world trading system and making sure nation states adhere to the rules laid down in trade treaties signed by WTO member states. WTO has made it possible for free trade to exist among countries and so Kenya has ended up getting benefits like increases in income through trade, economic growth stimulated by trade, access to better quality of products and services .According to (Rugman and Collinson 2006) WTO is now the umbrella organisation that governs the international trading system

(I) REFERENCES & BIBLIOGRAPHY

Graham, C. (2007). International Marketing13 Th edition p.28, 33, 46-59,158,196.

Hill, C. (2009) International Business competing in the Global Market Place7th edition p. 6,322,521,707-8.

Mahajan, V. (2009) Africa Risingp.16,29.

Rugman,MA. & Collinson,S. (2006) International Business4th edition p.12.

http://www.census.gov/foreign-trade/balance/c7790.html#2009 (Access Date April 07 2010)

http://www1.american.edu/TED/kenya.htm (Access Date April 07 2010)

http://www.tourism.go.ke/ministry.nsf/pages/facts_figures (Access Date March 09 2010)

http://www.euromonitor.com/FactFile.aspx?country=KY (Access Date March 09 2010)

http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact1_e.htm (Access Date April 07 2010)

http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm (Access Date April 07 2010)

http://www.economywatch.com/world_economy/kenya/export-import.html (Access Date March 09 2010)

http://www.wto.org/english/thewto_e/whatis_e/10ben_e/10b00_e.htm (Access Date April 07

2010)

http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm3_e.htm (Access Date April 07 2010)

http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm2_e.htm (Access Date April 07 2010)

http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm9_e.htm (Access Date April 07 2010)

http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm8_e.htm (Access Date April 07 2010)

http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm6_e.htm (Access Date April 07 2010)

http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm7_e.htm (Access Date April 07 2010)

http://www.wto.org/english/tratop_e/tpr_e/tp124_e.htm (Access Date April 07 2010)

http://www.kenya-airways.com/kq4/about_kenya_airways/corporate_social_responsibility/default.aspx (Access Date April 07 2010)

http://www.carnegieendowment.org/files/impact_doha_kenya.pdf (Access Date April 07 2010)

http://www.imd.ch/research/challenges/TC077-08.cfm (Access Date April 07 2010)

http://www.knbs.or.ke/ (Access Date April 07 2010)

http://www.kenya.rcbowen.com/economy/ (Access Date April 07 2010)

http://www.trade.go.ke/index.php?option=com_content&task=view&id=105&Itemid=135 (Access Date April 07 2010)

http://sukhan.com.pk/sukhan/wto.htm (Access Date April 07 2010)