How Firms Use the WTO and Its Rules to Their Advantage - Literature review Example

Report Name: Institute: Getting the government to fight your battles for you: How firms use the WTO and its rules to their advantage Introduction The WTO system according to Young (2013), encourages trade rules that are equally relevant to developed and developing countries in a similar way and are put into effect by a third party negotiation process to resolve any looming disputes. The procedures for WTO dispute resolution offer government of the member countries with a distributive approach that assists them to bargain trade barriers reduction aligned with their products. The developing countries have an extremely hard time protecting themselves in the WTO. According to Chen (2014), the internal rules of WTO state that each member country has one vote, so a vote from a developed country is equivalent to a vote from a developing country. However, resolutions in WTO are not usually taken by means of a voting process, but instead allegedly by agreement, that is to say no agreement is achieved if all members are not in accord. What ensues, after that, is that the developed countries congregate and formulate the rules, devoid of considering demands of developing countries. Usually the trade representative of the developed 20 rich countries, who subsequently invite a number of poor countries, whose governments are passionate cohorts of “free trade” meet to make resolutions. Ying (2014) posit that it is through such top secret meetings that agreements are struck, and afterward enormous demands is brought to manipulate and take advantage of other countries. The developed countries inflict their welfare on the developing countries, even though the latter are the greater part. In this regard, the report seeks to discuss and critically reflect the effectiveness of the different ways in which firms get their governments to advance their interests in the World Trade Organization (WTO). Government Policies Presently, the European Commission (EC) has set up fearsome barriers to defend its key companies from imports, and undoubtedly this has affected both the developing countries and United States. A research by Oxfam topped EC for holding two-facedness with its trade barriers not in favor of farming imports from Africa and other developing countries. Though a number of developing countries benefit from privileged trade accords with Europe, Marel and Dreyer (2014) believe nearly all have no ability to break through the high tariffs that defend the European market or contend with the subsidized products from Europe in global markets. Sometimes, regulations by European Commission double up as trade barriers, as occurred when two regulations for labeling damaged exports of sardines as well as scallops from Peru to Europe. However, Daugbjerg and Kay (2014) maintain that competent utilisation of legal approaches as well as collaboration with other countries in WTO assisted Peru to triumph on the European Commission to amend its regulations on labeling. Governments often control labeling policies for the benefit of offering the end user with precise information. For instance, regulations could need product and content names’ specification or the incorporation of health warnings. China Case With the exports of China towering, even while other noteworthy economies like US struggle to recuperate from the 2008 recession, proof is increasing that China is dexterously utilising irregularities in international trade rules to impel its own financial system to the detriment of others countries. In quest of upholding its export supremacy, China is caught up in a bilateral endeavor: battling protectionism in the midst of its trade cohorts and retaining its currency value. According to Nielsen (2013), China had a trade surplus of about $31.9bn with other countries in the beginning of this year, with the country’s exports to US exceeding imports by fourfold. Even so, China has filed additional cases with the WTO’s authoritative trade tribunals as compared to any other member complaining in relation to trade practices from another member country. What’s more, China is endeavoring to hold back a string of International Monetary Fund (IMF) reports that has documented how China has considerably undervalued its currency. According to Daugbjerg and Kay (2014), China purchases dollars as well as other foreign currencies such as Euros and Pounds worth some hundred billion dollars annually by trading a lot of its own money, which afterward depresses its worth. European countries optimism to exert global pressure to China, subsequent to years of complaining that China maintains its currency falsely low has failed, and Young (2013) affirm that undervalued currency makes the export of the country low-priced in international markets whereas it makes imports costly. Thus, it creates a possibility of trade surplus, decreasing joblessness for that country whereas heightening unemployment in countries of its trading cohorts. Russia and US case Subsequent to 20 years of negotiations, Russia at last joined the WTO, but the inferior trade barriers that accompanied its membership heralded novel opportunities for international firms to carry out trade in Russia. However, owing to the political tensions between Moscow and Washington, US-based companies have not benefited at all and could even experience higher Russian tariffs as compared to their competitors from rest of the world. Owing to wider policy concerns with regard to the Ukraine’s onslaught on rebels and Russia support for scoundrel governments such as Iran and Syria, the US Congress resisted to accept Obama request to grant Russia the status of permanent normal trade relations (PNTR). Undoubtedly, this status is crucial given that WTO demands that all its members have to use the similar trade rules to every other member country. Key US exporters to Russia, such as General Electric, Deer, and Caterpillar, are concerned about the looming effect on all members of WTO. Even though Russian bureaucrats articulate that they lack pressing purpose of using biased tariffs in opposition to US companies, they might lawfully do so an moment from now. Basically, Russia was the most recent key economy to join WTO, but its accession has turn out to be a blessing for Russian companies. Exporting companies in United States, Asia and Europe were excitedly waiting