Role of the World Bank and the World Trade Organization in International Development - Coursework Example

NAME : xxxxxxxxxxx DEGREE : xxxxxxxxxxxxxxxxx SUPERVISOR : xxxxxxxxxxxxxxxxx TITLE : INTERNATIONAL ORGANIZATIONS STUDENT No Introduction International trade has become an important activity in the modern and globalized world. The increase in the fusion of cultures, economic and political system has ensured steady flow of information of goods, services and information across borders. The increasingly competitive and globalized world has made it difficult for countries to live in isolation. The need to trade with each other has spurred the growth of international markets from where countries from around the world are able to exchange goods and services. Today, more firms, organizations and agencies have realized the importance of diversification and also the potential for growth available across the globe. Thus we are witnessing increased globalization in sectors like technology through outsourcing, manufacturing and the service industry. Multinational Corporations are at the forefront of the explosion of global investments. This essay will be examining the role played by nation-state governments as far as international trade is concerned. It will look at representatives from the nation states and how they have contributed to the organization of institutions in the international trade environment. It will specifically focus on the role these nation states play in the organisation of the World Trade Organization and the World Bank and how this is affected by globalization of worldwide trade patterns. It will also assess international trade in relation to existing international laws dealing with the environment and human rights (Parker 2003). To understand the pattern of international trade, there is need to assess the role that globalization has played in shaping current international trade patterns. Globalization can be viewed as the increasing fusion of people and countries which is as a result of the growing exchange of goods, services and investments across national boundaries (Sands 2000). Globalization of world economies became more pronounced after the end of the Second World War when the capitalism wave was being felt across the globe. Globalization has led to increases in the way people interact across borders and ensured that there is free flow of goods, services knowledge and experiences across the globe. Explosion of the information and communication sector has fuelled the high pace at which globalization is taking place. Free market economies were seen as the panacea for growth across the world. Establishment of international bodies like the World Bank and the IMF served as accelerators for international development. Nevertheless all after all these years of global trade the patterns are still skewed in favour of few countries that have come up with legislations and laws that have become big barriers to free flow of global goods and services. This is one issue that nation-states are grappling with as they try to fit into the global trade environment (Lowenfeld 2002). Nations states can be said to be political organizations that are legitimate in nature and have unlimited access to power as far as carrying out its administrative functions and maintenance of order is concerned. It has legitimacy over the use of force and all its citizens whether by birth or any other means are bound to obey its authority as far as they are within its boundaries. These nation states remain in existence as long as their claim to unlimited access to means of maintaining order is preserved. All citizens found in the confines of the nation state and those who fall under it due to other reasons are bound by the authority of that nation state. There are various characteristics that differentiate a nation state. These include-: unlimited control of ways through which violence is administered, presence of boundaries separating it from another, objective supremacy and autonomy (Pierson 1978). Sudden increase of international trade across the world influenced the formation and growth of various international organizations and treaties to facilitate smoother operation of trade activities between nation states. Some of these organizations include the World Bank and the World Trade Organization. These two organizations have continued to play different roles in influencing international trade activities. These trade organizations owe their establishment to the period immediately after the Second World War. After the Second World War countries had experienced a lot of economic ruin and were thus in need of plans that could bring them back to economic recovery (Sands 2000). This was after it was realized that one of the factors that brought about conflicts was due to widespread protectionism among most countries. Countries had put up barriers that did not give opportunities to other countries to carry out trading activities with them. This realization led to the conference at Breton woods which wanted to address the issues of economic relations across the world. Need for an international system that enhanced liberalization and multilateral economic co-operation led to the formation of the World Bank, IMF and World Trade Organization. “The WTO was established after an agreement that transformed the General Agreement on Tariffs and Trade (GATT) from a trade accord services to a membership organisation that brought together various agreements through a legislative framework and mandated to serve as a forum for negotiations, tribunal for solving trade disputes and as a trade policy review body”(Parker 2003, p. 91). The World Bank was initially formed to offer support in the reconstruction of Western Europe as a result of the Second World War. It was meant to give financial support to those countries that had been devastated by the war and thus needed enormous amounts of material and financial aid to get on feet. It was also meant to promote the United States’ vested interests in terms of trade and also the cold war that had just started to unfold. The United States wanted to use the funds to give support to those countries that seemed to support it in its ideological war with the Soviet Union. However, with changing times, the Bank moved its attention from focusing support to its allies in its war with the Soviet Union towards the developing countries and modified its aims to alleviating poverty across the world in tandem with the United Nations Millennium Development Goals. Thus it focuses on pressing issues like poverty, education, gender equity, maternal and child health, HIV/AIDS, environmental sustainability and promotes international partnership for development (Bandon 1995). To be able to operate effectively, these organizations have been