Judicial Function of the WTO, the Product Life Cycle Theory - Assignment Example

International business exam questions Name: Institution name 1. Judicial function is one of the two functions of the WTO. This function is performed by WTO through the dispute settlement system. The dispute resolution mechanism is not a creation of its own buy the result of an improvement of the former GATT system. This mechanism is characterised by three main principles deriving from its status: subsidiary, diversity and balance. WTO normally provides integrated dispute settlement systems whereby disputes regarding trade of services or products or the trade of intellectual property protection follow the same procedure. Therefore, this ensures that multilateral trading system is not only secure but predictable. WTO requires that countries comply with every obligation under a WTO agreement. If for instance a county believes that another member country is not doing so it invokes the dispute settlement procedures to help. WTO therefore ensures that the proper channel is followed and implemented. This is ensuring that the two countries enter into a consultation within 60 days after submitting notice to the dispute settlement body. The dispute settlement body comprises of all member of WTO and whose sole objective is to establish a panel to listen to cases presented to it. Additionally, the dispute settlement body can also dismiss findings of the panel or accept the findings. In addition to these, the body is also tasked with the responsibility of ensuring that countries adhere to the rulings of the panels. However, for countries that fail to adhere to the rulings the dispute settlement body may enforce retaliation. If for example the parties in a conflict do not reach consultation within 60 days then the WTO offers the good office of the director General. The dispute settlement body is sometimes responsible for establishing the panel to hear the disputes. This occurs in case the parties for instance fail to reach a consultation and do not require the good offices of the Director General. Where conflicting parties fail to compose members of a panel within 20 days, the WTO through the director general may appoint individual to serve in the panel. This application is normally made by either parties in conflict. The Secretariat, therefore, provides secretarial services and legal advice to the board. The WTO through the panel ensures that proper procedures are followed. This is submission of written arguments, and report preparation. Conflicting parties are the first to be issued with the final report relating to their dispute before the report is issued to other member of WTO. Sometimes the WTO's Appellate body is asked to examine the report, this arise when for instance the parties to conflict are not satisfied and have made an appeal. The dispute settlement body is responsible with ensuring that the losing party adheres to the decisions made by the board and the appellate body. However, trade sanctions could be imposed by the dispute settlement body, where no decision in relation to the conflict was reached at. 2. The Product Life Cycle Theory tries to explain the effect of various factors such as innovation, uncertainties and economies of scale can have on foreign investments and trade in general. The product life-cycle theory states that as a product moves through its life cycle a company is capable of engaging in direct foreign investments, shifting from exportation of its products. This is witnessed in the three stages of product life cycle, which are; new product stage, maturing product stage, and standardized product stage. Under the new product stage a product is produced domestically as a result of uncertainty in demand. The maturing stage is characterised by instances whereby the company invest in facilities to be used for production. This scenario arises out of the fact that demand is sufficient to sustain the company. This theory emphasises that as export strength of a country grows, foreign production starts taking place. However, it reaches a point that the export becomes quite competitive, thus leading to importation which is equally competitive. On the other hand, Investment Development Path (IDP) stipulates that inward and outward direct investment of any given company is based on economic developments. Therefore, the composition of investment is likely to change with change in economic developments. A prerequisite for the application of the theory is that the country´s economy is integrated with international capital markets. The IDP comprises of 5 stages, which have a close connection to level of economic development commonly referred to as GDP per capita. At stage 1 the host country’s assets are an attraction for foreign investors, at stage 2 foreign firms become affiliated to local firms due to the efficiency of the domestic market. At stage three the rate competition among firms greatly rises. Stage 4, on the other hand, is witnessed by the value of direct investment equalling the level of inward direct investment, at the final stage multinational enterprises control most transactions across territorial borders. 