Round of World Trade Negotiations - Assignment Example

ARTICLE WEIGHED IN THE BALANCE The Doha round of world trade negotiations dubbed the 'Doha Development Agenda' began in November 2001 with the supposed aim of lifting millions of the world's poor out of poverty, especially in Africa. However, the talks soon got bogged down since there has been little consensus between the developed and the developing world on the extent to which trade needs to be liberalized. The talks have had a checkered history. The talks were meant to have been completed by 2004, but several extensions in deadlines, have already been missed with no end in sight. The main reason being the differences in perceptions on tariffs and quotas between the two sides are too wide to be bridged. To fulfil Doha's mission to alleviate global poverty, the developed world must at the minimum, be prepared to waive tariffs and quotas on exports from countries officially declared least developed. However, they are loath to do so due to domestic compulsions. Studies carried out by the World bank show that if tariffs and quotas were to be totally done away with, it could "boost income in developing countries by $86 bn and pull an extra 30 million people out of poverty". However, the models used by the World bank do not factor in all possible variables and hence the figures are debatable, some other models for example predict a reduction in poverty by 2% for every 1% increase in income, but with globally variable distribution patterns. The Doha talks also suffer from a misplaced sense of priorities. In concentrating only on slashing tariffs in the agriculture sector, it is focussing its efforts on the one area where it is least likely to have any positive impact on the economies' of the least developed countries. It is felt that if subsidies are removed, world food prices will rise, hurting the consumers, the majority of whom are in the least developed countries. The article concludes that more than anything else, it is lack of ambition and political will on everyone's part - developed, developing, and least developed countries - is the main cause for the apparent lack of progress. Comments Contentious issues such as those being addressed by the 'Doha Development Agenda' are unlikely to be resolved anytime soon. What is important though is that the concerns of all the main players have been brought out in the open and on to the negotiating table. This is a major achievement in itself. For a change, the developing and least developed countries have a forum in which to voice their legitimated grievances. Partnerships between countries such as between China - Brazil - India have also highlighted the growing clout of these emerging economies and their willingness to stand up to the developed world to counter what they perceive as 'economic imperialism'. References The Economist, December 10th 2005, pp 75-76. ARTICLE 2 - NEW FRIENDSHIPS AND PETROPUZZLES China's unquestionable thirst for oil in the world market is well known, as it seeks to sustain a booming economy, with China's oil demand shooting up by 15% in 2005. A major share of China's oil supplies come from Saudi Arabia and the interdependence between China and Saudi Arabia is evident from the fact that King Abdullah's first official trip outside the Middle East was not to the United Sates but to China. A growing economy should have resulted in a corresponding growing demand for oil. However, China once again confounded al experts by disclosing that its oil demand fell by 0.2% in 2005. Other experts, however, scoff at these figures and maintain that demand actually rose by between 6.4% and 8% in line with economic trends. If China's figures were to be believed, then the OPEC might have to consider cutting production in order to maintain oil prices, even though parallel events in Nigeria and Iran fuelled speculations about a possible rise in oil prices. In Nigeria, attacks by militants resulted in a decrease in production by about 200,000 barrels per day (bpd). Iran's nuclear ambitions and threats to cut production in the face of sanctions also fuelled speculation of higher oil prices in the region of $70 per barrel. Nevertheless oil prices did not head north on account of two reason. Firstly, on account of a commitment by Saudi Arabia which indicated it was ready to, "expand output from 9.5 million bpd to 11 million bpd if need be", to stabilize world markets. Secondly, it might be recalled that the oil embargoes of the 1970s hurt producers as much as consumers. Hence, oil exporting countries have to keep on exporting oil - their main and perhaps only commodity - no matter what, in order to generate income and to feed their own peoples. Comments. Oil prices were set to touch the $70 a barrel mark on the back of increased Chinese demand and ongoing crises in Nigeria and Iran. However, why this did not happen remains a puzzle. Although the apparent decline in Chinese demand could be one possible reason, the figures released by them defy conventional logic, and hence the puzzle. The more probable reason is that following the oil embargoes of the 1970s, most countries built up their 'strategic petroleum reserves' to cater for such an eventuality, and hence, short-term production cuts and threats to cut production did not have the same effects as hither-to-fore. References The Economist, January 28th 2006, pp 64-65. ARTICLE 3 - DECOUPLED This article examines the link between companies' and countries' prosperity to explain why in spite of booming corporate profits, the economies of many countries that are home to these companies continues to stagnate. Two possible reasons are attributed to this phenomenon. Firstly, "companies are no longer tied to the economic condition and policies of the countries in which they are listed", and secondly, "the success of companies no longer guarantees the prosperity of domestic economies, or, more particularly, of domestic workers". As companies become more and more international in nature, their impact on domestic economies has reduced. This is substantiated by the fact that the, "world's 40 biggest multinationals now employ, on average, 55% of their workforce in foreign countries and earn 59% of their revenues abroad". Since profits accrue in the main from foreign operations, it has little effect on the domestic scene, as such profits are more likely to be ploughed back in the international arena to generate even more profits. Another effect of the globalization of operations has bee the shift in the, "balance of power in the labour market in favour of companies". Since cheaper labour is available abroad, companies have the choice of outsourcing their operations as a means of keeping domestic wages under control. Globalization has also resulted in the acquisition by 'foreign' companies of local companies such as the takeover of Arcelor by Mittal, and there should be no cause for concern in respect of such 'foreign' takeovers that make good economic sense. In the final analysis, "economic theory and historical experience argue that, in the long run, profits grow at the same pace as GDP". Comments. As stated in the article, it might seem, in the short term, that globalization is adversely affecting domestic economies. However if, "profits grow at the same pace as GDP", then, as a corollary, GDP will also keep pace with profits in the long term. This is particularly so when foreign companies start investing in the local economies be it Mittal in Arcelor, or Tata in Corus, as their operations will have a direct bearing on the economies of the countries in which they operate. What must be kept in mind at all times is that capital will always flow towards where there is the greatest profit to be made. And in the world of business, that is the bottom line. References The Economist, February 25th 2006, pp 67-68. Read More