Discussing Issues in International Trade - Assignment Example

Paper Discussing Issues in International Trade Q The GATT negotiations occurred right after ending of World War II and it remained a semi-permanent mechanism to facilitate international trade from 1946 to 1994. The General Agreement for Trade and Tariff suspended when World Trade Organization was formally established at the opening day of 1995 (Chaisse and Matsushita, 15). The GATT was used as a system which governed the international trade before the establishment of WTO and the development of GATT was caused due to the need to have international trade. The WWII caused hatred and offensive thinking to prevail in the international arena and therefore, trade was as usual the greatest causality of the war. When the Second World War concluded then the need to have a common system in order to manage and facilitate international trade emerged and that is why, the process of GATT negotiations was sped so that the abovementioned cause can be helped. Additionally, the presence of distrust and unwillingness to do trade with other national systems was growing and the business professionals of that time were concerned about the future of international trade and the GATT was indeed established as a forum to protect international trade from extinction in the era of nationalist thinking which flared military conflict in the first place (Franko, Tolbert and Witko, 930). The Soviet Union and its allies did not bother to participate in the historical negotiations of GATT, the decision was taken in the light of the belief that Union’s right to govern the entire world is unchallengeable and therefore, the State does not require to become part of any international forum that considered all members as equal. The Soviet Union identified GATT as a measure to undermine its claim to be the superior race and because of this reason; the Soviet Alliance did not participate in the negotiation rounds of GATT. The US did not apply the signed document of Uruguay Round agreements as international treaties as other members did but Americans decided to implement GATT through proper legislation. The step was supposedly taken in order to communicate America’s seriousness and dedication in the direction to facilitate international trade via GATT and the message was well understood by the global community because it came to realize the fact that US made GATT an integral part of its legislative system when others treated it as set of international treaties. The agricultural products and services were not entered into the treaty because the agreement was established to govern the trade of industrialized products only. The decision of not including the agricultural products and services was taken in accordance to the reality of that time that countries were not interested in trading agricultural products in the international marketplace and therefore, GATT’s application was limited to industrialized products’ international trade only. The notion of fair and free trade was advertised in the reign of social moment which promoted equality in the international market. The moment petitioned that developing nations must be helped in the due process of competing in the international market. The moment further argued in the favor of need to establish global trade institutions that will assist the products of less developed economies to get adequate visibility in the international economic arena. The establishment of WTO is said to be the practical implication of suggestion by social moment. The first six rounds of GATT gave special incentives for developing nations to impress them to think about throwing their products and services into the global marketplace and the products of developed nations were taxed at a higher rate in order to snatch the cost benefit in the international market which may be a result of currency rate differential. Q.2 The current negotiations are happening in the conferences of World Trade and the subject matter of Doha Round is continuing. The WTO’s prevalent agenda is to lower trade barriers all around the globe in order to make global trade more fluent in nature. The individual national interests are causing the process to become rather sluggish in recent years and therefore, Doha Round remained marginally effective in achievement of its stated goals. The negotiations of WTO at Singapore in 1996 took place in order to expand trade in the valuable area of agriculture and services and the US was the forbearer of the change but again the process of development halted as member nations did not get interested in sharing agricultural production with other nations (Bouët, Bureau and Decreux, 1341). The international trade of agricultural products and services is not growing because the countries tend to reserve their output for fulfillment of futuristic local needs. However, the negotiations that were planned to take place at Seattle in 1999 were postponed due to protest in front of the conference venue and therefore, the negotiations were actually conducted in Doha two years later. Q.3 The relationship between developed and less developed nations is always strained because the former set of nations are supposed to be robbing the latter one from their natural resources and using them in order to better the lifestyle of their own people. The recent wars in Afghanistan and Iraq are known to be started in order to attain access to oil reserves of both doomed economies (Moseley, 