The Three Views and WTO
Published: Mon, 5 Dec 2016
Globalization has extended the opportunities available for economic growth leading to extensive lobbying amongst world financial institutions. The high influence of exchange rates has also extensively affected business transactions. The price of commodities, air fare tariffs, foreign exchange levels and export and import licenses have been affected across world markets. The World Bank, major banking institutions, World Trade Organization and UN agencies have converged to control the world markets from various levels due their extensive consultations and economic persuasions on vital financial matters. The economic control by these organizations has also lead to political and social influences amongst various nations across the world. Most countries’ sovereignty has been weakened especially amongst third world countries has they depend on financial support from these organizations for their financial stability (Gregory, 2000).
The three main economic principles, economic liberalism, nationalism and structuralism can be used to analyze the functioning design and operation of WTO. Let us look at each of these perspectives and how they can be used to explain design of WTO:
Economic liberalism, a principle that supports laissez faire economics also greatly values private property in production. It analyses the specific institution that produce a certain commodity e.g. wine production in Italy. The principle refutes the intervention of governments in market influences but it supports the intervention of governments to guard against exploitation of consumers. It maintains the importance of the state to provide public goods and services without tapering into the running of economies. For instance, Adam Smith asserted that it’s the role of the state to provide sufficient infrastructure e.g. roads, railway lines and schools in order to support private ventures. The theories that have been uplifted to support the economic principles include Wealth of nations. It argues that free markets are beneficial and more productive to their societies.
The attitude change towards international trading system especially in marginalized nations came about with the Uruguay round. Since the GATT had always been viewed as a club of rich nations, the establishment of WTO ensured substantive contributions to trade issues by marginalized nations. By setting of trading rules to serve trading partners, the WTO ensured liberalized markets to all trading partners without tapering into internal politics of its members. The keen interest of countries especially marginalized ones into WTO was due to the re-orientation to their trading policies. This was as per there market growth and interests into world trade and the fact that WTO acknowledged and supported their trading interests.
In the Uruguay Round, the negotiations allowed for market access hence the famous GATT rules were extensively reversed. Formation of the provision of single undertaking, all rules that were applied by all the WTO members compared to the optional codes in the GATT. This equaled the rights and obligations as they could not be revoked by other members hence creating a fair trading field for all participants. Liberalism hence is the most favorable design adopted by the WTO to run its operations and make its principles. (WTO,Economic Research and Analysis Division, 1997).
According to Bello Walden, the World Trade Organization undermines the world’s poorest countries by setting policies that favor developed countries especially the USA. Most of WTO agreements do not serve the interests of developing markets as they want to develop a monopoly in conjunction with to US in order to control world trade. A clear example is the introduction of agriculture into the GATT-WTO in 1995 system. By stating that developing countries should feed themselves, it was a clear indication of the importance to create food security in the US due to reliance on US produced products. Due to the easy available of food at a low cost in the USA compared to other developing markets.
The creation of WTO dispute resolution mechanism was to ensure favorable resolution of disputes especially financial, a point emphasized by C Fred Bergsten. He states that ” We (USA) can now use the full weight of the international machinery to go after trade barriers, reduce them, get them eliminated” (Gregory 2000, p. 9). This is because they considered GATT efforts to be weak as they are unable to give favorable financial rulings to the USA.
The establishment of the WTO in 1995 was an idea formulated by the USA to serve its interests and help in its raid on monopoly of markets. By assessing the interests of its corporations and realizing that they are not served effectively, it led to the structured and highly US favoring WTO. It led to development of free markets, setting up of the Uruguay round, decision making and accountability system clearly shows its intentions, to control world markets. The fear tool used by US propagandists that staying out of WTO resulted in the isolation of a country from world trade and that rules could protect emerging markets from unilateral acts lead to consent. With time, the terms were revoked rendering the emerging markets incapable to put trade measures for their development. The use of trade as a tool for development was abandoned and industrialization principles adopted that was unfavorable to Third world countries. The development of the world trade governing bodies like WTO,IMF and World Bank have led to undermine of the liberalism economic principles due to the control the impose onto world markets. (Bello, 2000)
The second principle, nationalism, was postulated by Alexander Hamilton works on policies that aid in economic control by countries. It emphasizes on empowering the state to produce goods that were previously imported also called import substitution industrialization (ISI). This acts as a way of strengthening its economy and reducing its dependency on foreign markets. The state controls its resources on basis of equal distribution to its citizens for growth and development. The development of export promotions policies, devaluations of exchange rates and giving subsidies to local firms are meant to encourage locals to produce surplus goods for export enables development of local industries. The uniting of people under a national identity acts as the foundation for development as it creates a sense of belonging. Presence of nationalism as a way of economic development as long as it geared towards ultimate growth of a people can also be used as a national symbol.