for open access to Russian market with mounting revenues as well as an increasing middle class. Ying (2014) believes that WTO membership will adjoin 3% points to Russia’s GDP after the latest tariffs are introduced. Russia had been negotiating to join WTO for almost two decades, starting when the World Trade Union was known as General Agreement on Tariffs and Trade (GATT). Without doubt that was lengthily as compared to other major WTO entrants, such as China. Sarcastically, the current and former US presidents (Obama, Bush, and Clinton) every one supported inclusion of Russia, but many believe this support was mainly due to the potential market offered by Russia consumers. Subsequent to Russia WTO accession, nearly all other countries across the globe had an option since the global trade group for solving rows managed to demand the approving and lower tariffs from Russia’s during the process of application. Whatsoever the fiscal significances for US companies, US Congress members believe that that granting Russia a PNTR status could as a result make an exception to Russia’s backing for scoundrel governments, and its insolence of EU and US endeavors to isolate Iran and Syria. Benefits of WTO WTO members according to Marel and Dreyer (2014) enjoy the benefits bestowed by any trade agreement, but given that the WTO has a lot of members, its benefits are in fact worldwide. Importantly, the WTO assists trade all over the globe to flow smoothly across its agreements on trade. This according to Nielsen (2013) offers its members with an equitable way to resolve trade rows devoid of resorting to aggression. WTO membership as well has responsibilities; for instance, members concur to shun erection of trade barriers, rather adhering to the WTO dispute resolution. Daugbjerg and Kay (2014) argue that this avert the intensification of trade barriers that might assist the entity country momentarily, but damage global trade in general. Actually, it was only this form of castigatory trade competition that exacerbated the 1929 Great Depression. As worldwide trade decelerated, countries attempted to defend their home industries; thus, leading to erection of trade barriers, which as a result generated a descending spiral. All this led to shrank of global trade by 25 percent. Competition policy Presently, competition policy is high-flying on the global program for trade policy, and has started to play a progressively more vital part in certain arrangements of regional trade. The trade program according to Nielsen (2013) is more and more concerning fortifying markets, and making them open. Amid the slow elimination or reduction of trade barriers like quotas as well as tariffs, the conduct of WTO members in developed countries takes on enormous significance in possibly limiting competition both across and within borders. Whereas competition policy remains to be the subject of in detail research as well as debates for scores of years, Young (2013) posits that the discussion focus has been on the suitable use of local competition policy, in addition to the desire for enhanced collaboration and coordination in the implementation of this policy. The mounting interest in bilateral rules in the field of competition policy is associated to the multi-market impact of anti-competitive doings, the national inquiry efficiency as well as implementation actions with regard to multi-jurisdictional instances, as well as the equivalent setbacks this creates for national enforcement and jurisdiction. Dealings like joint ventures, mergers, and horizontal agreements are progressively more being examined concomitantly by WTO. These activities interjurisdictional nature is heightening the pleasant appearance of collaboration between WTO and member country in the competition law application as a means to handle cross-border anticompetitive practices (Chen, 2014). The competition policy internationalization poses multifaceted setbacks for governments, and for this reason it is imperative to be grateful for those considerable divergences in the substantive standards of competition policy as well as implementation processes of key global trading countries, in spite of over 10 years of soft union in analytical methods (Marel & Dreyer, 2014). Such divergences are profoundly embedded and reveal different fiscal, historical, cultural and legal attributes of the individual countries. Furthermore, several countries have failed to espouse competition laws; thus, any progress toward the bilateral rules implementation on competition policy will need wide-ranging reflections purposely handling such issues. Conclusion In conclusion, it has been argued that WTO members understand what the rules are, the consequences for breaching the rules, and how to play the international trade competition. This certainty helps the governments generate a trading field that is safe for all and sundry. It as well enable the government lower the costs of carrying out business only by getting rid of instability. Such wide-ranging benefits broaden to every WTO member, and given that the membership is so enormous, scores of these benefits are as well experienced worldwide. The setback that government endures with regard to WTO rules is to differentiate between policies that legally control labeling policies as well as those that double up as trade barriers. References Chen, G. (2014). Piercing the veil of state sovereignty: How China's censorship regime into fragmented international law can lead to a butterfly effect. Global Constitutionalism, 3(1), 31-70. Daugbjerg, C., & Kay, A. (2014). A trade balance: litigation and negotiation in the World Trade Organization's dispute settlement system. Australian Journal of International Affairs, 68(1), 105-120. Marel, E. V., & Dreyer, I. (2014). Beyond Dutch disease: when deteriorating rule of law affects Russian trade with and investment from advanced economies. Economics of transition, 22(2), 341-364. Nielsen, L. (2013). How to Classify Countries Based on Their Level of Development. Social Indicators Research, 114(3), 1087-1107. Ying, L. (2014). The Applicability of Environmental Protection Exceptions to WTO-Plus Obligations: In View of the China - Raw Materials and China - Rare Earths Cases. Leiden Journal of International Law, 27(1), 113-139. Young, I. (2013). Industry welcomes WTO deal, urges tariff reductions. 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