established with regard to international laws and treaties that affect their functioning. Furthermore, with the end of the Second World War, various treaties were established to direct the way country related with each other. These laws that apply between states are established in the statutes of the International Court of Justice. Article 38 (1) of the court makes provision for the establishment of covenants which defines the agreements that countries make with each other; thus the agreement to establish the World Trade Organization in 1994 was based on pre-written international law (Lowenfeld 2002). These laws provides for partial autonomy in terms of legal personality of these organizations. They also have power to exercise legal capacity in a judicial setting, for example, the WTO Dispute Settlement Body. Thus under law, international organizations can conclude treaties, even though they are created and governed by nation states. Nation-state governments and their representatives play an important role in the organization of these two organizations. Nation states shareholding in the World Bank is dependent on the size of their economy. This shareholding will also determine the amount of capital Contribution by each member state. However, the US has total veto. The fact that the World Bank and WTO have played a very important role in global international trade development needs to be appreciated. The World Bank played a critical role in the rehabilitation of economies that were devastated by the Second World War. Their funding laid the foundation of what those countries currently are. To some extent, the World Bank through conditional aid has contributed to promotion of human rights, democracy and good governance. It is now continuously relying on these benchmarks as conditions for assistance in development of the developing countries. Countries that do not uphold these values have been excluded from participation in international trade and hence leading to knock off effects on their economies. The WTO has also played its part and continues to impact on the general international trade framework. It has contributed to the reduction of trade barriers and sanctions that had made it easier for smooth running of international trade to take place (Pierson 1978). However this is only as far as their positive roles can reach. These organizations have been criticized for limiting rather than promoting fair trade relationships between member countries. The WTO for example has failed to address the issue of the death of local industries due to trade. Even though trade has been a contributing factor in the development of emerging economies like India, Brazil and China, it has contributed high inequalities in access to social and economic amenities (Knapper 1998). WTO has been criticized for their free market policies have served as the greatest impetus to the propagating of globalization and spread of free market capitalism that has negatively affected developing countries. Additionally, the WTO has failed to protect farmers from developing countries who are facing unfair competition from products from the US which are heavily subsidised by the government and hence putting them at an upper advantage. The developed countries also charge a lot of duty on exports from poor countries, another issue the WTO has failed to address. The World Bank on the other hand has failed to address the issue of debt relief. It does not make any sense to continue holding on debts especially from very poor economies. Most of these debts have attracted huge interests’ rates that are crippling any economic growth of these countries (Lowenfeld 2002). Most of its debts also mainly benefit the few rich and connected people in the developing world and multinationals that are contracted out to carry out projects. Majority of the citizens do not benefit from these funds but they have to bear the debt burden for years. The effects structural adjustment programs on the economies of developing countries are still being felt. These countries cannot compete effectively in the global trade environment because they are trying to repair their economies that were greatly damaged by the policy. These countries are grappling with massive unemployment, low education standards and a weak industrial base. Generally only those nation states that have advanced economies can effectively influence policy at these organizations. Developing countries are left on the periphery and everything is decided for them. The US and European countries have deliberately denied other countries from participating in the top decision making organs of these organizations. That is why the head of World Bank is always exclusively nominated by the US while that of the IMF belongs to Europe. Therefore poor countries cannot have their own who might understand their problems assent to those positions (Bandon 1995). International trade is influenced by various factors and these could be political, economic or social in nature (Childers 2001). The level of political dispensation of a country influences the level by which they participate in international trade. Countries that have stable governments and political organizations have been able to achieve much penetration of various types of business opportunities that have enabled them to be part of the global trade system. Nation states that support free market economies continue to play an important role in promoting markets for trade in goods and services from around the world (Lowenfeld 2002). These states provide a conducive environment that enables various parties from different global locations to carry out trade in a more free and sustainable manner. Generally each nation state has in place legislations and incentives that they use to attract investments that come in as a result of international trade. Therefore political stability of a country is very important in determining the level by which it will participate in international trade. Unstable governments are always a source of uncertainty which is not good for business. Social factors can also impact on international trade. The explosion of the information and communication sector has brought with it unlimited and far reaching effects on how international trade is being conducted across the world. The growth of the internet has opened new opportunities and brought about a lot of flexibility in international trade. Areas that are experiencing unprecedented growth include the business of outsourcing, marketing and even purchasing of goods and services across the world (Knapper 1998). Thus growth in information and communication sector has brought with it new opportunities to explore new markets and be able to use the best methods to reach those markets and do business. Additionally, international