...Business Environment The World Trade Organisation (WTO) It has been suggested that “of all major economic institutions, the WTO has the worst reputation”. Outline the role of the WTO, and explain why it has proved difficult to reach agreement in recent WTO meetings in Doha, Geneva and Hong Kong. The World Trade Organisation (WTO) The WTO was founded in 1995 after the 8 year Uruguay round of talks, and it succeeded the General Agreement on Tariffs and Trade (GATT) created in 1947. Most of the WTO's current work comes from the Uruguay Round of negotiations (1986-1994). Headquartered in Geneva, Switzerland, the WTO has 151 members (as at 27th July 2007), accounting for over 97% of world trade. The organisation is governed by a Ministerial Conference, which meets every two years, a General Council which implements the conference's policy decisions and a director-general appointed by the Ministerial Conference. The World Trade Organization deals with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. These agreements are the legal ground-rules for international commerce Global trade deals are negotiated at the Ministerial Conference meetings, which are known as trade rounds and are aimed at reducing barriers for trade. One of the central principles...
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...Although free trade has so many benefits, there are a number of disadvantages of free trade. First of all is unemployment. Free trade can impact on large numbers of workers. Because of free trade, unemployment levels in rich countries may be higher than poor countries. Second is decrease domestic economic stability. This means that business, industry, market, employees and consumers are more vulnerable to go down in the economies of our trading partners. For example, the foreign company imported goods are cheaper than same goods made by domestic suppliers and local manufactures, so they have to compete with imported goods. Next is unfair. Developing or infant industry may establish it difficult to become placed in a competitive market without any short-term protection and supporting policies by governments. It’s hard to develop economies of scale in front of competition from huge and strong TNCs. Moreover, free trade can cause to pollution, working conditions, technology, education. People’s living standard may be improved but the problem of the environment is very serious. The increase of corporate companies in developing countries increases building factories and energy use and they ignore costly environment standards. In addition, because of competition between companies, they reduce or remove the cost of environmental protection. Finally, free trade widens the gap between rich and poor nations. Free trade helps transfer technology from developed countries to developing...
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...with globalization, and many people in the countries being globalized do not want it to happen. No one should ever argue that globalization is perfect, because it is not. However, the concerns of skeptics can be easily alleviated. The earth is now divided into countries and continents after the big wars in the history of man. Nevertheless, there is a massive rising issue of globalization also known as free trade. Global economy is expansion of economies to the rest of the world which is demolishing industries, businesses and creating financial crisis in developing countries, on the other hand generating economical wealth in developed countries. Global economy needs national regulation and corporation should not have complete freedom. The reason is that the countries which have powerful economy can protect their own nation by limiting the number of imported goods, supplying subsidies and quotas, but developing states getting poorer. Global economy is also producing cultural effects and migration problems in developing countries, which is also a problem for developed nations. In...
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...Economics Free Trade Free trade is a system in which goods, capital, and labor flow freely between nations, without barriers which could delay the trade process. There are many nations that have free trade agreements, and several global organizations promote free trade between their members. There are a few arguments both for and against this practice, ranging from economists, politicians, industries, and social scientists. A few barriers to trade are struck down in a free trade agreement. Taxes, tariffs, and import quotas are all eliminated, as are subsidies, tax breaks, and other forms of support to local producers. Restrictions on the flow of money are also lifted, and regulations, which could be considered a barrier to free trade. Free trade enables overseas companies to trade just as efficiently, easily, and effectively as local producers. The idea behind free trade is that it will lower prices for goods and services by encouraging competition. Local producers would no longer be able to count on government subsidies and other forms of assistance, including quotas which force citizens to buy from local producers, while overseas companies move in on new markets when barriers to trade are lifted. In addition, free trade is also supposed to encourage improvement, since competition between companies triggers a need to come up with original products and solutions to capture market share. Free trade can also substitute global cooperation, by encouraging nations to freely exchange...
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...Summary: The notion that free trade is beneficial to all countries involved in free trade system can be challenged with the most recent wave of globalization. In the past, outsourcing was mainly used to save money and cut costs by moving low skilled, blue-collar manufacturing jobs into poorer, low wage countries, however, currently there has been an increase of higher wage and skilled white collar professions following suit (Hill, 2012). 6a. Who benefits from the outsourcing of skilled white-collar jobs to developing nations? Who are the losers? The people who benefit from outsourcing skilled white-collar jobs to developed nation are those whole live in the poor countries as well as the consumers of goods or services being produced in the poor countries. Outsourcing benefits the poor countries by creating and supporting jobs, which results in the country being able to attain sustainable economic growth. It also benefits consumers in developed nations, who can save money when purchasing these goods, which results in them having more money to spend on other goods and services. Having more money to spend on additional goods and services is needed when improving their living standards. The people who are the losers in this process of outsourcing of skilled white-collar jobs to developing nations are the producers in more developed nations, who have lost business to enterprises that outsource (Hill, 2012). 6b. Will developing nations like the United States suffer from the...