88). However, the developed nations are those economic systems which have managed to sustain their per-capita income over the past number of years and their literacy rates are exceptional as well. The developing or less developed nations are those countries which have failed in terms of uplifting their quality of life whereas their literacy and unemployment rates remain lower and higher respectively in the past and their current situations is these regards are also hopeless to say the least (Walts, 10). The developed nations place a blame of being lethargic on the governments of developing ones and argue that they should widen their taxation nets in order to increase money supply for the government that can then be used for public welfare. The governments are also suggested to help the process of industrialization to become strengthened by investing in local production facilities. The developing nations on the other hand try to establish that developed nations are purposely dumping their products in order to out-compete those of developing nations. The developing nations’ production has to suffer the worst possible fate in the international market because their demand is dropping as they have been known to have lower level of quality and therefore, they fail to compete against high quality production of the developed and advanced nations (Baillie and McMahon, 148). Finally, the political and governmental sectors of developing nations are notorious for housing corruption and because of this reason, the general public of these nations have to suffer pain and discomfort. The suggestions and recommendations made by United Nations and World Trade Organization are not heard by local governments of the developing nations because they often involve the suggestion to cut down governmental expenses. As mentioned earlier, the political arena of developing and under developed nations is plagued with corruption while the individual is more powerful than the community in featured types of countries and therefore, the real culprits with respect to not helping the goal of national development of developing nations are political leaders who do not sacrifice their private agendas in order to cause greater good of the public. The blame of producing high quality production on advanced nations is illogical and it is fabricated in order to cover up developing nations’ inability to compete successfully in the international marketplace. The policies of developing nations are counterproductive with reference to developing the nations and the suggestions made by international institutions are often placed in the cold-storage without any further action. Q.5 The effective rate of tariff that is also known as effective rate of protection has been characterized as a net level of protection which is being provided by import duties and taxation to local industries (Gereffi, 39). The tactic is used in order to limit the exposure of local players to international product quality. The tariffs are usually increased so that imported products can be made expensive and any cost advantage due to currency differential can also be mitigated. In short, the playing field is leveled to give local products and foreign ones to compete on the basis of quality only and in major number of cases, foreign products are made expensive to a level that they become expensive in comparison with local offerings. The Chinese government is famous for applying hefty tariffs in order to keep its Balance of Payment positive and in favor of the local production (Tang, Snowden and Höök, 420). The huge percentages of import duties are used so that the indigenous society should not become dependent on usage of foreign products (Vernon, 203). The government of China is purposely keeping the local currency inexpensive in comparison to other currencies so that its imports should remain low priced in the foreign markets. Finally, it can be established that tariffs are used as a barrier for stopping international competition from entering and invading the local markets. Works Cited Baillie, Richard T., and Patrick C. McMahon. The foreign exchange market: Theory and econometric evidence. Cambridge University Press, 1990. Online. Bouët, Antoine, et al. "Multilateral Agricultural Trade Liberalisation: The Contrasting Fortunes of Developing Countries in the Doha Round." The World Economy 28,9 (2005): 1329–1354. Online. Chaisse, Julien and Mitsuo Matsushita. "Maintaining the WTOs Supremacy in the International Trade Order: A Proposal to Refine and Revise the Role of the Trade Policy Review Mechanism." Journal of Economic Law 16, 1 (2013): 9-36. Online. Franko, William, Caroline J. Tolbert, and Christopher Witko. "Inequality, Self-Interest, and Public Support for “Robin Hood” Tax Policies." Political Research Quarterly 66.4 (2013): 923-937.. Online. Gereffi, Gary. "International trade and industrial upgrading in the apparel commodity chain." Journal of International Economics 48, 1 (1999): 37–70. Online. Moseley, Alexendar. Just War Theory. New York: Blackwell Publishing, 2011. Online. Xu, Tang, Simon Snowden, and Mikael Höök. "Analysis of energy embodied in the international trade of UK." Energy Policy 57: 418-428.. Online. Vernon, Raymond. "International Investment and International Trade in the Product Cycle." The Quarterly Journal of Economics 80, 2 (1966): 190-207. Online. Waltz, Kenneth N. "Structural realism after the Cold War." International security 25.1 (2000): 5-41. Online. Read More