The World Trade Organisation Challenges

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Table of Contents

Introduction
Tariffs
Government Procurement
Dissatisfaction of the Developing Countries
Counterfeiting
Fairness
Conclusion
List of References

Introduction

The World Trade Organisation (WTO) has been in the forefront in the liberalization of trade. This organisation has from time to time advocated for free trade where there are no restrictions to trade within and between countries (Barfield 2001). There are rules that WTO has formulated in a move to have trade liberated all over the world. However, various contemporary political problems have resulted in the slow progress in the implementation of the WTO’s goals (Deutch, Gunter & Bernherd 2001). This paper aims to address the political issues that have delayed the activities of the WTO since its inception in the year 1995.

Tariffs

The World Trade Organisation (WTO) is facing this challenge as a result of different nations imposing different tariffs on various goods. According to Schott (1998 p. 7), this challenge was foreseen during the inaugural of the WTO in 1995 where participating countries were required to embrace and implement the famous Uruguay Round.

Among the items that have been imposed more differing tariffs include the textiles, apparels, agricultural goods and the electronics. The United States and the European Union still impose high tariffs on imported goods (Baldwin 2002, p. 30). This is hampering the agenda of the WTO, which is to create a free market where there is free and easy movement of goods within and between nations.

Schott (1998, p. 8) admits that there are countries that do not fully embrace the idea of the WTO where free trade is advocated. The author continues to say that such nations are the most affected in terms of tariff application. A country like China may produce a good using a relatively lesser amount of resources, which implies that this product will be sold at a reduced price.

However, the kind of tariffs that various nations impose on such a good increases the retailing price of the said product to amounts that are so high that the good becomes unavailable to the poor communities (Hoekman & Mavroidis 2014). This is a political issue that has been addressed by the WTO; however, there has not been a permanent solution to the problem. Baldwin (2002, p. 31) says that another contributing factor to this problem is the fact various political regimes face different economic goals.

A tariff in a developed country cannot be the same as the tariff in the developing country. This is attributed to the fact that a developed country has achieved most of its economic goals such as infrastructure, industrialisation, and economic stability. However, most developing countries are still developing their economy through the creation of infrastructure and industrialisation. To this effect, the developing countries are still indeed of more resources and the explanation of the high tariffs that most of them charge.

According to Baldwin (2002, p. 35) the tariffs on agricultural goods is as a result of the bindings that various countries and organisations have on the agricultural items. For example, in the year 2000, the European Union binding on the dairy product was at 178%, while the binding of sugar was at roughly 152%. In the same year, the binding by the US on dairy and sugar was at 93% and 91% respectively. The binding of dairy and sugar by the Japanese was at 326% and 152% respectively in the year 2000 (Baldwin 2002, p. 35).

This scenario shows clearly how different nations impose differing tariffs on the agricultural goods. This act has been said to hamper the development of free trade and liberalisation of trade as there is no common denominator on which such goods are charged all over the world. Baldwin (2002, p. 38) admits that the differing bindings on some of the items are contributed by the different political ideologies and motives towards their economy.

The developing countries also have a stake in the imposing of tariffs on various goods. Schott (1998, p. 16) says that most of the developing nations have not lowered the tariffs as stipulated in the Uruguay Round cut off rates. As a result, there seems to be a competition on the imposing of tariffs. This has in turn hampered the development of industries in such areas as the tariffs pose a challenge in acquiring cheap materials needed for the smooth running of the industries.

Schott (1998) recommends that there needs to be a consensus on the rates that need to be imposed on various items. This will contribute to the liberation of trade according to the interests of the WTO. Both the developed countries and the developing countries need to lower the tariff rates on various goods as stipulated in the Uruguay Round cut off points (Warwick Commission 2007).

Government Procurement

This is another challenge that the implementation of the WTO’s goal of trade liberation is facing. The process of procurement in different nations is conducted in a manner that does not promote trade liberation. Sutherland and Sewell (2000, p. 82) indicate that the role of the authority that is mandated to oversee the government procurement process in any country is to promote equity in that particular nation. However, Sampson (2001) reveals that that this has not been the case. The authorities that are mandated to oversee the procurement process have been involved in such cases as corruption.