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...Introduction Globalization generally refers to the worldwide idea of economic, technological, cultural and political exchanges enhanced by the modern transport, communication and legal infrastructure. The political choice to open links and borders in international finance and trade makes it easy for globalization to happen. This means that human beings are continuously interacting with each other across the globe politically, economically and culturally. Economic globalization refers to the process of increasing the economic integration between two or more countries which leads to the emergence of a worldwide marketplace or a single global market. The international Monetary Fund defines globalization as “the growing economic interdependence of countries worldwide through increasing volume and variety of cross-border transactions in goods and services, freer international capital flows, and more rapid and widespread diffusion of technology”. At the same time, the International Forum on Globalization defines globalization as “the present worldwide drive toward a globalized economic system dominated by supranational corporate trade and banking institutions that are not accountable to democratic processes or national governments.” The two definitions vary and so depending on the paradigm, the aspect of globalization can be seen as both positive and negative effects. Nonetheless, globalization has cultural, political and technological factors that are closely intertwined. All these...
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...about the “German market” or the “American market” Instead, there is the “global market” falling trade barriers make it easier to sell globally consumers’ tastes and preferences are converging on some global norm firms promote the trend by offering the same basic products worldwide 1-3 What Is The Globalization of Markets? Firms of all sizes benefit and contribute to the globalization of markets 97% of all U.S. exporters have less than 500 employees 98% of all small and mid-sized German companies participate in international markets 1-4 What Is The Globalization of Production? Firms source goods and services from locations around the globe to capitalize on national differences in the cost and quality of factors of production like land, labor, energy, and capital Companies can lower their overall cost structure improve the quality or functionality of their product offering 1-5 Why Do We Need Global Institutions? Global institutions help manage, regulate, and police the global marketplace promote the establishment of multinational treaties to govern the global business system 1-6 Why Do We Need Global Institutions? Examples include the General Agreement on Tariffs and Trade (GATT) the World Trade Organization (WTO) the International Monetary Fund (IMF) the World Bank the United Nations (UN) the G20 1-7 What Do Global Institutions Do? The...
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...Dependency Theory: An Introduction 1. Vincent Ferraro, Mount Holyoke College South Hadley, MA July 1996 Background Dependency Theory developed in the late 1950s under the guidance of the Director of the United Nations Economic Commission for Latin America, Raul Prebisch. Prebisch and his colleagues were troubled by the fact that economic growth in the advanced industrialized countries did not necessarily lead to growth in the poorer countries. Indeed, their studies suggested that economic activity in the richer countries often led to serious economic problems in the poorer countries. Such a possibility was not predicted by neoclassical theory, which had assumed that economic growth was beneficial to all (Pareto optimal) even if the benefits were not always equally shared. Prebisch's initial explanation for the phenomenon was very straightforward: poor countries exported primary commodities to the rich countries who then manufactured products out of those commodities and sold them back to the poorer countries. The "Value Added" by manufacturing a usable product always cost more than the primary products used to create those products. Therefore, poorer countries would never be earning enough from their export earnings to pay for their imports. Prebisch's solution was similarly straightforward: poorer countries should embark on programs of import substitution so that they need not purchase the manufactured products from the richer countries. The poorer countries would still sell...
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...market” * Instead, there is the “global market” * falling trade barriers make it easier to sell globally * consumers’ tastes and preferences are converging on some global norm * firms promote the trend by offering the same basic products worldwide What Is The Globalization of Production? * Firms source goods and services from locations around the globe to capitalize on national differences in the cost and quality of factors of production like land, labor, and capital * Companies can * lower their overall cost structure * improve the quality or functionality of their product offering * Firms source goods and services from locations around the globe to capitalize on national differences in the cost and quality of factors of production like land, labor, and capital * Companies can * lower their overall cost structure * improve the quality or functionality of their product offering Why Do We Need Global Institutions? * Institutions * help manage, regulate, and police the global marketplace * promote the establishment of multinational treaties to govern the global business system * Examples include * the General Agreement on Tariffs and Trade (GATT) * the World Trade Organization (WTO) * the International Monetary Fund (IMF) * the World Bank * the United Nations (UN) What Do Global Institutions Do? * The World Trade...
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...Advantages and disadvantages of free trade In international trade theory, globalization and free trade results over the long term in "commodity price equalization" across countries; or if capital, labor and technology are highly mobile, free trade and globalization is only for rich countries. “Free trade” means freedom to trade. Freedom is a concept and principle that everyone holds dearly, except dictators and bullies [1]. We are going to analyze the advantages and disadvantages of free trade in both cases: the poor and rich countries. The aim of this work is to look into the particularities of free trade. In order to achieve this aim we shall present tasks as following: * Define the concept of free trade; * Explore advantages of free trade; * Find out of disadvantages of free trade. Free trade occurs when there are no artificial barriers put in place by governments to restrict the flow of goods and services between trading nations. When trade barriers, such as tariffs and subsidies are put in place, they protect domestic producers from international competition and redirect, rather than create trade flows. It is in the case of poor countries due to we can’t be competitive with development countries such as Germany, Europe. Some groups, however, have a double standard. They want all their consumption needs and production inputs to be liberalized and to be available at bargains, but want their own products and services to be protected from competition. It doesn't...
