Politics: International Relations and the Global Economy

Politics: International Relations and the Global Economy

 

 

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Introduction

It has been argued that there are numerous benefits that accrue to countries that are members of multilateral economic institutions such as World Trade Organization (WTO). This can be attested to by the fact that joining these institutions is voluntary and any county may decide to exit at any time (Milner 2005). The rational conclusion of so many countries joining these multilateral economic institutions is that the net benefits supersede those available if such a country is not a member. The foundation of multilateral economic institutions can be traced back to the end of Second World War.  A number of multilateral economic institutions were formed for purposes of avoiding another Great Depression as well as to manage the economy of the world. Some of these institutions included: the World Bank (earlier referred to as the International Bank for Reconstruction and Development), the World Trade Organization (WTO) since 1995 (earlier referred to as the General Agreement on Tariffs and Trade (GATT)), and finally the International Monetary Fund (IMF). It has been argued that these institutions have played a very crucial role in mitigating the pressure mounted on developing nations by encouraging them to adopt policies that market efficient. The study however will be focusing only on the role of World Trade Organization (WTO) in mitigating the effects of an anarchic international system.

Discussion

As Hoekman, (2002, p.32) has argued, even though joining World Trade Organization (WTO) could have some negative impacts, they are less compared to those that a state would encounter   if it chooses to remain outside such multilateral economic institution. In an argument put forward by Gruber, (2000, p.54) the developing countries will be better joining multilateral institutions with open alternatives formed by powerful states than not joining them at all since outside of them they have no alternatives to chose from good or bad. It is worth noting that the recent witness rush to join these institutions is a clear indication that most countries have realized that it is a better alternative to a member than otherwise. There are a number of reasons that have been advanced in support of the foregoing which include: the ability of these institutions to constrain the Great Powers, reducing the cost of transaction and providing information, facilitating reciprocity, and finally, facilitating reforms local politics.

Ikenberry, (2001, p.46) contend that the World Trade Organization (WTO) may be able to put forth restrictions on the underlying great powers (anarchy) of the international system. This multilateral economic institution has established procedures, norms, as well as rules that deter powerful nations from pursuing their national interest by force at the expense of other states. The behavior of great nations is therefore harnessed.  Other states are assured that the Great Powers are not likely to take advantage of their weakness through the acceptance of these Great Powers to comply with the rules of this multilateral economic institution WTO notwithstanding the fact that they are the founders.

As rightly pointed out by Kuper, (2004, p.14) there is a big possibility of trade expansion and more profitable transactions under the WTO where the conditions  are certain and the rules to access the market are well outlined diminishing any possibilities of the Great Powers influencing the results. Such motivation is important for purposes of trade development in that the market powers who are members of the World Trade Organization (WTO) can make favorable bilateral negotiations with countries that have large market size. Some critics of multilateral economic institutions maintain that the World Trade Organization (WTO) has benefited the developed countries more than the developing countries. There are even some allegations by international institution scholars that the trade rounds presented by the World Trade Organization (WTO) have permitted the developed countries to exploit the developing nations through engaging them to enter into agreements that are unfair. According to Stiglitz, (2000, p.33) the previous rounds of trade negotiations instituted by General Agreement on Tariffs and Trade (GATT) now the World Trade Organization (WTO) were geared towards protection of the industrial states

Multilateralism provided by the World Trade Organization (WTO) enables the developing countries to have better trade outcome compared to the outcome of bilateral negotiations which would be the only alternative if they are not members of members of multilateral institution (Milner 2005). Under a multilateral arrangement, there is a high chance of protection, and transparency even though it may be inadequate it is better in mitigating the unequal influence as well as unequal power in the international community. Further, multilateralism may not only be able to enforce some constraints particularly on Great Powers but also enable developing countries to become conscious of their general grounds as well as be able to counter balance the states that are more developed and powerful. The World Trade Organization (WTO) may also boost the capacity of the developing countries to influence trade results through giving such countries more political voice.

