Easing World Restrictions

INTERNATIONAL MARKETING

Section 1-C

Easing World Restrictions

          As an offshoot of protectionism countries have bounded together to ease the trade flow in their respective regions.

          The WTO (World Trade Organization) based in Geneva, Switzerland on January 1, 1995 have succeeded the GATT (General Agreement on Tariffs and Trade), a trade body since 1948. It has 149 member countries with a Secretariat, headed by a Director General; to ensure trade flows smoothly and freely.

WTO Activities:

·         Administers WTO agreements.

·         Serves as forum for trade negotiations.

·         Handles trade disputes.

·         Monitors national trade policies.

·         Provides technical assistance and training for developing countries.

·         Cooperates with other international organizations.

A Multilateral Trading System is basically used by WTO it:

-          Consists of WTO agreements, negotiated, signed and ratified by a large majority of the world trading nations.

-          Forges legal ground rules for international commerce.

-          Guarantees trade rights.

-          Serves as contracts that bind governments to keep the trade policies within agreed limits to benefit everybody.

MFN (Most- Favored- Nation) - a WTO status that encapsulates the most basic principle of non-discrimination.  It states that all members shall give equal treatment to the products and services of all other WTO states/nations.

DSB (Dispute Settlement Body) – handles trade frictions and disputes. Once trade disputes are settled potential military and political conflicts are mitigated.

TPRB (Trade Policy Review Body) – a forum of all countries to review trade policies of member countries.

The WTO strives to reduce trade barriers. Over 75% of WTO members are developing or least developed countries.       

Trading Blocs

          These are organizations formed by some countries to facilitate trade among themselves and with other countries.

Types of Trading Blocs:

1.       Free Trade Area – members remove all trade barriers among themselves. But they can improve their own tariffs to non-member countries. Ex. European Free Trade Area

2.       Customs Union – members remove all trade barriers among themselves and they have the same set of external barriers consequently eliminating the need for customs inspection at international borders. Ex. Customs and Economic Union of Central Africa

3.       Common Market – member countries permit full freedom of factor flows (migration of labor or capital) among themselves, in addition to having a free trade area. Ex. European Union (EU); Central American Common Market (CACM).

4.       Full Economic Union – member countries unify all their economic policies including monetary, fiscal, welfare policies as well as policies toward trade and factor migration. The ultimate goal of EC (European Community) is to form one nation. But did not actually materialize the ECU (European Currency Unit) was replaced by the EURO.

IMF (International Monetary Fund)

          The IMF was formed to ensure stability of the international monetary and financial system.

General Activities of the IMF:

·         Promote international monetary cooperation.

·         Facilitate the expansion and balanced growth of international trade.

·         Promote exchange rate stability.

·         Assist in the establishment of the multilateral system of payments.

·         Make its resources (under adequate safeguards) available to member.

Main Functions of IMF:

1.       Surveillance – monitoring of economic and financial developments and policies in member countries at the global level. It also gives policy advice to members.

2.       Technical Assistance – IMF provides the governments and central banks of member countries with technical assistance and training in its area of experience.

3.       Lending – IMF lends to member countries with balance of payment problems.