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...Does Globalization Help the Poor?) Business Ethics in a Global Economy Does Globalization Help the Poor? by Jerry Mander, Debi Baker and David Korten IFG Bulletin, 2001, Volume 1, Issue 3, International Forum on Globalization During the past few years, we have heard steady proclamations emanating from the advocates of economic globalization and leaders of the Bretton Woods institutions - the World Bank, the International Monetary Fund (IMF), the World Trade Organization (WTO), et. al. - that their deepest purpose in pushing economic globalization is to help the world's poor. More specifically, they contend that removing barriers to corporate trade and financial investments is the best path to growth, which they say offers the best chance to lift the poor from poverty. They also assert that the millions of people who have visibly opposed the economic globalization model are harming the interests of the poor. Everyone should please back off and leave it to corporations, bankers and global bureaucracies to do the planning and solve the world's problems. Such claims are routinely replayed in the media. One prominent national columnist, for example, says, "protesters are choking the only route out of poverty for the world's poor." In other words, if the protests would stop, the IMF, the World Bank, the WTO, Nike and Monsanto would save the day. Is this true? Are the interests of global corporations and bureaucracies really aimed at helping the poor? Or do these institutions...
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...global marketplace. Ex: In many industries, it is no longer meaningful to talk about the “German market” or the “American market”. Instead, there is only the global market. Falling trade barriers make it easier to sell internationally. The tastes and preferences of consumers are converging on some global norm. Firms help create the global market by offering the same basic products worldwide. 2) The Globalization Of Production: The globalization of production refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production like land, labor, and capital Companies compete more effectively by lowering their overall cost structure or improving the quality or functionality of their product offering. The Emergence Of Global Institutions : Institutions are needed to: * help manage, regulate, and police the global marketplace * promote the establishment of multinational treaties to govern the global business system Institutions created over the past half century include: * the General Agreement on Tariffs and Trade (GATT) * the World Trade Organization (WTO) * the International Monetary Fund (IMF) * the World Bank (WB) * the United Nations (UN) a)The World Trade Organization (like its predecessor GATT) is...
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...Chapter 12 in Charles Wheelan's, Naked Economics, is about trade and globalization. Weelan stresses the importance of trade and how it's vital for every nation if they want to strive. The poorer nations produce products like clothes and other goods, while the better off nations can focus on bigger and better goods like technology. Wheelan concludes with stating that governments that close their door on trade and globalization aren't doing themselves any favors. Before Naked Economics I didn't know about free trade. I’ve heard about outsourcing and trading but I’ve always associated those with the negative aspects of the economy. I thought outsourcing was the worst for many American workers, however it allowed some to succeed. As...
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...for the world's poor” – to do the planning and solve the world's problems. So far, almost all of the evidence from the past three decades (1970-2000) - the period of economic globalization's most rapid ascendancy - shows that it is bringing exactly the opposite outcome that its advocates claim. Clearly, poverty and inequality are rapidly accelerating everywhere on earth. A 1999 report by the United Nations Development Program found that inequalities between rich and poor within and among countries are quickly expanding, and that the global trading and finance system is one of the primary causes. Even the U.S. Central Intelligence Agency (CIA) confirms the United Nations' (UN) conclusions, agreeing that globalization brings massive inequalities. The benefits of globalization do not reach the poor, says the CIA, and the process inevitably brings increased global protest and chaos. Robert Wade of the London School of Economics, wrote in The Economist (2001), "Global inequality is worsening rapidly...Technological change and financial liberalization result in a disproportionately fast increase in the number of households at the extreme rich end, without shrinking the distribution at the poor end...From 1988 to 1993, the share of the world income going to the poorest 10 percent of the world's population fell by over a quarter, whereas the share of the richest 10 percent rose by 8 percent." The ideologies and rules of economic globalization - including free trade, deregulation...
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...Andrea Innes Review Questions March 8, 2012 Global Business Management Terri Brown 3. Unions in developed nations often oppose imports from low-wage countries and advocate trade barriers to protect jobs from what they often characterize as “unfair” import competition. Is such competition “unfair?” Do you think that this argument is in the best interests of (a) the unions (b) the people they represent (c) The country as a whole The Comparative advantage theory says that if a country should specialize in producing those goods that it can produce most efficiently, while buying goods that it can produce relatively less efficiently from other countries. It also says that opening a country to free trade stimulates economic growth. If a low-wage countries can produce certain products more efficiently than high wage countries, the low wage countries should produce and export those products. Trade barriers are supposed to protect workers and the companies, but they are only a short-term fix. By protecting industries the government is not encouraging companies to be more efficient. Consumers end up losing on this deal because they have to pay higher prices and have fewer choices. 4. What are the potential costs of adopting a free trade regime? Do you think governments should do anything to reduce these costs? What? Having a free trade regime will create job loss in some industries. One thing the government could do is provide retraining programs...
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