IPE Week 9 Flashcards
World Trade Organization (WTO) definition:
Is a multilateral organisation that seeks to advance free and fair trade by establishing regulations & processes that oversee global trade relations and facilitate the resolution of conflicts
When & how did it emerge:
Emerged from the General Agreement on Tariffs and Trade (GATT) and became the WTO in 1995
What it covers
Its agreements cover goods, services, and intellectual property
Its aims:
2.
- Facilitate smooth, predictable, and free trade globally.
- Help its members use trade as a means to raise living standards, create jobs and improve people’s lives
Significance of WTO for IPE:
2.
- Plays a crucial role in the international political economy by promoting trade liberalization, which is believed to drive economic growth and development.
- By creating a common set of rules and a mechanism for resolving disputes, the WTO helps reduce trade barriers and increase economic cooperation among its 164 members, which account for 98% of global trade
Trade Liberalisation def:
- Trade barriers include:
a.
b.
i)
ii)
iii)
iv)
v)
The free movement of products and services among different countries via the removal or decrease of trade barriers.
- Include:
a. tariffs
b. non-tariff barriers:
i) restrictions on quantity
ii) quotas
iii) subsidies
iv) restricting the amount of foreign currency
v) licensing regulations
Pros of trade liberalisation:
- Existing literature
- The proportion of
- Application of theory of
- Protectionism considered
- Existing literature supports the notion of international trade as being largely beneficial at a global level
- The proportion of global (GDP) attributed to the trade in goods (imports and exports) increased from “only 18 per cent in 1960 to more than 50 per cent by 2008”
- Application of theory of Comparative Advantage ensures the growth of the national economy, improved employment, productivity, and foreign investment
- Protectionism is considered “inefficient since it reduces competition and increases the monopoly power”
Cons of trade liberalisation:
- Does not
- Legacy of:
- Left many
- Reliance on
- Disparity in
- Does not correctly take into account “the importance of historical power relations in the creation of comparative advantage”
- Legacy of Colonialism:
- Left many developing countries with skewed economic structures that are overly dependent on a few commodities or sectors (mostly low-value)
-Reliance on imported goods -> risks to domestic self-reliance & security - Disparity in capacity between African producers & foreign producers:
Liberalising African Markets without addressing this -> local producers outcompeted by foreign competitors -> decline in domestic production & rise in unemployment
Principles of WTO:
- Non-discrimination
- reciprocity
- transparency
- multilateralism
Why does the WTO’s functions & principles matter?
- Influences
- Guide
- Dispute settlement
- Influences Africa’s participation in the global economy and its efforts to address development challenges
- Guide trade relations among member countries, affecting Africa’s trade policies and economic strategies
- WTO’s dispute settlement system provides a mechanism for resolving trade disputes, ensuring predictability and stability -> attract foreign investment & helps integration into global market
Issues with the WTO:
3.
4.
- Addition of Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement
- Consensus Basis of WTO
- Skewed Participation in WTO day-to-day functioning
- Agreement on Agriculture
Issues with WTO: 1. TRIPS
- What does it do?
- WTO (hopeful) amendments
- Issue with amendments
- Effect on Africa
- allows pharmaceutical industries “exclusive patent rights on drug innovations for a period of 20 years”
- Options to use compulsory licensing and parallel importing
- Not always effective due to pharmaceutical companies’ power over their government decisions
- pharmaceutical firms that control the patents of medications dictate the pricing of crucial treatments -> make it unaffordable for many African countries
Issues with the WTO: 2. Consensus Basis of WTO
2.
Challenges in reaching a consensus and effectively dealing with trade negotiations
-> breakdown of of multilateral negotiations -> particularly marginalizes Africa (dilution of African influence + exclusion from NB agreements)
-Stalemate/veto power: abandonment or delay in addressing NB African issues
Issues with the WTO: 3. Skewed Participation in WTO day-to-day functioning
- Results
- Example
- More developed countries actively participating, while developed countries have limited representation
- There are over 1200 events held in Geneva each year. However, developing countries have different resources than developed nations and, therefore, have limited representation in these meetings
Issues with the WTO: 4. Agreement on Agriculture
- Agri NB to _____________-
- Agreement resulted in _______ + whilst there was _________________, the industries _____________+ US & EU ____________________, violating _________ -> Foreign competitors _______________ -> Diminish ____________ + Many African countries ________________ -> vulnerable to _______________ -> threat to _______________
- Agri important to the economies of developing nations, w. many African countries relying heavily on exporting agri goods
- Agreement resulted in trade liberalisation of Agri + whilst there was special and deferential treatment for African countries, the industries where high tariffs remained were not in agriculture + US & EU provide farmers with export subsidies & domestic assistance, violating WTO rules -> Foreign competitors outcompeting domestic producers -> Diminish revenue of agri + Many African countries depend on imported foods -> vulnerable to food price changes -> threat to national security
