Wednesday, January 11, 2006

The WTO - World Trade Organizations

“Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value” was the cogent argument presented by Ayn Rand when asked to define money and trade. The concept of trade is the root of civilization, the very essence of a society which is based on a system where progress is achieved by exchanging value. Initially men formed small communities based on common trading practices; their small society developed based on the various different values, which each of them brought to the market for exchange with another’s value offering. As these values were exchanged, it brought along with it progress, and with progress a requirement for more variety in the needs. As trade flourished, so did the economy and consequently the growth facilitated establishment of trade with other similar communities. Geographical obstructions crumbled away as new and unique commodities and services were included for trade. As these concepts spread around the world systems, rules and regulations were formed by trading communities to ensure that there was a value for the transaction. As more and more communities came into the trading market, the perception of “value” was found to be just as varied. This necessitated the setting up of a coherent system of “value” judgment and hence the establishments of the organizations like the WTO to achieve these goals. In today’s world where inevitably there are trade links between every corner of the globe to the other, a common platform for deciding on perceptions of value is required and to discuss the efforts made by the WTO to address these issues, Dr. Abdul Qader Shaikh, a renowned economist with the United States Chamber of Commerce, delivered a seminar at the J.R.D. Tata auditorium on 10th January, 2006.

The WTO is the successor to the GATT or General Agreement on Trade and Tariffs, which was established in 1948 to quell the post war economic depression. It was initially established to develop guidelines for the commodity based trade which existed around the world. The economists from the member countries which were part of the GATT met at regular intervals and negotiated over the various trade issues prevalent in the day. But with the emergence of the computer and software business and the ascendance of the free market economy around the world, where the focus shifted towards trade in services, there was a need to include this also into the negotiations and discussions. Hence in the rounds of meetings in Uruguay during 1986-1994, the charter for including the value perceptions of services trade was drawn up and thus the WTO was established.

The WTO charter not only had frameworks for dealing with the issues of a service economy, but also had new concepts like Intellectual Property Rights which have become cornerstones of a free market economy. TRIPS or Trade Related Aspects of Intellectual Property Rights is an integral part of the WTO charter which deals with rights given to people over the creations of their minds. With a lot of financial services and the exchange of money and currency also gaining popularity in the economy, the WTO has recognized this and has developed frameworks for dealing with these issues under the TRIMS or Trade Related Investment Measures.

The representatives of the WTO member countries meet at regular intervals and discuss and negotiate on the various tariffs and duties which are currently present restricting trade between various economies. These tariffs which exist as a result of differing value perceptions result in the price of the commodity or service being costly and hence not beneficial to the consumer. The WTO makes efforts to curb practices of predatory pricing and excessive tariffs imposed by economies so that the products remain competitive. By curbing monopolistic trends developed due to unfair duty regimes, the WTO is required to provide the consumer not only the financial benefits but also benefits in terms of choice and quality. With the global trade values exceeding the rates of GDP growth, the importance of free and fair trade is highlighted by the WTO.

But, there are many issues which in the method and policies of the WTO which make it very unpopular in the developing environments. Some of the policies in the WTO, where the economically strong nations with their inherent financial strength seem to dominate the negotiations have not been readily accepted by the developing and least developed countries. One of the allegations which have been made against the WTO is the claim that it dictates the trade policy on its member states and advocates free trade at any cost. For example, some developing countries have alleged that rules like enforcing the cutting down of subsidies in agriculture exports where the major economy of the country is agriculture leads to unfair disadvantages to those countries, and the conferences have been witness to many heated arguments on these issues.

Going by the policy of the WTO of not wanting to engage in a zero-sum game, where one party rules the roost while the other suffers at the winning party’s behest, these and many other allegations were addressed during the rounds of talks held in Doha, Qatar during 2001. Although the Doha round and the subsequent rounds of meetings in Cancun, Mexico did not lead to concrete measure being taken on many of these issues due to differences in opinions, the Doha Development Agenda was finalized and the was discussed during the meet at Hong Kong in mid December of 2005. Some of the issues which were negotiated and resolved during the Hong Kong rounds were the issue regarding cotton subsidies for countries where the main product of export is cotton. The developed countries decided to phase out the cotton subsidies which their exporters enjoy by end of 2006, so that the products of countries like Burkina Faso and Benin to be more competitive in the market. Other issues dealt in the round were the decision to phase out agricultural subsidies which are biased against some countries by the year 2013.

The dominance of US, the European Union and Japan in the WTO is one of the main concerns for the other members. The improvement of market access to non agricultural products into these economies is one of the demands of the other countries and negotiations are yet to take a positive turn in this issue. Many developing economies in the world perceive the WTO as a threat, but there have been many positives also. The WTO agreements have helped countries like South Africa which are faced with the AIDS pandemic to gain access to generic versions of patented drugs, which otherwise may have been extremely costly to import. Despite the rosy picture painted by the US and few other dominant members, the WTO still faces stiff opposition from many other nations which are not fully open to a free market economy. The WTO may not be without imperfections and the imbalance may need to be addressed, but it is necessary for those countries which benefit most from its decisions to accept that money permits no deals except those to mutual benefit by unforced judgment of the traders involved; also imperative is for those who do not benefit to understand that wealth is the product of man’s capacity to think and the WTO may be a very able forum to provide such a fair framework.


Anonymous said...

very interesting and analytical!

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