Unrestrained Competition in Free Markets: Developing Countries and the Wto Reform

UNRESTRAINED COMPETITION IN FREE MARKETS: DEVELOPING COUNTRIES AND THE WTO REFORM

FE2036 Globalization

By

Nora Adel

TABLE OF CONTENTS

1. Abstract 3

2. Introduction 4

3. The Two Sides of the WTO 5

4. Protectionism 6

4. Unrestrained Competition: 7

5. The Main Debate 8

6. Primary function of the Global New Deal 11

7. Conclusion 12

8. References 13

9. Bibliography 17

1. Abstract

In this paper, the debate about whether free trade is beneficial to third world countries is explored. On one hand are the WTO advocates ranging from powerful WTO members like the United States to full-fledged commercial corporations supporting globalization and the benefits free trade has brought with it and on the other hand are the left-wing critics who consist of democrats, governments, cultural custodians, and environmentalists, etc. who argue about the activities and the competition the WTO has brought along with it .This paper argues for the reform of the WTO internally with the aid of richer countries to help Third World countries become more developed and for this to occur change within the WTO is vital.

2. Introduction

Globalization is the buzzword of the 21st century but globalization is not really new. Even though it is difficult to define globalization it is generally thought of as being the "free flow of capital and trade between nations unhindered by geographical barriers or government policies" (Albert 2000).The term globalization came into being in the 1980's but the concept is hundreds of years old. Events leading to globalization can be traced back as far as 1492 B.C.E. This was a time when people began to communicate and travel around the world. After World War II, in 1944, 44 nations came together at Bretton Woods, New Hampshire, to further strengthen globalization. Thus, the IMF (international monetary fund), the World Bank and GATT (General agreements on tariffs and trade) were then set up to promote globalization.

In 1995, the WTO was established replacing GATT (Britannica). The WTO is an international organization of 134 member countries. The world trading system came under pressure as Japan became more economically successful (Hill 2008). Also, the US developed a trade deficit as domestic producers lost out to foreign competitors this resulted in a rise in unemployment and the US congress called for protection against imports (Hill 2008). Many countries found ways to get round GATT regulations and, therefore, there was a call for greater protectionism (Hill 2008). Globalization is paving the way for powerful multi-national companies to come into developing countries, which is the least to say a new form of imperialism (Hargrave and Ashwin, 2004). Critics of the WTO say that although it is protectionist, it is only protecting multinational companies and not the developing or lesser developed countries. Of the largest hundred greatest economies in the world, 52 of them are not countries but MNC (multi-national corporations). If there are no restrictions then the multinational companies can force countries to compete against one another (Weisbrot 1999). If free trade means that US corn has a lower price than Mexican corn, US corn will be imported into Mexico and domestic Mexican corn producers may lose their livelihood and be forced into leaving their communities in search of work (Weisbrot 1999). Globalization does cause some problems to the developing countries since those countries primarily rely on the WTO to regulate its trading rules and so those countries heavily depend on world trading systems to lift them from poverty and help them reach a developed state in other words industrialize. Therefore, the WTO needs to be reformed to fully benefit itself and the developing countries. When the WTO isn't working for the good of the economy as a whole then developing countries will have to face the "unrestrained power of the developed countries" (Kufuor 2004). Globalization's debates almost always revolve around whether the liberalization of trade that is brought to effect by the WTO is better than protectionism which the WTO is not advocating (Oplas 2007).

3. The Two Sides of the WTO

Essentially, the WTO aims at establishing free trade between nations in order to benefit producers, suppliers, exporters, importers of goods and services in countries since trade is seen as beneficial to countries involved in trade. However, this doesn't mean that the WTO does not still impose barriers to trade; it does, but when needed. According to the WTO, it was set up to help both developing and developed countries and does not favor one over the other (WTO). WTO advocates strongly believe that the WTO is non-discriminatory, reciprocal, transparent, democratic, and fair (WTO). In fact, those advocates are pro-trade believing the developing countries will ultimately benefit. WTO advocates are those who support the policies imposed by WTO. The proponents of globalization claim that it has promoted the exchange of information, led to greater understanding of other cultures, raised living standards, increased purchasing power, and allowed greater democracy to triumph over communism (Imade 2003). WTO advocates support the very reason for which it was erected which is "fighting poverty through trade" (Department for International Development 2007).

There are many controversies surrounding the negotiations that occur between