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Trading Blocs and World Trade Organisation Issues Report (Assessment)

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Updated: May 25th, 2020

Introduction

When considering a trade, international relations become one of the most critical aspects, because countries cannot strive alone without exchanging products. In an attempt to foster universal trade, countries come together to form blocs that help to liberalise the movement of business people across borders. However, the formation and operation of these blocs have experienced critical challenges that are pertinent to their prosperity. Besides the blocs, international trade is affected by the policies and operations of WTO that is mandated to oversee the running of this trade. This paper seeks to analyse some of the issues that revolve around trading blocs and WTO bearing in mind that they are major players when it comes to global trade.

Identification of Major Issues

While analysing a case study that sought to investigate the flexibility of trading blocs, it was established that these coalitions encounter severe shortcomings. In this context, flexibility is the ability of trading blocs to disband, reorganise, and update the existing policies with the aim of aligning them to the changing global dynamics (Melatos and Dunn 1). It was established that the trading blocs end up stipulating overlapping agreements so that various coalitions have made similar provisions to the member countries. This implies that, if a country needs to join several trading blocs, there are no additional privileges occasioned by the multi-membership.

Therefore, the countries commit themselves to agreements that liberalise trade with many countries without adding economic advantages. This can result in severe deterioration of the economies, because most countries will allow their counterparts to trade freely, but the similar policies are provided across various blocs that they have joined.

The second aspect that was identified was conjoined with the prevalence of free trade area is contrary to the unions. In this regard, it was noted that most countries preferred free-trade areas rather than the formation of customs unions. Indeed, FTA was found to have more benefits, since it did not only allow the free movement of goods and services but also allowed people to interact without restrictions among the member countries. On the other hand, the customs union provides an opportunity to make a common external tariff that is pertinent to each of the members.

In addition, it was noted that the disbandment of the binding agreements between the members of trading blocs is essentially rare. It is evident that there are very few trading blocs that review their trading policies and agreements in order to update them according to the prevailing economic conditions. This is essentially conservative and dangerous since the agreements should be updated to ensure that they do not become ineffective as far as the presence of financial, social, and political aspects are concerned.

After evaluating the case study concerning the future of WTO as a global regulatory and supportive authority of international trade, the most conscious theme that comes out is the change of trade patterns and powers. In this case, the authors reveal that the economic powers have shifted from the European to Asian countries (Abbott 10). Most of the developing countries have started trading with the Asiatic countries, such as China, Korea and India, in a more active manner than the western counterparts. This undertaking has led to profound changes in the trading patterns so that WTO faces critical challenges regarding global governance.

Potential Solution

In regard to the overlapping of policies and lack of review, the most pertinent solution is the establishment of a provision that triggers the trading blocs to review their agreements on a routine basis. This implies that the trading blocs should evaluate their agreements after a stipulated time in order to identify the changes that have taken place in the economic arena. Subsequently, the members are capable of reviewing their agreements as well as policies in order to align them with those global changes. In addition, the reviewing process should be conducted in a comparative manner, thus enabling the members to avoid duplicating policies that are offered by other blocs. This will ensure that the trading coalitions will develop innovative agreements that will attract more members and provide better opportunities for them.

Regarding the aspect of WTO, where it was established that the organisation is affected by the changing trading patterns and economic powers, it is essential for this organisation to restructure its policies in line with the dramatic changes. For example, China has become the second-largest world economy, thus acquired great global power when it comes to economic credence. In addition, the country has subscribed to the membership of WTO since it has not been one of the players. Consequently, the organisation should restructure its decision-making policies to accommodate the upcoming economic giants because their influence is very critical to the success of international trade.

Decision Criteria

When dealing with the issues of overlapping policies and conservative agreements, the decision concerning the time of reviewing the agreements should be based on routine and emergency plans. For the routine plan, the trading blocs should be structured to review their agreements and policies after every financial year. However, some issues might emerge urgently so that immediate review is needed before the end of the financial year. In that situation, the blocs can still evaluate their policies based on the emergency provision. In addition, the decisions concerning the change of these agreements should be based on comparative analysis.

In essence, the analysis should be compared to the provision of other trading blocs to avoid duplication. For the case of WTO, the decisions concerning the countries to include in the organisation should be based on economic and political capability. Understandably, the power to make critical decisions is affected extensively by its influence in the global arena. For example, decisions that are supported by China can be supported by countries such as Korea and India. On the other hand, if the USA supports a certain decision, there is a very high possibility that countries such as France and the UK will support it.

Conclusion

It is evident that international trade is one of the most vital aspects of the global economy since countries rely on each other for the exchange of goods. In that regard, the existence of blocs among nations and WTO is of great significance to the worldwide trade bearing in mind that they are critical facilitators. According to the above analysis, it is evident that the trading blocs are faced by critical challenges, including the overlapping of policies, more prevalence of FTA than unions, and existence of conservative agreements that are not changed. In essence, it has been established that they can be solved by the routine and emergency review of the agreement to align them to the economic changes.

Works Cited

Abbott, Roderick. “The Future of the Multilateral Trading System.” International Centre for Trade and Sustainable Development 2 (2012): 10-14. Print.

Melatos, Mark, and Stephanie Dunn. “Flexibility in Trade Bloc Design.” Department of Economic Journal 16 (2010): 1-24. Print.

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