World Trade Organization is a body of organization which is intergovernmental and it regulates international trade all over the world (Hamilton and Webster, 2018). World Trade Organization (WTO) is the only organization globally deals with business policies between nations. All these policies were created, agreed and signed by many countries in the world and the same those rules were accepted and supported from their parliaments (Jin, Ramkumar and Chou, 2018). All these rules and regulations aim to improve the trade operations and be as smooth as possible between all interrelated nations. WTO is managed and operated by the contribution from the countries which are the member of WTO.
This is the main body of the report and it will contain various practices which are performed in the international business and how are being modified by financial, political, social-cultural factors and economic theories according to the World Trade Organization (Kobayashi, Yaguchi & Maekawa, 2018). Also, this will include the various form and location activities involved in the international business. All this ideal will focus to achieve the analysis of how the World Trade Organization is involved in promoting global trade within its member’s countries.
Many activities are always performed in the international market according to the rules and regulation of the World Trade Organization. These practices involve trading with different products and services from different countries, this involves technology, capital and use of innovation knowledge across the boundaries of nations. This makes the business to globally automatic (Ahn, Bahmani-Oskooee and Efstathopoulos, 2018). All this means that several factors will much highly be affected by the practice. These factors include political factors, financial factors, social-cultural factors and finally, the economic factors from different countries. For international business practice to be carried out successful some barriers must be removed and this is the apart which World Trade Organization plays in the global market (Nikitin, 2018). This will ensure smooth and comfortable moved of products and services and capital across the boundaries. The other factor which has influenced the global business to grow to a higher level is an innovation of the technology sector. Technology aspect has through different sectors like communication, transport and data processing.
The practice involved in international business is trading mainly on the exports and imports of products and services within different countries (Barenberg and Dutke, 2018). This operation is important since it will improve the economy of the involved countries using the Balance of Payment concepts.
Figure 1: Industrial Policy and the World Trade Organization (2018).
Through the use of World Trade Organization all practices have been neutralized regardless the several factors which are discussed below.
International business cuts across several boundaries thus experiencing different political status. Traders from different regions need to feel comfortable and secure when traveling to other countries and perform successful business regardless of the difference in political status. World Trade Organization is important to govern the rule which will control all political status of different countries. The rules and regulation of the international business are set and safeguarding the foreigners trading (Bowie, 2018). If the countries exercised conducive political environment the international will be highly practiced since they will be no fear of the unseen. The countries will more feel more encouraged to import and exports the product which they do not have. Through the exchange of the products and services this way, it improves the standard living of the citizen in that country (Yildirim, 2018).
No business can be performed successfully without money. Capital is a very vital factor for every business in the world. World Trade Organization helped this business in many ways. Global financial institutions have been established with a common currency or having affordable exchange rates (Blundell-Wignall, Atkinson and Roulet, 2018). Example of those financial institutions is like World and International Momentary fund. These financial institutions are used to grant the loan to any trader or government regardless of the geographical area, only that focus on the customer to meet only the requirement. Common and fair means of exchanging currency is set around the world at a standards rate according to each country’s economy.
World Trade Organization has an economic impact on international business. This is because is the body which develops policy over the business. Most economists today they desire to have free trade through the development of international bodies like the World Trade Organization, International Monetary fund, and the World Bank. Another agreement which was developed after the second world and is important up to date is the General Agreement on Tariffs and Trade (GATT). These agreements improve the trade among nations which supported the development and implementation of those tariffs. These trade tariffs have a direct impact on the growth of small companies and business within the local countries and internationally (Zaman, 2018).
However, since the economic theory is progressively evolving substantially it pushes out also the World Trade Organization policies and General Agreement on Tariffs and Trade to grow also. As these bodies grow also the economic sector of the business and countries at the same rate (Shadikhodjaev, 2018). The exports and imports of crucial products and services improve the economy at greater percentage since this involves an exchange of currency and improve the ways most things are local and expand them to be done internationally.
According to the economist, Ricardo shows that is important to have a comparative advantage so more in the countries which have national production centers. This theory of comparative advantage holds that “even if a nation is able to produce all goods more cheaply than another nation, both nation can trade under conditions where each benefit”, therefore this theory increasing the efficiency of comparative advantages within different Nations. This theory further was developed to discuss the factors of production with the countries which are used to export and import commodities from other countries (Ezeani, 2018). This is important to the countries whose production is relatively less abundance since it will be allowed to import the commodities from the countries which have abundance production of the commodities. This factor of production is explained well using two countries (Portugal and England) using two product (Wine and Textile). Portugal as a country has relative have abundant labor while England has relatively abundant of capital, while the production of wine entails abundant labor and that of textile requires relatively heavy and large capital. Therefore, each country to have both benefits of the production of wine and textile they should engage themselves in free trade between those two countries, since this will improve the conditions of the economy between those two contrives. England and Portugal each would be able to export and import what is requiring for its country freely without more trade challenges in between (Gooberman, 2018). Considering such factor of comparative advantage, the economist concluded that this theory of comparative advantage it acts like cornerstone towards the international Trade economy growth.
