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The impact of the information technology has been to highlight a fourth element in the process of globalization and make it typical of globalization in our times. This is financial capital invested in the capital market of emerging countries. It is true that in the earlier period of gradual globalization, finances were even invested but this was in the form of foreign direct investment in factories and enterprises in different countries. The integrated capital market is a unique feature of the 20th century and our current times. A corollary of the process of globalization and the impact of technology has been the impact of advances in communication especially through satellite broadcasts as well as other means of communications like fax, telephones and the internet. This freedom of communication has also led to a pressure especially on those governments which try to operate a controlled regime. The collapse of the Soviet Union from 1990 onwards and the conversion of many of the erstwhile communist countries to market dynamics can also be, among other things, traced to the era of information technology where policing the borders became more difficult in view of the reach of technology.
This, in turn, led to a greater pressure on the global trade front resulting finally in the end of the Uruguay round leading to the setting up of the WTO in 1995. One major impact of the WTO has been that the trade barriers must be brought down. Government of India is also now part of this general trend. After the permit license raj for nearly forty years, from 1991 due to factors beyond contract, the Government of India adopted policies which are more market friendly. We are still progressing perhaps in a gradual way with two steps forward and one step backward. But the fact remains that in certain infrastructure areas like telecommunications, changes have come to stay.
The World Trade Organization (WTO) is among the most powerful and one of the most secretive international bodies on earth. It is rapidly assuming the role of global government, as 134 nation-states, including the U.S., have ceded to its vast authority and powers. The WTO represents the rules-based regime of the policy of economic globalization. The central operating principal of the WTO is that commercial interests should supersede all others. Any obstacles in the path of operations and expansion of global business enterprise must be subordinated. In practice these “obstacles” are usually policies or democratic processes that act on behalf of working people, labor rights, environmental protection, human rights, consumer rights, social justice, local culture, and national sovereignty.
The International Forum on Globalization (IFG) focused its efforts throughout most of 1999 on the WTO and its relation to the larger issue of economic globalization. In Seattle, World Trade Organization (WTO) talks collapsed from internal irreconcilable divisions and the weight of protests directed at labor, human rights, the environment and secrecy. While grievances coalesce into new coalitions, an extensive structure of roots underlying these branches was unearthed: the perverse incentives favoring transnational corporations and vast inequality in the prices of goods traded. Creating a system that promotes healthy economic development will require creating new “rules,” new institutions and funds.
The WTO, globalization, and a new world order
IMF-instituted structural adjustment programs (SAPs) were designed to boost export crops to ensure repayment of debts. But belt-tightening stipulations cut nation-state spending on housing, education, health and public transport — the sectors that buttress domestic economies. Dismantling state infrastructures has harmed many nations and has widened income gaps. The discrepancy between the “state of the economy and the condition of populations has become increasingly evident. By the early 1990s it became apparent — even to prominent World Bank economists — that SAPS were pulling the rug out from under national infrastructures, preventing poverty alleviation and competition, and encouraging corruption. Meanwhile, floating exchange rates facilitated an explosion in currency trading (yen vs. dollars, etc.) from $18 billion daily in 1972 to over $1.5 trillion daily in the 1990. The rapid movement of what might be called “specudollars” helped set the stage for the 1996/97 collapse of Asian currencies. A new architecture for global governance could have three elements:
[1] Rules: New rules are needed to constrain capital flows to prevent the volatile, destabilizing, speculative movement of capital and to direct funds towards healthy development. Unplayable debts must be forgiven. The forgiving of debt would be a compensation for past inequities of terms of trade and extraction of wealth.[2] Institutions: The World Bank (WB) is a bank, not a development agency. One possible candidate for administrating global governance is the Global Environmental Facility (GEF) — a union of the UN Development Program, the UN Environmental Program and the WB. GEF gives grants. Recently it has increased Non-Governmental Organization (NGO) participation, albeit inadequate; and its funding is grossly insufficient.[3] Incentives and Funds: Perverse subsidies — those encouraging the extraction, mining, refining and combustion of coal and oil — must be eliminated. Subsidies and tax incentives must be switched to stimulate producers and consumers of clean energy and energy-efficient technologies. New enterprises for fuel cells, solar, etc., can generate jobs and trade — a “win-win” for the economy and the environment. International agreements — such as the Kyoto Climate and Biodiversity Conventions — are hampered by the absence of financial resources. Universal acceptance of the 1987 Montreal Protocol to phase out stratospheric ozone depleting chemicals was achieved when funds were allocated to transfer technology to poor nations. For wealthy and poor nations, funds can help “jump-start” clean, infant industries. Funds are also needed to support what the private sector will not, such as watershed protection.
