Globalization: Economy and the World Trade Organization

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Discuss homework.

Min-Candy bar trading activity – to show that trading can make you more satisfied. Take a vote of satisfaction before and after trading.

The World Trade Organization is likely the largest force when it comes to the globalization of world economies. It’s stated purpose: “The World Trade Organization (WTO) deals with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible”

It is a highly controversial organization. Four of the most common complaints against WTO:

  1. Places economic considerations ahead of concerns for the environment, animal welfare, and even human rights.
  2. Erodes national sovereignty.
  3. Undemocratic
  4. Increases inequality – makes the rich richer and leaves the world’s poorest people even worse off than they would otherwise have been.

Issue #1:

WTO responds in Common Misunderstandings about the WTO: “What’s important in the WTO’s rules is that measures taken to protect the environment must not be unfair. For example, they must not discriminate. You cannot be lenient with your own producers and at the same time be strict with foreign goods and services.”

This seems fair, but it not reflective of the way dispute panels have ruled. Consider Tuna/Dolphin dispute. WTO characterized it this way:

“The U.S. Marine Mammal Protection Act sets dolphin protection standards for the domestic American fishing fleet and for countries whose fishing boats catch yellowfin tuna in that part of the Pacific Ocean [where schools of dolphin swim over schools of tuna]. If a country exporting tuna to the United States cannot prove to the U.S. authorities that it meets the dolphin protection standards set out in the U.S. law, the U.S. government must embargo all imports of fish from that country. In this case Mexico was the exporting country concerned. Its exports of yellowfin tuna to the U.S. were banned.”

However, the panel concluded:

“that the U.S. could not embargo imports of tuna products from Mexico simply because Mexican regulations on the way tuna was produced did not satisfy U.S. regulations. (But the U.S. could apply its regulations on the quality or content of the tuna imported.) This has become known as “product vs. “process” issue.

Another example: European union wanted to ban cosmetics that had been tested on animals, but was advised this would be a breach of WTO rules. Never implemented. Many more examples…

This means that goods produced in a way that violate human rights – for example, by using forced labor, or pushing indigenous people off their land – would also fail to pass the test of being applied to a product, rather than a process. This drastically curtails the way a nation can protect its values.

This leads to a weird situation where a country could ban a product that is harmful to wildlife, but not a product that harms wildlife in its making.

Issue #2

So can’t a nation simply leave? Once a government joins, it is under a great deal of pressure to remain. Export industries based on free trade develop and employ a substantial number of people, and would likely collapse if a nation withdraws from the WTO. Going one’s own way becomes almost unthinkable.

But this is a little like the social contract of Rousseau. You give up a little sovereignty to join in the management of the whole community. Which brings us to…

Issue #3

WTO: “Decisions in the WTO are generally by consensus. In principle that is even more democratic than majority rule because everyone has to agree.”

Very strange view of democracy – rule by veto. One single member can prevent overwhelming majority from making changes.

In practice, agenda is set by informal meetings of the super powers. Many poor countries can’t even afford to maintain offices in the extremely expensive Geneva headquarters.

Also, no formal way to recognize population differences. One billion people in India get the same one vote as 275,000 people in Iceland.

Issue #4

Hard to say…The gap between the average income of the top 1/5 richest and bottom 1/5 poorest has definitely increased. This also leads to lower self esteem.

However, overall poverty has fallen. Life expectancy has increased across the board. Under-nourishment has decreased.

Discuss Foxconn and Apple relationship.

Watch clips from Mardi Gras: Made in China

Homework: In journal: to what extent, if any, are we obligated to help people who live in other countries?

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