World Trade Organization improves the world trade between nations through the use of “terms of trade” concept in governing the countries which need to obtain or release import and export from another respectively. Terms and condition may act as a challenge and also as the benefit in improving trade of another country on another side the welfare of the country is diminishing (Abel, 2018). Terms of trade are influenced by the government policies as the same as demand and supply of the commodities. World Trade Organization policies act as a protector towards the negative impact of these factors between different countries. For example, if one country like Japan demands aircraft from American and then they agree in returns the Japanese will produce and exports Television to the Americans, this will be agreed as a term of the trade. Them finally, Japanese starts producing aircraft meanwhile, this means that the favor of trade goes to the Japanese and therefore, the American will suffer in terms of the business. The Japanese will have a large supply of Television in America and the same time alternative supply of aircraft within the country (Han and Niosi, 2018). However, if these countries will continue with the same game they will worsen off the economy and terms of trade towards each other. In this instances now World Trade Organization comes in and resolve this issue concerning the terms of trade between the countries.
World Trade Organization and General Agreement on Tariffs and Trade they believe that reducing barriers of trade within multilateral basis it will enhance greater and more benefits in expanding the production basing to the comparative advantage. According to the General Agreement on Tariffs and Trade argues that some countries should have been given equal and the same opportunity regarding the barriers if they belong to the trade bloc (Ogbor and Eromafuru, 2018). The policies from these organizations allow the fair and free trade within those countries and create barriers to the countries which are nonmembers. Creating these blocks have improved the trade between countries thus improving the countries’ economies and the living standards of the citizen living in it. These blocs create free trade among the countries and purchase the products at the lower price for the members. Also, this encourages low import cost of the products thus becoming efficiency in creating global welfare within the trade. This creates healthy competition among the member of the bloc without facing any discrimination in the trade like those non-members.
The diversity of trade is enhanced thus incurring low traffic on collecting the imports from the partner’s countries, the imports commodities will be having duty free from the bloc partners. This improves the global welfare of the nations as the aim of the World Trade Organization towards the global business (Gökmen, 2019). These blocs minimize the consequences which might occur within the business in the future, therefore eliminating possible barriers between the trade partners.
Figure 2: International business environment, Hamilton, (2018)
Using all the above-discussed points, the World Trade Organization is able to promote and create a conducive environment of the global business. Stabilizing the political status of the different nations by creating common and favorable governing bodies will promote the trade. Nations will be free conducting exports and imports with a reasonable duty thus improving the national balance of trade between the countries. Creating favorable terms and condition in the World Bank and International Monetary Fund organization helps the countries to develop and implement economic developments within their countries. These developments will help to create long lasting growth towards the local and international trade (Payosova, Hufbauer and Schott, 2018).
World Trade Organization helps to set the favorable terms and condition which will favor all countries which are within the membership of the international business. This promotes international trade since no country will be able to discriminate the other because are commonly governing by the same terms. Also, the World Trade Organization helps to create trading regional bloc where these terms of trade will be implemented. These blocs help to improve and maintain quality services and product within the boundaries of operations (Priem, Wenzel and Koch, 2018).
Roles of World Trade Organization plays an important role in building up policies and regulations which will monitor the conducive environment of the international business. This helps to reduce barriers in financial assistance and creating privacy of the intellectual properties and rights (Nicodano and Regis, 2018). Also, Roles of World Trade Organization helps the members of the organization to enjoy smooth, free and greater trade regime. Roles of the World Trade Organization in Promoting International Business comes as a replacement of the General Agreement on Tariffs and Trade. The following are the main responsibility Roles of World Trade Organization which helps in promoting international business.
Figure 3: Journal of International Trade Law and Policy, (2018).
All these rules and regulations aim to improve the trade operations and be as smooth as possible between all interrelated nations. Word Trade Organizations is managed and operated by the contribution from the countries which are the member of Word Trade Organizations.
Conclusion
In summary, Word Trade Organizations has played a very important role in promoting and creating a conducive environment of the international trade. The common rules and regulations developed by the organization have helped to confer differences in political status, economic factors and financial consequences. This enhanced creation of good and viable terms and condition like terms of trade, creating trading blocs, gaining comparative advantages from a trading partner and finally getting financial support from the internal financial institution. All these are developed and enhanced by the effort of Word Trade Organizations to the international business. Word Trade Organizations have critical roles to play to ensure success in international business.
References
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