Compensation will be needed for nations sharing their genetic resources for medicines and crops. And (credit Harvard economist Jeffrey Sachs), funds are needed to develop vaccines and drugs for diseases like HIV/AIDS and malaria, for which there is no current lucrative market in the most afflicted nations. And funds are needed for reparations for climate and extreme weather-driven devastation in nations such as Honduras, Venezuela and Mozambique. Developed nations have also begun to experience more severe and unpredictable weather patterns. Hurricane Floyd in North Carolina, September 1999, afforded an abrupt and devastating end to an extended summer drought. Prolonged droughts are also afflicting parts of Europe, while growing temperature contrasts between cold poles and warm tropics generate windstorms, like the twin winds that raced across the Atlantic over Christmas 1999, destroying France’s forests. Extreme weather events are having long-lasting ecological and economic impacts on a growing cohort of nations, affecting infrastructure, trade, travel and tourism.
WTO’s limited mission
The WTO replaced the better known GATT (General Agreements on Tariffs and Trade) which was itself a far cry from the originally planned International Trade Organization (ITO). The ITO was to be created after the second World War as the third pillar of the Breton Woods system and was meant to take an integrated approach to many trade related matters: securing full employment, reducing tariffs which stand in the way of economic growth, protecting workers’ rights, preventing undue domination and manipulation by big companies (competition policy), assisting weaker economies in gaining access to capital and technology, and managing commodity trade. The WTO was established with a far more limited mission:[1] Enforcing the trade contracts negotiated in the Uruguay Round (1986-1994) among the member countries (132 by end September 1997).[2] Continuing negotiations on trade and investment rules and liberalization of trade in agricultural and manufactured goods, the services sector (e.g. consultancies, tourism) and investment.
But many of the matters the Ministerial Conference, the highest decision-making body of the WTO, had to contend with at its initial meeting in Singapore in December 1996 were ITO issues left out of the WTO: passionate discussions on whether the WTO should deal with labor rights; calls for technical and financial assistance for the least developed countries (LLDCs) and new WTO discussion groups on the issues of competition policy and multilateral investment rules. As in the draft ITO, the WTO has to cooperate with the World Bank and the IMF with a view to achieving greater coherence in global economic policy-making. Cooperation agreements between the WTO, the World Bank and the IMF have been signed but there is no high level macro-economic co-coordinating mechanism to deal with debt, trade imbalances and budget deficits – all obstacles to weaker economies benefiting from world trade. Co-operation seems to occur mostly at the operational and country level such as exchanging information and expertise at meetings and among officials (e.g. on balance of payment problems of a particular country). Recently, the World Bank and the IMF have been involved in efforts to coordinate technical assistance for each of the LLDCs. Such co-operation increases the danger of joint conditionality towards total free trade in developing countries.
WTO’s role in globalization and marginalization
At the Singapore Ministerial conference many euphoric statements were made about the achievements of globalization and the WTO’s contribution to this process. Globalization is not only the result of technical innovations, capital concentration, the geographic spread of production processes and other company strategies to improve profit-making worldwide 24 hours a day. Political decisions by governments to remove institutional barriers to international trade and capital flows and to provide incentives for companies have also supported the globalization process: at national level through unilateral liberalization and structural adjustment for export-led growth, and through labor and social policy reform; at regional and multilateral levels, through agreements on trade and investment liberalization.
The WTO is the most important regulator of trade at international level and also sets the terms within which regional agreements can be signed. In this way, globalization is managed at world level from a trade perspective.
The WTO contributes to unequal competition
The WTO and the Uruguay Round agreements contribute to unequal competition because: 1. Developed countries give less market access to products from developing countries (average 4.3%) than those from among themselves (average 3.8%), and tend to impose high tariffs on those products most valuable to least developed countries (clothing, leather, fish, agriculture). 2. The phasing out of quantitative restrictions for textiles and clothing exports to the North is very slow and may make it difficult for small and poor producers to compete. 3. The agricultural agreement has led to competition between (indirectly) subsidized farm products of the North and unsubsidized agricultural products in developing countries. 4. Safeguard and anti-dumping rules still have loopholes and are more frequently being used to stop competition from labor-intensive products. 5. The enforcement of intellectual property rights (TRIPs) is likely to make necessary technology and essential goods (e.g. medicines, seeds) too expensive while not being able to stop bio-piracy by foreign companies.
true..through bringing multilateral treatises between the nations in almost all kinds of industries thereby causing significant contribution to the growth of IB. Thanks.
Free trade has led to globalization of financial institutions, leading to introduction of credit facilities to local investors. If their rates are favorable or lower than those of local financial institutions, customers will tend to seek the services of the foreign institutions. This leads to a change in the working of the local financial institutions which resort to promoting their products in order to attract more customers. They tend to lend money to their customers in a profitable way in order for them to uphold their business. With lending comes the need for risk assessment. This culminates in reforms within the financial institutions of an economy that enhances profitable lending. Such reforms are beneficial to the economy, and can help in the avoidance of miscalculated lending risks that can cause financial crisis, such as the banking crisis that occurred in the United States in 2007 (John, 2001).