As Keohane, (2004, p.51) point out, multilateral cooperation such as The World Trade Organization (WTO) reduces transaction cost as well as provide useful information for purposes of facilitating better cooperation at a multilateral level in an anarchic system. The World Trade Organization (WTO) for instance facilitates agreements through increasing the costs of altering transaction costs, violating the property rights of other nations, and also through providing the member states with reliable information. The WTO as a multilateral institution also mitigates the levels of uncertainty in an anarchic system by allowing decentralized enforcement as well as monitoring the behaviors of member states. The reciprocity strategies of the institution help it to achieve these goals.

The World Trade Organization (WTO) has also been very critical in providing crucial information obtained from it function of monitoring and reporting about states compliance to the commitments they have agreed upon among themselves (Grant and Keohane 2005). This effort by the World Trade Organization (WTO) gives a reassurance to the domestic public as well as other member states about their political leaders conduct, thus, ensuring that there is a big possibility of achieving cooperation and a sustainable cooperation for that matter. It is suggested that member states stand to gain a lot of information by joining multilateral economic institution such as the World Trade Organization (WTO). Consequently, the mutual gain accrued from being a member of this institution may be the only logical explanation for the increased voluntary participation of a big number of countries in multilateral forums organized by these institutions (Adsera and Boix 2002).

It has been argued that multilateral economic institutions such as World Trade Organization (WTO) play a vital role in facilitating reciprocity. In a study conducted by Bagwell and Staiger, (2002, p.22) the WTO has played a significant role in facilitating reciprocity strategies in an anarchic system among countries. It is worth noting that cooperation in anarchy is highly dependent on the level of reciprocity. Countries that are big actors in the world market may use this advantage to formulate trade policy aimed at manipulating their terms of trading for purposes of having an edge over their partners in business. The enhancement of reciprocity by the WTO presents a situation in which the Great Powers can be able to achieve cooperative results that are more efficient and at the same time protect the developing countries from being exploited by countries that are economically powerful. World Trade Organization (WTO) achieves this reciprocity through setting rules and monitoring them to ensure that they are followed to the letter. It further ensures that reciprocity is both feasible and credible.

Economically powerful countries such as Japan the United States as well as the European Union have used this international institution to reduce their trade barriers and for purposes of implementing reciprocity strategies. Nonetheless, there is little evidence indicating that reciprocity has been felt in the developing countries particularly in regard to reducing trade barriers. Most of the developing countries were not members of the World Trade Organization (WTO) until the Uruguay Round launch was launched. Most of the members by then were industrial states that were able to negotiate in a multilateral setting. These countries were able to negotiate among them in an effort to lower trade barriers.

In addition to facilitating reciprocity, the World Trade Organization (WTO) as an international institution has played an important role in encouraging reforms in domestic politics. It has been argued that the act of joining an international institution such as WTO and accepting to adhere to the norms, practices, as well as rules of such an institution can have positive consequences in the domestic politics of a given country (Milner 2005). Membership of a country to such institution may enable the domestic leaders of this country to change policies for the good of that country. Joining such institutions can be very critical in enabling the leaders to reject policies that are aimed at benefiting special interests and instead adopt those policies that enhance the general welfare of the country. By joining the World Trade Organization (WTO) many developing countries were able to liberalize their markets and most importantly, they were able to mitigate the effect of raising trade barriers and other trade restriction that accrue to those states that are not members of the World Trade Organization (WTO).

There are however a number of situations where World Trade Organization (WTO) as a multilateral economic institution has failed to mitigate the effects of an anarchic system. Some arguments have been advanced to the effect that the World Trade Organization (WTO) has had little or no impact at all (Grant and Keohane 2005). Others have argued that since this institution was formed by the powerful and rich countries, it has been used over the years by such countries to perpetuate their own selfish interests rather than the interest of all member countries. Some scholars agree that the existence of World Trade Organization (WTO) is just a formality crafted by the powerful and rich countries while in the real sense of the matter, they are the ones who set the rules of the game. Therefore it is very difficult for this institution to go against the interests of the very individuals who founded it. According to Stiglitz, (2002, p.43)the World Trade Organization (WTO) is an institution that even though members are not coerced to join, they do not have a better alternative than becoming a member of this institution. It is a kind of institution that a country is better off as a member not because of the benefits that accrue from that membership, but because of the difficulties that non members have to encounter in trade.

