• Friday, December 08, 2023
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The global trade (1)


The economies of different nations of the world are categorised as either a “planned economy” or “market economy.” Whether planned or market economy, these countries could further be characterised, with respect to their contacts with the outside world as ‘closed’ or ‘open’ economies. The fact remains as it were, that by the international diffusion of information and movement of capital; no economy is entirely closed, but the various possible forms of contacts with the outside are restricted in several ways.

In the same vein, no economy, even the most advanced, is entirely open (for transactions with the rest of the world) in all ways to all comers. In this light, therefore, trade in goods and services for most economies may be viewed as partially open for some of these forms of contact. On this premise, various nations of the world utilise diplomatic channels to make contacts through signing of bilateral and multilateral trade relations and agreements, for a common purpose, to improve their respective economies, although this has not been too favourable so far, to most of the developing countries of the world, based on conditionality relating to “trade liberalisation.”

The global dimension of the socio-politico or economic importance of the exchange of capital, goods and services across international borders has been on the increase in the recent times. This singular observation is not unconnected with the continuance of globalisation.

In the present era of information technology, the ‘global village’ gets more and more improved in terms of efficiency in all forms of transactions. There is therefore hardly any nation that is limited to the goods and services produced within their own borders without international trade presently. The fact remains that, every economy wants to relatively improve and grow in a progressive manner, especially with the very readily available influence of advanced transportation (both passengers and cargo logistics by air, land and sea), industrialisation, multinational corporations and outsourcing on the trans-border trade system. The fact equally remains that the global trade per se, in principle, is not different from domestic trade as the motivation and behaviour of the parties involved in a trade do not change fundamentally, regardless of whether it is international or domestic.

The major difference typically lies on the fact that the international transactions are more costly than domestic trade. This is based on the additional costs the border imposes; they include tariffs, freight, time costs due to border delays and costs associated with country differences in the legal system, language and culture. The major attraction of trade across borders (on the other hand) when compared with domestic trade is the competitive and the comparative advantages of such goods; with respect to its abundant endowment and the issue of economies of scale (i.e. cheap labour) in countries of origin and destinations for such labour-intensive imports. International trade is mostly restricted or preferred on goods and services.

These identified major differences and attractions on trade across borders culminated into international trade partnerships and diplomatic ties/relations and trade agreements, to improve on the best practices of running trans-border transactions that could be mutually beneficial to all the parties involved. The establishments of various trade organs, institutions and treaties for such purpose came to bare as a way of bilateral and multilateral relationships, the likes of General Agreement on Tariffs and Trade (GATT, established in 1947) and the World Trade Organisation (WTO) were put in place.

GATT was a treaty among nations that promoted trade among members; because it lacked enforcement power, the WTO, based in Geneva replaced it in 1995. The WTO is the only international organisation that provides forum for trade related negotiations among 159 members, globally. The goal for establishing it is to help producers of goods and services, exporters, and importers conduct their business. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.

Other functions they perform include, helping countries develop economically by stimulating employment, cutting the cost of doing international business and they also encourage good governance for peace and stability to thrive in the business environment with further support on health, among other functions. It serves as dispute mediators to reduce trade tensions and is empowered with the ability to enforce rulings. Countries in violation of WTO rules are expected to change policies or else face sanctions. It is observed however on this premise that, the Chinese government (at the wake of their resolution in 1978, on economic reforms and opening-up policy) found it imperative to join as a member nation).

The mutual benefits that are gained, through signing of bilateral or multilateral trade agreements, by member countries, are the aspect of the global trade that the world’s only existing trade-rules umpire (WTO) should particularly and seriously look into always, to remain a fair and impartial arbiter; if really trade liberalisation in its true literal meaning, is to improve economies and help parties concerned develop.

Trade liberalisation, for poor developing countries should not be viewed as a source of economic woes and a much dreaded counter-productive venture for the less developed countries. The WTO for this reason ought to sincerely live up to its avowed promise to duties and functions by “giving the weak a stronger voice.” On this note, WTO is now expected to complete negotiations on the Doha Development Round, which was launched since 2001, with an explicit focus on addressing the needs of developing countries. 


Nwachukwu writes from Onitsha,

Anambra State.

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