The principle is viewed as powerful and attractive in protecting and enhancing a state’s growth in internationalized markets. The continuous growth of international economies, technology and infrastructure has shrunk the importance of countries. The formation of world trade organizations that govern major trade and financial issues in many countries have also helped to reduce dominancy of countries in their financial matters. The resurgence of economic nationalism being expressed is due to the unfulfilled expectations economically. The fear of dominance of emerging states by the developed nations as also led to development of economic resistance. Occurrence of economic nationalism bases its progress on various levels, pursuit of national interests that include power e.g. the passing of the border security bill by the US. As much as it’s viewed as a source to fund the $600 million plan to secure the Mexican border, it’s also a way of undermining foreign firms especially Indian. Since they outsource cheap labor, the bill makes it extremely expensive to secure foreign work visas hence creating more jobs for its citizens. There’s a threat by the Indian government to take the matter to WTO through the dispute settlement understanding(Méndez, 2010).
The continuous development of globalization poses a fear of eradication on some ethnic states due to competition hence leading to adoption of the economic nationalism in order to instill a sense of national identity. Also there’s a high misuse of the principle by the political elite for their ulterior motives. The identification of economic prowess is viewed as a way of enhancing a nation’s power for political manipulation (Donaldson, 1996). Politics and economic growth combined with a sense of national unity acts as a catalyst to a nation’s growth. The mercantilist and protectionist nature of economic nationalism aims at creating a nation’s financial dependence. Through the activation of independence strategies e.g. creating of trade barriers acts as a way of protecting its citizens against exploitation by foreign markets. The hegemonic stability theory is emphasized by the economic nationalism principle where each country wants to get to superiority status. The basic argument is that any economic system is stable when it’s controlled of a single country (hegemon). It should be able to control all aspects of in the international trade systems and exercise its power at will to other world countries (C,R, 1999). The theory is practiced effectively by the USA to assert its powers on other world states, a clear indication of economic nationalism maturity. Although its being faced by extreme competition due to its mild inability to access large markets, weakened military and fluctuations in its currencies. The development of WTO is seen as part of the US to affirm to the HST theory. The influence impacted through the WTO, World Bank and other trade organizations which are partially controlled by the US affects the trading conditions especially in developing markets. This principle can explain the voting patters in WTO where those countries that have influence like USA seems to have more voting rights compared to other countries.
The structuralism principle also called Marxism is based on the basic interpretation of history and the struggle that occurs between people of varied classes to uplift their living conditions. According to Karl Marx, the capitalistic mode of management leads to oppression of the low class people working for high classed people. He proposes the adopting and implementation of socialism to ensure equity in distribution of resources (Barry Eichengreen, 2000). Dialect materialism was a philosophy initially proposed by Joseph Dietzgen in correspondence with Karl Marx. It’s characterized that history is based on class struggles and the general Hegelian principles. It also asserts the importance of the material world. All things in the world are interconnected and dependent on each other to develop on natural laws. The principle of dialects states that change and motion of world dynamics leads to contractions hence occur only in the presence of those contractions. Heraclitus says ” everything flows and nothing stays” (Donaldson 1996, p. 43). Contradiction as a logical is extensively appreciated by dialects. The constant accumulation of capital influences extensively capitalist nature of countries in order to dominate their markets. The gain of control is demonstrated in the laws of accumulation principle leading to wages and salary dependent among employees. In most cases, the wealth of the capitalists grows significantly compared to that of employees (Einhorn, 2006). According to Henrylk Grossman, the capitalistic nature leads to a considerable decrease in profit margins leading to considerable demise of capitalistic systems.
Structuralism can be used to explain the design of WTO in different ways. WTO has been designed to become a dependence organization where all people run to resolve their business conflict. It has been designed to operate as the big brother who oversees business transaction between all nations. However, the structural design of WTO reveals existence of classes of countries. There are those countries that have more influence in the organization like USA, which funds its operations, while others like third world countries have less influence in the organization. This means that it creates a state of dependency where some have less influence on the organization and depends on those that have more influence to articulate their case.
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