Doha Trade Round Faces Risk of Collapse after 10years of Talks
1. Describe the role of the World Trade Organization
The World Trade Organization (WTO) is an international body founded in 1995 to promote international trade and economic development by reducing tariffs and other restrictions. It encourages trade to go smoothly and easily, and there are seven main activities listed in the WTO hompage:
– Negotiating the reduction/elimination of obstacles to trade
– Administering and monitoring the application of the WTO’s agreed rules for trade in goods/services and trade-related intellectual property rights
– Monitoring and reviewing the trade policies of our members, as well as ensuring transparency of regional and bilateral trade agreements
– Settling disputes among our members regarding the interpretation and application of the agreements
– Building capacity of developing country government officials in international trade matters
– Assisting the process of accession of some 30 countries who are not yet members of the organization
– Conducting economic research and collecting and disseminating trade data
– Explaining to and educating the puclic about the WTO
Furthermore, the WTO strives for non-discrimination amongst trading partners, lowers trade barriers, increases predictability and transparency, calls for competitiveness, gives beneficiaries for less developed countries, and also protects the environment.
2. Using diagrams to aid your explanation, analyze the impact of imposing a tariff on an imported good.
A tariff will have a comparative advantage to domestic producers by raising the world supply curve from Sw to Sw + tariff, increasing prices from Pw to P1. Because domestic producers they are able to produce their goods at a lower opportunity cost compared to the world, and a comparative disadvantage to foreign suppliers. However there is a dead weight loss which implies that there is a waste of economic resources.
3. Discuss why Brazil, China and India are reluctant to agree to the demands from the US and the EU to reduce the level of protection on their manufactured goods.
Brazil, China and India are reluctant to agree to the demands from the US and the EU, because by decreasing the level of protection, or tariffs, domestic suppliers will have a comparative advantage compared to world suppliers. This increased competition may eliminate sunrise industries, which could increase the productivity of production in Brazil, China, and India. Hence, the imports will increase. In addition, because Brazil, China, and India want their production to be diverse, they will want to avoid overdependence which could lead to volatility.