3. In a market where buyer and sellers interact freely without government intervention, individuals are likely to feel more protected. This is attributed to the fact that agreements are reached by ways of mutual consent. When the government regulates the market it does so in favour of the rich and powerful, thus ignoring the plights of the poor and less powerful individuals. By free market will offer protection to even those with little access to power. Specific regulations, on the other hand, present various disadvantages especially to the less privileged. This is evidence in instances where unemployment of unskilled workers is likely to rise due to low minimum wages. In markets where there is increased politicisation, those that enjoy political superiority are more likely to have decisions in their favour from regulators. Regulators in government will in most instances be controlled by individuals who ensure that their powers are safeguarded thus acting in their favour. This is contrary to what they are expected to do, which in this case is to act on behalf of the consumers and the environment. As the capture theory put it, it is easier for regulators to find themselves acting in ways that favour companies in a given industry. This, in return, could prove to be quite detrimental to the consumers as they are bound to follow the regulators decisions.to be captured by the industries they regulate and then regulate in ways that favour the industry and nothing else. Without a price, system people are blind; when they regulate markets, we are vision impaired. Consumer protection is much evident in free market because of rewarding integrity of the free market made possible by a good reputation. On the contrary, most people believe that without government regulations are important in offering protection in situations where free market do not. it is believed that pharmaceutical company for instance will dupe consumers and use short cuts in order to make profits. Regulations in such cases are necessary to reign in companies whose greed would otherwise make them engage in unethical practices. Government regulation is seen as a tool to curb pollution, which is difficult to achieve in free markets. Without government control businesses will operate at their own interest of making money at the expense of the environment through emissions into the atmosphere, dumping chemical wastes into water bodies and this could lead to rise of infections. With free trade, individual rights will be violated. This includes the rights better health care or right to a fair wage. 4. The idea of corporate social responsibility can make business achieve market acceptance and gain competitive advantage over it competitor. Adopting CSR into the wider business strategy boosts the reputation and brand image of a company. Having a good public reputation has become an integral marketing asset, thus it cannot be ignored. By having, a good brand image the business has increased customer loyalty and sales. However, it is quite clear that companies that put their social impact into consideration are more likely to be successful. Businesses that have strong corporate responsibility do not solely focus on providing satisfaction to customers through their products, but ensure that their operation are not detrimental to the environment. This makes them operate their business in ethical manner. Corporate responsibility standards compel the businesses to go beyond legal compliance and becoming trust worthy and transparent, which increases the consumer preference for company and its products and services. CSR sole objective is to achieve economic success by incorporating responsible corporate governance. It pushes organisations, and businesses to do better since their actions affect the customers. at some point these standards guide in decision making which are more stable for example, drawing up and implementing employment and environmental standards and protection of human rights Without clear understanding of what corporate social responsibility is then business will fail it its implementation. Therefore, find it difficult in gaining market acceptance or better competitive advantage. There are two different kinds of corporate social responsibility, which most business and people do not get clearly. If a business firm for instance provides funding and resources for worthwhile social causes such as generous donations of money or employees time to charity. To many people this is social responsibility; this cannot however make the firms products and services acceptable to the users limiting the potential of gaining a large market share. Furthermore, this line of corporate social responsibility is not a strategy to gaining competitive advantage if not this is seen as a threat to the business. Porter for instance mentioned that for businesses to have competitive advantage and gain market share they must use strategic measure such as focus, differentiation cost leadership. In addition, in order to gain market penetration then customer loyalty to products could help which cannot be achieved by corporate social responsibility focused on funding and donation other than concentrating on the strategies and ensuring the products are not harmful to environment and the consumers. 5. Economic integration comprises of five levels; free trade area whereby all trade barriers are eliminated. Therefore, as a result trade barriers such as quotas, discriminatory tariffs administrative impediments or subsidies do not exist. However, such agreement could have partial application or complete application in matter dealing with international trade. The North American Free Trade Agreement (NAFTA) is a good example of such agreements under free trade. Member countries are capable of adopting common external policies as a result of custom unions. This requires harmonising external trade policies of member countries. This can be achieved through establishment of common tariffs and import quotas for products coming to the region from other third party countries. This also calls for establishment of common remedy policies; example is anti-dumping and