When local financial institutions support reforms in order to benefit in terms of credit facilities and profit, property rights are strengthened, encouraging foreign direct investments in the economy. This is a positive outcome of the reforms. These present the developing countries with an opportunity to market their products globally as well as making global financial systems available to them for example the World Bank and the IMF (Barry 2008). The Word Bank provides loans to developing countries in a bid to alleviate poverty through development programs. The IMF is also significant in fostering global financial cooperation, to ensure that economies maintain their financial stability, and enhancement of international trade as well as provision of employment to aid in poverty reduction especially in developing countries. The United Nations Conference on Trade and Development (UNCTAD) offers the technological support to developing countries in their attempt to get incorporated into the global financial system and to handle their external liabilities. This is an important organization that assists developing countries which are normally faced with external debts (Geoffrey, 2004).
The economic infrastructure of developing countries has been improved through global economic associations enhanced by the WTO. This has resulted in a dynamic growth of the developing economies, which is necessary in attracting the rising inflows of capital and skills from the developed economies. Raymond (1999) observes that most of the developing countries that have liberalized their markets have acquired a “state of economic health especially in Asia and Latin America”. These nations usually do not require foreign aid. China and India are said to be some of the developing countries with a liberalized economy whereby the standards of living amongst the people have improved due to the opportunities presented by free trade and globalization. The WTO round of 2001 that was held in Doha is believed to have boosted economic growth in developing economies. According to (Barry 2008), “the Doha trade momentum led to an improvement of standards of living, life expectancy as well as poverty reduction”. Children are getting better education and unemployment is gradually being eradicated. The organization has enhanced economic freedom which has facilitated economic growth.
Although free trade has a number of benefits to the developing economies, there are various disadvantages associated with it. It is known to pose threats to the economic sovereignty of developing countries. This mainly occurs when these countries are steadfast to a flat exchange rate, in which case, they tend not to make changes in the exchange rate. The reason for free trade is to augment the flexibility of exchange between risk-adapted rates of return on domestic resources and liabilities and those in international markets, until the domestic central depository has no margin in which it is open to establish domestic interest rates (Tobin 1998). The domestic financial system can be adversely affected if the right channels of integration in to free trade are not followed. Capital in flows and liberalization can hamper the domestic market. A worsening of the market basics leads to tentative attacks which culminate to the withdrawal of the domestic as well as foreign investors. This can adversely affect the domestic economy. Brazil and Argentina were faced by economic crisis attributed to free trade.
Free trade usually creates interdependence amongst states, and deficiencies in the international market such as the unpredictable nature of capital inflows and outflows, can result in crises. More over, an economy can be affected by political and economic instability in another economy (Rajan 2005). Liberalization of the economic system makes a country to be subjected to the market discipline of foreign investors. An economy without a liberalized market has its investors monitoring the economy alone, reacting to unsteady financial fundamentals (Kaufmann 1995). The introduction of foreign market discipline can destabilize the functioning of this system, especially if the market systems are divergent.
In conclusion, it is important for a developing country to have policies that make an economy open for trading and investing internationally. The WTO has been promoting these policies, leading to reductions in trade barriers amongst members of the organization. The resulting opening up for free trade has led to the integration of many economies around the world in international trade. Many have achieved a lot in terms of development in the financial sector. Financial systems become advanced when they are integrated in the international markets (Barry 2008). Most of the domestic market systems have changed due to exchange of experiences within these markets. The financial institutions that provide assistance to domestic borrowers have increased, consequently raising the probability of acquiring assistance by developed countries.
Economic markets working in the international background facilitate international risk multiplicity and smooth the progress of consumption. This enhances the ability of countries to manage risks effectively to avoid problems such as recessions. Even though financial globalization is beneficial to developing countries, it is associated with bringing in new challenges to the economies. Integration of world economies through the WTO has been beneficial in terms of economic development for the emerging economies. Technology transfer has enabled them to increase their pace towards industrialization. The quality of manufactured goods has improved due to globalization of technology that has resulted from free trade. Developing economies have become integrated through the common laws and regulations that have been established through the organization, facilitating the existence of harmonious relations. The WTO has benefited the economic growth of developing countries by enabling them to engage free trade.
I fully agree with the answers been added by EXPERTS.............Thanks.
mashalla full agree with answer given by mr. Mohammed Ashraf
True... One of WTO objectives is to help in developing businesses in developing countries and helping in developing international businesses whether by legislation, resources or contributions !
Thank You
Agree with all =====================================
Thanks I amagree with my colleague’s answer Mohammed Ashraf he gives us good answers
Acknowledge expert answer given by Mr. Mohammed Asharf . Thank you
I agree with Mr.Ashraf's viewpoint on this one!
