WTO:
Globalisation and International Institutions
Introduction
One of the major objectives of the WTO is to create functions of trade between the nations free and smooth without having any conflicts (Harrison, 2007). On the other hand, the goal of the WTO is to focus on the regional and bilateral agreements, which will help to create a dynamic and vulnerable framework to maintain the Trading facilitation agreement more simple and trouble-free.
The study will give an in-depth analysis of WTO agreement negotiations with China after a long 15 year gap. The study will also highlight globalisation and its impact on CSR activities (Yearwood, 2012).
With the change in the Asian economy, which is mostly dominated by China, is on the verge of becoming one of the superpowers in the coming years.
1. Critically analysing the reason for China joining the WTO and issues that may arise in future
China is now one of the members of the prestigious organisation WTO. It took China 15 years to agree on the negotiations with WTO.
Since 1970, the economy of China has been managed by a communist government, whose major agenda is to keep the economy close to other nations (GU, 2012). As a matter of fact, China opened their economy in early 1980 by signing the Trade agreements with GATT.
China wanted to be one of the founders of the WTO in order to achieve the power to make a legal framework between the nations.
However, as noted by Herz and Wagner (2011), the attempt was failed because of the most of the founder nations like US, Europe and Japan asked China to reforms its trade policies and tariff changes and bring open market operations polices which was of course rejected by latter.
One of the major reasons that China joined WTO is that China is now looking to explore its wings in other nations as the products and services of China are too much advanced, which will help them outperform its rival companies worldwide (Horlick, 2001).
Joining the WTO has played a very crucial role in developing the Chinese economy. This will improve the relationship of China with other developed nations like US, UK and European nations. Apart from that, China’s membership with WTO would develop the Chinese market via international trade and investment, and the global economy would open up for Chinese export.
The trade agreement with WTO will increase the GDP rate of China up to 15.5% annually. Besides that, China’s size of the economy would be more than USD1.4 trillion to USD 5.02 trillion.
This will help the Chinese economies to boost its world rankings to the six largest economies (Charterhouse.org.uk,2014).
As per the WTO statistics, china balance of trade is given below:
Trade flows 2000 2010 (%) share
Export from US to China 20.1% 5.6%
Import from US to China 9.06% 20.03%
Export from EU to China 1.03% 3.4%
Import from EU to China 3.01% 7.01%
Export from Japan to China 7.01% 15.03%
Import from Japan to China 15% 23.02%
At the time of Trade Agreement with china Mr. Pierre-Louis Girard of Switzerland was chairperson. The negotiations was concluded and agreed to forward more than 950 pages of legal agreements acceptance (Epublications.bond.edu.au, 2014). This acceptance is conducted in the light of more than 142 members of government of WTO.
Some of the major negotiations commitments during the time signing the agreement treaty are as given below:
• Apart from that, the other major factor which influenced the chosen to join WTO is that WTO is now considered third major pillar of after UN and IMF who maintain huge amounts of funds to encourage the world to remain one and provide financial security to the members (Fpc.state.gov, 2014). China will treat equally to the entire member of the WTO. Entire members of the WTO should not be biased towards another nations or take participate any kind of treatment in respect to china or any other nations (Epublications.bond.edu.au, 2014).
• China will no longer be using dual pricing practices with other nations export units.
• China must make sure that, domestics market or an industry is not harmed by the entry of foreign investors or service providers (Ecb.europa.eu, 2014).
• China will not be entraining any kind of export subsidies on the agricultural products.
Years (2001-2010) China GDP (USD billion)
2001 550
2002 1050
2003 1300
2004 1500
2005 1800
2006 2050
2007 2600
2008 3000
2009 3500
2010 4500
Graph 1: China GDP before the trade agreement with WTO
(Source: Wang, 2011, pp-450)
From the above, it has been found that, although the Chinese economy is growing by 7.03% power year but still the fluctuations in economy can be seen because of the low international trade presence (Roy, 2007).
After the 2011 negotiations, it growth was rate is more than 10.03% per year. With large amount of funding from the US and Europe for manufacturing unit in China which has encouraged the economy by double and the opportunity of job is remarkable.
Evaluation of rising issues in future
Pricing Practices for domestic market
One of the rising issues would be China domestic law and regulations will be violated because of the new framework in trade and bilateral agreements. China has to modify its existing norms as per the WTO complementary reforms (Reynolds, 2009). This has cost the china to exit the legal system which was still prevailing. This has cost the chosen with more than ¥23.01 billion.
As opined by Powell (2012), another major issue will be ensuring the existing industries and trade within the domestics market will be in endangered.
Although the China is reforming its law in order to cater the domestics industries too but the major portion law will be changed which will discourage the local investors in near future.
China agriculture import fell down from 14.02% to 21.01% due to reforms made in the pricing strategy. Most of the edible products are hamper such as wheat, maize, rice and oil etc (Nber.org, 2014).