trade is influenced by the economic dispensation of countries around the globe. These have to do with the kind of taxation regime or trade barriers that are meant to protect local business from undue competition and other non-tariff barriers that have to do with the licensing policy of the government. Nation states have an obligation to put up more efforts in attracting and retaining investments through international trade. Some countries have realized the importance of this on their overall welfare by trying to come up with the best policies that can make them compete favourably in the international global market. The adoption of better economic policies ensures that countries are at a better competitive edge and thus better bargaining of influence when it comes to international trade (Pierson 1978). International trade organizations have continued to exert their influence on nation states and this influence permeates the overall spheres of these countries. Although international trade continues to be carried out questions have been raised with regard to whether it is being carried out in a manner that respects human rights, the environment and the level of extent through which states can carry out their responsibilities. Promotion of human rights is being challenged by the increasing different ways through which people are carrying out international trade. One issue that raises great fundamental questions is the trade that is based on pre-determined conditions. These conditions can be said to be going against human rights because they touch on issues of self determination. Nation -states are sovereign and that means that they have the freedoms to determine the kind of trade activity and country to carry out the same. But this is not the case especially in the modern economy where providers of goods and services supply them depending on some preset conditionality. Countries, especially the poor ones are powerless and cannot determine the direction they want their trade to go (Parker 2003). Hence, presence of increased cases of multinationals demanding exclusive rights over minerals that they exploit. Oil is the major foreign exchange earner for developing countries that produce it, but the ironical part is that these countries cannot exactly agree that they live better lives. In fact, there are rampant cases of human rights abuse by the multinationals and also environmental degradation. The “W.T.O continues to ignore labour relations in most of the countries. It is only concerned with promoting globalization of the industry but has failed to address the issue of labour exploitation by MNCs, especially those that carry out their activities in developing countries in Asia and Africa”( Lowenfeld 2002, p. 51). The introduction of structural adjustment programs by the World Bank led to untold suffering in developing countries. This model of development is an example of imposing an idea that might have worked somewhere else but cannot be applied to other countries. Resultant effects of the program like loss of employment, redundancies and reduced expenditure on educational institutions was a very gross violation of residents’ human rights. Abuse of human rights has continued unabated sometimes due to lack of responsiveness and complacency on the part of the nation states. Some of these states play a complementary role of abusing their citizens’ human rights by accommodating the organizations that are engaged in such abuses. Also, the political elite give undue help to these organizations for their personal gratification. This means that global organizations need nation states to maintain the rule of law and good governance for them to continue being seen as trade partners (Knapper 1998). Thus countries that have failed the human rights test like Zimbabwe have been slapped by sanctions from these organizations. This underscores the importance of upholding human rights in the global trading environment. Even though international organizations continue to engage in global trade, the challenge of environmental degradation has become more real with more organizations doing activities that are endangering to the overall global environmental safety. Thirst for more resources by different MNCs has made them explore every corner of the world to satisfy their resource needs. The World Bank as an international body has done very little to promote the conservation of the environment, and instead it had been one of the culprits through funding of projects that have been seen to have negative impacts on the environment. Too much emphasis on the economic rewards of projects has sidelined the most important factor, which is conservation of the environment and therefore, conservation of the environment and protection of the laws and statutes protecting the same should be a top priority for international organizations. The World Bank needs to focus more on funding projects that would bring about multi-sectoral development and not the kind of skewed and unsustainable kind of development that it has been promoting (Pierson 1978). Conclusion Globalization of the world especially with regard to international trade has brought about a lot of opportunities in trade across borders. It has enhanced the way countries interact with one another and the resultant socio-economic implications. The role of the World Bank and the World Trade Organization in international development has been one of contradicting nature with policies that have enhanced international flow of goods; while others have been very controversial due to the outcomes of the programmes. Nation states continue participating in international trade with the realization of the need to for interrelationships so as to promote markets and also find markets for exports (Parker 2003). All these have been facilitated by international organizations like the World Bank and the W.T.O that continue providing assistance in terms of finance and logistics. There is also need to reform these two institutions to reflect the dynamics of the global trade environment so that they are able to effectively deal with the problems as they arise. References Parker, L 2003, Political Organizations, Pearson Prentice Hall, Upper Saddle River, NJ. Sands, P 2000, Analyzing International organizations, (Third Edition), Oxford University Press, Oxford Pierson, B 1978, Political Power and Modernisation, Cambridge University Press, London Knapper, S 1998, World Trade Organization: Study in Skewed Integration, McGraw Hill, New York. Lowenfeld, F 2002, International integration and the WTO, Oxford University Press, London. Bandon, D 1995. Third World Poverty and the World Bank, St. Martin's Press, New York.   Childers 2001, Environmental Management in Developing Societies, Columbia University Press, New York. Read More