Corruption is one vice that does not take to heart the interests of the trade liberalisation. The WTO aims at ensuring that there are fairness and equity in all processes of trade (Rugman & Verbeke 2012, p. 5). This includes the elimination of corruption in the awarding of contracts. However, it is worrying to note that the level of corruption, especially in the developing countries, is so high that the government contracts are awarded based on how an organisation bribes the authorities involved.

It has been said that politics carry the day in the awarding of contracts emanating from the government. There is the element of awarding political allies that have been supportive of the political party in power. Such allies are awarded contracts irrespective of whether they qualify for the contract or not. Sutherland and Sewell (2000, p. 88) admit that such actions do not promote trade liberation. Corruption is also manifest through ethnicity and racism.

The World Trade Organisation (2010, p. 18) reports that many of the tenders from the governments are awarded to domestic companies. This is attributed to ethnicity and racism, where those awarding the contracts believe that only people from the same community and those speaking the local language can deliver as per the requirements of the tender. The resulting effect is that the multinational organisations are not in a position to present their expertise, and this drags the implementation of the trade liberation.

Competition is a factor that is involved in government procurement. Esty (1998, p. 129) says that different companies compete for the available tenders that the government of the day is advertising. This kind of competition often results in such acts as corruption and ethnicity. The organisations that bribe the government officials more are generally awarded the contract without even considering the credibility of the company. Esty (1998, p. 129) indicates that the developed countries have moved ahead in fighting corruption during government procurement where the individuals that are caught practicing the act are punished by a court of law.

This is a commendable action that is gradually promoting the objective of WTO in trade liberation. Politics in the developing countries need also to change to address the issue of corruption if such countries are to enjoy the fruits of trade liberalisation. Esty (1998, p. 129) admits that the move from being a corruption-hit country to a corruption-free country requires a total transformation in the operation of the government operations. The political regimes need to realise that the idea of corruption is affecting the liberalisation of trade in their countries, and, therefore, there is a need to advocate for the non-involvement in corruption, especially in the awarding of tenders.

Dissatisfaction of the Developing Countries

The developed countries were mainly involved in the formation of the WTO. To this effect, Bellman, Hepburn and Wilke (2012, p. 20) indicate that the developing countries express their dissatisfaction with the operations of the WTO. There have been feelings of the political parties in the developing world that the sole purpose of the WTO is to implement the objectives of the developed nations.

This can thus explain why most of the developing countries are reluctant in embracing the WTO and advocating for the liberation of trade. Bellman, Hepburn, and Wilke (2012, p. 21) confirm that the situation has been worse in certain developing countries to such an extent that the reigning political leaders have deported the foreign investors back to their mother countries. This is in contrast to the goal of the WTO, which is to liberalise trade to such an extent that investors can be free to invest in any country.

Another contributing factor as to why most developing countries fail to embrace the ideologies of the WTO is that, there is always a feeling of the political leaders that the WTO oppresses the poor (Ortiz, Bellman & Mendoza 2012, p. 27). The argument is based on the view that the liberation of trade would result in the creation of many industries that would require labour. The most likely sources of labour are the poor communities as they will not ask for high wages. In addition, most poor people do not have an idea of the importance of having proper protective clothing while in the working environment.

They will also hardly form trade unions to fight for their rights as a result of ignorance of the importance of such organisations. Therefore, the poor will be oppressed by such industries for many years. This is the reason as to why political governments in the majority of developing countries fail to embrace the ideology of the WTO in liberalising trade.

Counterfeiting

One of the objectives of the WTO is to ensure there is free trade among and within nations. This can only be realised if the issue of counterfeit goods is addressed in an objective manner. Sutherland et al. (2004, p. 66) indicate that the number of counterfeit goods that find their way into any market is so alarming that the original goods face extinction if the government takes no action. However, some countries have been reported to wipe out all counterfeit goods from their markets.

Sutherland et al. (2004, p. 68) admit that there is a majority of nations that still do not eliminate counterfeit goods as the public prefer such items due to their reduced prices. The situation is even worse in developing countries where quite a considerable amount of people live on less a dollar a day. Such countries can, however, address the issue of the influx of counterfeit goods by conducting public awareness to the public on the dangers that the counterfeit goods have to the economy of the particular nation.