countervails measures. Common market, here factors of production including labour and capital are free to move within member countries, these results in expansion of economies of scale and comparative advantage. The mobility of a worker in a member country for instance is high, meaning that they are able to move and work in other member countries. This results to an efficient allocation of resources. Economic union, at this level there is harmonisation of monetary and fiscal policies between member countries, which implies a level of political integration and monetary union made possible by establishment of a common currency, such as with the European Union (Euro). Political union, which represents the most advance form of integration where there is a common government and sovereignty of member countries reduced. This is only found within states such as federal states having a central government and the regions have a high level of autonomy. Several factors causes countries to co-operate together, these include economic or political environment or political economic initiative where focus is placed on achieving broader socio-political and security objectives. Therefore, through such agreements countries can easily overcome trade barriers. 6. Discontents of Globalization Even though globalisation has been the most powerful economic phenomenon, the world has ever seen the processes it involves have left many worse off. Globalization cannot be said to be the problem but rather the manner in which it has been handled. However, international economic bodies can be said to be responsible for the problems witnessed. The way globalisation has been exported particularly in regards to politics and the pace of change has been damaging. Many have not been lifted out of poverty and some are even worse off because of the exploitative economics policies trumpeted by the West. Investment in affected areas such Africa is still hard. Many countries have been exposed to market extremities because of the pressure emanating from international institutions to rapidly liberalise capital markets. This pressure sometimes extends to infringement of economic and regulatory sovereignty, in the end creates resentment, and damages the international relations. Despite constant debates touching on transparency, institutions such as IMF cannot be said to be transparent or open. This is attributed to the fact that such institution give little concern to the plight of individuals in accordance to the right to information. Therefore, it becomes quite difficult to determine and know the activities that the institution engages in. this is a clear indication that most institutions try to avoid direct accountability, contrary to the expectations of public institutions. This therefore means that national economies regulated by international institutions could be highly affected. IMF for instance has concentrated on foreign creditors, which in most instances conflict the objective of promoting global stability. IMF put a lot of emphasis on credit contract, whose objective is aid countries in avoiding bankruptcy, rather than focusing on social contact. The social contract entails that the government’s objective is to ensure protection both social and economic. This was witnessed at one point whereby IMF tried to put the blame on Asian government for the Asian crisis. The IMF attributed the Asian crisis to lack of transparency of Asian governments. However, this was not the case since the Asian crisis could be attributed to failing IMF policies such as market liberalization. Impact of lobbying in International Business Businesses are becoming quite central in governing processes which is witnessed at both the local level and global level. As a result of lobbying companies have demonstrated uniformity in performance touching on issues such as human rights, corporate governance and environmental issues. While business lobbying is a legitimate activity in a democratic society, there are instances whereby business lobbying has been found to be inconsistent, non-progressive and in other instance not transparent. This is attributed to the fact that differences in culture, rules of engagement and legal and public norms leading to risks arising in the business. International Strategic Alliance (ISA) In order to attain global scale in operations, business enterprises are choosing international alliances. The international strategic alliances provide firms with strategic flexibility, which makes them, respond to changing market condition and the emergence of new competitor. these alliances are prompted by a wide range of motives which include need to economise on production and research cost, need to strengthen market presence and access to intangible assets crucial to the business such as managerial skills and market knowledge. in sectors such as pharmaceutical for instance high cost of research and time slag to commercialisation are driving need to alliances formation. There has been growth in international strategic alliances in parallel to cross-border merges and acquisitions. These alliances are witnessed by companies forming joint ventures and at the same time linking together for production and marketing. The alliances are being formed across a wide range of sectors such as, chemical and pharmaceuticals, computers and electronics equipment and financial and business services. Despite the sectors involved strategic alliances are being driven by the economic demands of global markets , the cost of keeping up with ever changing technology and the opportunities the government deregulation and liberalisation initiatives is providing. Read More