The Faults of Rich Countries in the WTO and RTA's

Today in lecture we discussed the lessons we can take away from trade. More specifically, we mentioned the faults of rich nations within general trade agreements, foreign aid, and regional trade agreements. The Guardian published an article on January 12, 2013 that addresses these issues in further depth. The arguments from this article are useful in furthering our understanding of problems within WTO trade agreements.

As we have determined early on in this course, trade liberalization is based on providing the optimal result for both nations negotiating. In lecture, we mentioned how Collier takes issue with the claim that trade is bad for developing countries. Although, we examined the counter argument that often times the richer nations impede the goals of developing countries through ties to aid or trade policies. This notion is included in the article from The Guardian, 

"The developed countries do not want to have these discussions," Flassbeck says. But without confronting issues such as these, which are key to emerging economies, the WTO may risk becoming irrelevant. "If they [developing countries] are not treated as equal partners, if their concerns are not listened to, why should they say 'we're willing to open our markets more'?"

This discussion relate to the negotiations taking place between the developed and developing nations in the WTO. Evidently, the impact of the WTO in providing the optimal trade policies for development is minimal, at least in these discussions. If the WTO fails to bring together the ideals of both sides, trade will ultimately not be beneficial for the developing countries that are members of the WTO.

The article goes on to discuss the possible reasonings behind why outsourcing has "probably passed its peak." The author includes the ideas of Simon Evenett, a professor at the St Gallen University. The articles details his argument, "He cites issues with intellectual property, product quality and the treatment of staff in far-away factories as complications that make the process less of a boon for the bottom line than it once appeared." Similarly, these ideas reaffirm what we discussed to be the faults of rich countries in lecture. More specifically, this issue of labor mobility and its effect for developing nations. 

In our readings, Collier states that his problem with RTA's is they they do not encourage diversification or outside trade. This principle is further explained in the article. The author concludes that RTA's do not allow the weaker nations to band together, as they can in WTO negotiations, which enables the richer countries to use their bargaining power to produce a better trade policy for them. Moreover, RTA’s are a mechanism for richer countries to in a sense, exploit individual developing economies. Also, the author mentions that RTA’s are accountable for making contradictory rules that can result in say 10 different versions of the same product being produced within the market. Furthermore, this represents a failure in export diversification. As we determined in lecture, export diversification is essential for poor countries because it provides them a sort of insurance in the global Markey. This argument supports that of Collier, in regards to the faults of RTA’s and the resulting consequences for developing countries.

Here is the link to the article:
http://www.guardian.co.uk/world/2013/jan/13/world-trade-organisation-new-director-general

Here are follow up links to other articles discussing these issues:
http://www.wto.org/english/news_e/pres12_e/pr676_e.htm

http://borgenproject.org/wto-failures/

http://www.wto.org/english/tratop_e/devel_e/a4t_e/aid4trade_e.htm