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Impacts of Wto on Trading Countries

By:   •  Research Paper  •  1,357 Words  •  December 17, 2009  •  1,382 Views

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Essay title: Impacts of Wto on Trading Countries

Impacts of WTO on Trading Countries

International trading has had its delays and road blocks, which has created a number of problems for countries around the world. Countries, fighting with one another to get the better deal, create tariffs and taxes to maximize their profit. This fighting leads to bad relationships with competing countries, and the little producing countries get the short end of this stick. Regulations and organizations have been established to help everyone get the best deal, such as the World Trade Organization (WTO), but not everyone wants help, especially from an organization that seems to help only the big countries and those they want to trade with. This paper will be discussing international trading with emphasis on national sovereignty, the World Trade Organization, and how the WTO impacts trading countries.

To understand how the World Trade Organization impacts international trading and national sovereignty, we must know what they are and mean to countries. All countries must trade to sustain their people and to get the products they need. It is a known fact that certain countries have what other countries need/want; whether it is natural resources, labor or consumer products. Trading though needs to be regulated, because bigger countries can "bully" smaller less experienced countries. Countries are looking to get the most profit necessary, and with out regulations some countries could take what the need. National sovereignty is when a nation has complete rule over its country or the region in which it controls. When international trading comes into play, that nation's rule can change, or be changed, to better fit trade agreements, taxes/tariffs, and the sort. National sovereignty is usually bent, even if just a little, to abide to companies within their nation and other trade partners.

To discuss how the World Trade Organization impacts international trading and national sovereignty we must first explain what it is and why it was established in the first place. The World Trade Organization is designed to create the rules involved with trade. These trading rules include all countries, not just the US, and can therefore be a little tricky at times. "The WTO establishes a framework for trade policies, it does not define or specify outcomes" (Bagwell)

As we can see, the rules of trading are simply set as guidelines and cannot guarantee a certain outcome for each agreement between countries. There are five main rules that the WTO depends on to operate smoothly on a daily basis and they are as follows: nondiscrimination, reciprocity, enforceable commitments, transparency, and safety valves. (Paullier)

First, we will look at nondiscrimination. There are two main concepts to understand when looking at the nondiscrimination rule: Most Favored Nation (MFN) and National Treatment Principle (NTP). The MFN involves one country, usually a larger, more developed country, deciding that it wants to trade with another country, usually a little country, and give them certain benefits that other countries might not get because the larger country doesn't like them as well or had bad relationships with them. For example, if the Japan decided that it wanted to trade with Australia, and didn't want as much from China, it could make exporting and importing more beneficial to Australia by overlooking tariffs and taxes it might impose on China. This would negate the US. National Treatment Principle, which can best be explained in terms of goods being treated equally, regardless of the origin of the product. For instance, if Texas wanted to sell its beef to Idaho and so did Australia; Idaho wouldn't be able to impose a tax on the beef from Texas unless it imposed the same tax on the ones from Australia. This rule it supposed to keep trading fair between nations.

Second, reciprocity is an important part of negotiation where, ideally, each side makes mutual changes in trade policy that bring other changes into play, which affects the amount of imports and exports each country is allowed to handle (Bagwell). An example might be when China meets with India to negotiate terms for their rice industry; each country might have a few trade concessions in mind and work to create a balance between them.

Third, we will consider how "enforceable commitments are crucial in ensuring market access commitments are implemented and maintained" (Bagwell). They restrict tariffs from going up and down too much. If tariff changes happen that don't coincide with the WTO guidelines, the government usually makes it their duty to change the policies. Because the WTO is an intergovernmental agreement they can handle their own cases, unlike private organizations, which do not have the same legal footing.

Fourth, transparency is important for the WTO because it "requires

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