Lack of Judicial Review
With WTO agreement, china will be entering into the development and improvement of livelihood of the populations but the 20 years of reform and market opening will give an emergence of serious market disorders which includes , smugglings, corruption, bribing and tax evasions will be increased (Pieterse, 2004).
However, it will be threat to the existing economy because of there will be fundamental obstacles to create economy on values of reliability, honesty and truthfulness after the WTO agreement.
As the longer of queue of investor are waiting and using bribery mode to enter in the armlet of China which has hamper the economy by USD 40 billion of tax evasion (Larouer, 2006).
Lack of Transparency
Lastly, With FDI in economy will give a competitive edge to the country GDPO in terms its growth. As evidence to this story more than 57.03% of overall imports and exports have benefitted the Chinese economy by increasing the job opportunity for 20 million jobs (Horlick, 2001).
However, FDI has also created long term problems of corruption which because of the lack of transparency in the law and the confusion of percentage of investment made and joint venture that has made the lack of transparency in local regulations and international law practices (Fpc.state.gov, 2014).
As discussed by Herz and Wagner (2011), most of the emerging nations has benefitted due to free economy. One of them is China which is also known for its vast growth and standard quality of life. During the year 1978 to 2007, china GDP was poor which as 16,458 Yuan. Due to WTO agreement, China has been able to create enough capital by improving the living standard of the citizens (GU, 2012).
Business being strong in china which shows that rate of investment has gradually being improved by 88.6% in 2010 to 95.3% in 2012. Some of the major driving forces for Chinese trade which helped them free trade via WTO, IMF and GATT. Along with that, EU and NAFTA have abolished the single market economy (Powell, 2012).
Business Customers Development of republic China
Access to large market
Higher sales Penetration pricing
(low cost) Living standards of the entire nations is improved
Reducing the cost Diversify choices Fall in communalism and increase in freedom of speech and choice
Large access to the resources
(HRM, Funds, Minerals) Growth in quality Pool of talent , learning new things
Easy access to finance and tax savings Access to job opportunity Large opportunity
Foreign exchange rates will have burden
Another major challenge that will be faced by china would be burden of foreign exchange rates. The government of china will be able to hold the protective policies on the various agricultural products for longer term (Roy, 2007).
Although China will be getting bigger and greater market but lower prices will become one of the greater challenges for the country. With the flood of overseas products within the China and the tough competition to beat them with local farm products will be one of the greater challenge faced by china (Wto.org, 2014).
Moreover, China existing laws and regulations and policies still do not have change as per the foreign law. Most of the retail and farm or other business will be based on joint venture which restarting the foreign counter part to full enter in the market (Wang, 2011).
It took china to 15 years to enterer in to the agreement with the WTO because of the complete set of laws and regulation s are needed in order to meet the world standard of IPR (Intellectual property right) act 1974 (Fpc.state.gov, 2014).
Some of the major examples of IPR projections systems in China:Year IPR laws of China c is changing
1982 Patents and trade make laws was formed which was one of the most influential and modern system in china (Reynolds, 2009).
1984 Copyright law was formed by the communist which was considered one of the bold move
1986 The law related to protection of computer software programme was initiated
1990 The modifications of the copyright treaty were reformed in order to make clear the rights of foreign copyrights holders. The law was expanded and scope of the law has for the foreign nationals (Wto.org, 2014).
1997 The regulations on Intellectual property rights have been issued (Wang, 2011).
Disagreement over the market accessibility
One of the major reason that china does not want to be part of the WTO because of the unfair demand of US and European Union. Although Chinese products already has capture the large customer base in US but the access of Chinese products in US market in every state was not allowed and is illegal (Pieterse, 2004).
There has been a legal contradiction which shows that most of the china has agreed that import of the investment will conditioned as per the balance of trade and trade payments. With rise in Vat (Value added tax) by 17%, china has used uniformity in its tariff rates in both domestic and foreign businesses which have created problems for the local products manufacturer.
Apart from that, China has also been guaranteed the license to the US and European companies only with certain conditions (Powell, 2012). Besides that, China is also looking to expand the geographic opportunities for the foreign banks to conduct local currencies in the existing business (Wto.org, 2014).
China has also made sure the in order tom achieve the global super power now it need to resume its existence in every nations. In 2000, china was the 6th leading exporter of the merchandise products in worldwide (Herz and Wagner, 2011). With risen export product which has helped the China to reach the large audience which has create positive atmosphere in the other nations. China was 12 the larger expert in the commercial services on global scale.
Impact of WTO Entry in China
One of the most influential advantages for the WTO is member now will be able to cater large part of Asian population. China also is getting the preferential treatment specifically in the tariff and subsidies on the food products.
The entry will help China to reform their laws on agriculture worldwide (Nber.org, 2014). This will help the nations to get an international exposure of agro- products on cheaper rate. As about more than 32% of population of Chinese are in the agricultural sectors.
As one of the member of the bilateral trade companion, the conflicts with other country and states will give an edge to the company.
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