Fairness

It has been reported that the WTO is not fair to all nations. Sutherland and Sewell (2000, p. 97) admit that there are those nations that feel side-lined by the WTO. Such countries often tend to withdraw from the activities of the WTO, which drags the liberalisation of trade in the particular nations. Political leaders are to blame for this action as, more often than not, they lead their communities out of the WTO once they feel that their interests are not taken care of by the organisation.

Baldwin (2002, p. 34) adds that there are other reasons that contribute to the feeling that the WTO is not fair. One such reason is that the WTO has limited staff. The number of the WTO staffs in any country cannot be the same in another country. This translates to the fact that the implementation of the agendas of the WTO cannot be fully implemented in all countries at the same rate (Soloway 2002).

There are those countries such as European countries that will feel that their trade interests are taken care off due to the proximity to the WTO headquarters in Geneva. On the other hand, some countries may feel side-lined by the fact that they are far away from the WTO headquarters and that the number of the WTO staffs in their countries is quite small.

The WTO has limited resources that are needed to implement its goal of trade liberalisation. According to Rugman and Verbeke (2012, p. 30), the meagre resources lead to the dependence of the national governments on the implementation of the various objectives that the WTO has on trade. Some government organisations may be reluctant on the implementation phase as a result of various personal interests.

In addition, the auditing process that the WTO is required to conduct from time to time in different countries is hampered by the limitation of both the staff and other necessary resources. Thus, it is evident that the effectiveness of the WTO depends on the co-operation that national governments have with the organisation. The more cooperative a country, is the more implementation of the goals of the WTO will be.

Conclusion

One primary objective of the WTO is to contribute towards trade liberalisation. The problems by political institutions have hampered this objective in the majority of nations. The tariffs that are imposed on various goods always differ from one country to another. This is despite the recommendation by the Uruguay Round that the tariffs be cut off by a certain margin.

The procurement process in government institutions is normally characterised by acts such as corruption and ethnicity. This has, in turn, prevented the liberation of trade where openness and equity are advocated for. Some countries feel that the main purpose of the WTO is to protect the rich and oppress the poor. This has in turn resulted in many political regimes failing to embrace the WTO and its objectives. The limited the resources of the WTO result in the dependence of the trade organisation on national governments. Some governments are, however, reluctant in the implementation of the WTO’s goals.

List of References

Baldwin, RE 2002, Key challenges facing World Trade Organization, University of Wisconsin Press, Madison.

Barfield, C 2001, Free trade sovereignty, democracy: The future of the World Trade Organization, The AEI Press, Washington, DC.

Bellman, C, Jonathan, H, & Wilke, M 2012, ‘The challenges facing the multilateral trading system in addressing global public policy objectives’, International Development Policy, vol. 3, pp. 20-28.

Deutch, K, Gunter, S, & Bernherd, M 2001, The World Trade Organization Millenium round, Routledge, London.

Esty, DC 1998, ‘Non-governmental organizations at the World Trade Organization: Co-operation, competition or exclusion’, Journal of International Economic Law, vol. 1, pp. 123-147.

Hoekman, B & Mavroidis, P 2014, ‘What does the WTO need from its next DG?’, Global Governance Programme, vol. 4, pp. 5-10.

Ortiz, RM, Bellman, C, & Mendoza, MR 2012, The future and the WTO: Confronting the Challenges, International Center for Trade and Sustainable Development (ICTSD), Geneva.

Rugman, AM & Verbeke, A 2012, The World Trade Organization, multinational enterprises, and the civil society, Indiana University Press, Bloomington.

Sampson, G 2001, The role of the World Trade Organization in global governance United Nations, University Press, New York.

Schott, JJ 1998, ‘Challenges facing the World Trade Organization’, Institute for International Economics, vol. 3, pp. 1- 24.

Soloway, J 2002, Linking trade environment and social cohesion, Ashgate, Aldershot, UK.

Sutherland, P & Sewell, J 2000, ‘Challenges facing the WTO and policies to address global governance’, Goldman Sachs International, vol. 4, pp. 82-100.

Sutherland, P, Bwagwati, J, Botchwey, K, Hamada, K, Jackson, K, Lafer, C & Montbrial, T 2004, The future of the WTO: Addressing institutional challenges in the new millennium, World Trade Organization, Geneva.

The World Trade Organisation 2010, Global solutions: Towards better global governance, World Trade Organization, Geneva.

Warwick Commission 2007, The multilateral trade regime: Which way forward? University of Warwick, UK.

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