Conclusion

Multilateral economic institutions such as World Trade Organization (WTO) were formed at the end of Second World War for purposes of preventing another occurrence of a Great Economic Depression as well as to manage the economy of the world. Indeed there are a number of ways that this institution has tried to mitigate the effects of an anarchic international system without which, the current trading environment could not be in existence. The central role of the World Trade Organization (WTO) has been to promote trade liberalization by encouraging member countries to engage in negotiations for purposes of reducing trade barriers and also through providing useful information about trade policies in different member countries. Due to the numerous benefits that accrue from being a member of World Trade Organization (WTO), the membership of this organization has over the years increased tremendously. Way in which World Trade Organization (WTO) has reduced the effects of an anarchic international system includes: establishment of procedures, norms, as well as rules that deter powerful nations from pursuing their national interest by force at the expense of other states. The behavior of great nations is therefore harnessed.  Consequently, other states are assured that the Great Powers are not likely to take advantage of their weakness through the acceptance of these Great Powers to comply with the rules of this multilateral economic institution WTO notwithstanding the fact that they are the founders.

Secondly, the World Trade Organization (WTO) in an effort to reduced the effects of an anarchic international system has enabled the developing countries to have better trade outcome compared to the outcome of bilateral negotiations which would be the only alternative if they are not members of members of multilateral institution. Under a multilateral arrangement, there is a high chance of protection, and transparency even though it may be inadequate it is better in mitigating the unequal influence as well as unequal power in the international community. In addition, the World Trade Organization (WTO) has also been very critical in providing crucial information obtained from it function of monitoring and reporting about states compliance to the commitments they have agreed upon among themselves. This effort by the World Trade Organization (WTO) has given reassurance to the domestic public as well as other member states about their political leaders conduct, thus, ensuring that there is a big possibility of achieving cooperation and a sustainable cooperation for that matter. Finally, the WTO has played a significant role in facilitating reciprocity strategies in an anarchic system among countries as a means of mitigating the effects of an anarchic system. The enhancement of reciprocity by the WTO is design in a way that the Great Powers can be able to achieve cooperative results that are more efficient and at the same time protect the developing countries from being exploited by countries that are economically powerful.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Adsera, A., and Boix, C. (2002). Trade, Democracy and the Size of the Public Sector: The            Political Underpinnings of Openness. International Organization 56(2): 229-62.

Bagwell, K., and Staiger, R. (2002) The Economics of the World Trading System. Cambridge        MA: MIT Press.

Grant, R., and Keohane, R. (2005). Accountability and Abuses of Power in World Politics.          American Political Science Review. 99 (1): 26-44.

Gruber, L. (2000). Ruling the World: Power Politics and the Rise of Supranational Institutions.      Princeton, N.J.: Princeton University Press.

Hoekman, B. (2002). Economic Development and the WTO After Doha. World Bank Policy        Research Working Paper (2851).

Ikenberry, J. (2001). After Victory: Institutions, Strategic Restraint, and the Rebuilding of Order     after Major Wars. Princeton, NJ: Princeton University Press.

Keohane, R. (2004). After Hegemony: Cooperation and Discord in the World Political Economy. Princeton, N.J.: Princeton University Press.

Kuper, A. (2004). Democracy Beyond Borders: Justice and Representation in Global         Institutions. NY: Oxford University Press.

Milner, H. ( 2005). Why the Rush to Free Trade? Democracy and Trade Liberalization in the        Developing World, 1970-1999. International Organization. 59 (1): 107-143.

Stiglitz, J. (2002). Globalization and Its Discontents. NY NY: Norton.

 

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