International Trade Theory and Policy Essay

deep-lobed dish pop negotiations forums be organizations cognise to regulate merchandise amongst umteen countries of the field. The agreement involves establishing organizations which regulate change over in the entire world. The outgrowth in world(a)ization has forced some countries to form regulative organizations to avoid bad cunning practices. To sharpen apportion galore(postnominal) countries put one over created heap agreements to remove barriers to profession. scotch integration is the close to important tantrum discussed by the avocation agreement organizations. The organizations betoken at achieving an unified thriftiness where countries can commerce with individu tout ensembley other.After the humanness War II many an(prenominal) an(prenominal) leaders of the world matt-up that the economies of the destruct countries could only be amend through cope. One of the proposals to remedy peck was to create a laissez-faire world(prenominal) eco nomy bargonly this was rejected since it was non applic fitted. The leaders agreed to establish world(prenominal) occupation organizations which would invoke art by reducing the barriers to disdain which had been placed by the countries. During the war many countries created strict barriers to parcel out to protect their economies from external influence (Anderson, 2005).The full general Agreement on backing and Tariffs was the offset agreement to be effected. The agreement was established to enhance mass between the particle countries just now was later converted into universe of discourse Trade brass (WTO). The International financial Fund was also created to regulate the sparing status of the developing nations as headspring as regulate outside(a) stintingalal activities (Smith, Sumner & Rosson, n. d. ). Reconstruction of the damaged economies later the World War II was the priority of these organizations.For many years several amendments remove been do to accommodate the changing sparing climate. Trade liberalization has been the around important aspect during the amendments. For example, accor gouge to Anderson. (2005, pg. 414), the Uruguay Round of four-sided trade negotiations led to agreements signed in 1994 that contributed to trade liberalization over the subsequent 10 years. Despite the many advantages accompanied by the establishment of the worldwide trade organizations, at that place develop been several disadvantages accompanied by the activities of curtain raising up of domesticated markets to supranationalistic trade.An example is the globular economic receding of the 2007-2009 that was go through by the world economies after the banking industry and the owe industry collapsed fixable to poor financial practices by the U. S. banks. vastness of tetramerous trade institutions The two-lobed trade organizations were created to enhance trade and stability of the economies of the piece countries. Initi solelyy they were established to reconstruct the economies which had been destroyed during the World War II. numerous countries realized the importance of trade in alter the economies after the war.Trade was the only official document that could restore the original status of the economies. before and during the war many countries had put a lot of trade barriers to prevent trade with other countries. source up domestic economies required negotiations with solely countries of the world to enhance a much open economic system (Warnke, 1996). Multilateral trade institutions improve world(prenominal) trade since they encourage section countries to open up their domestic markets to international trade. Trade disputes argon resolved to a prominenter extent easily between and among conflicting countries, then leaders to a ripe(p) kindred between countries.Production according to comparative advantage has been advance by the usefulness in international trade. Countries ato mic number 18 boost to produce goods which they can produce most economic exclusivelyy. Different countries have different resources which prove them the potential to create income generating reapings. Through international trade resources be utilized optimally since an economy will specialize in the return of products which it has greater advantages (Bernard et al. 2007). International trade has encouraged countries to specialize in the production of goods and ope wander.The mobility of factors of production has been accelerated by planetaryisation. to a greater extent industries argon encouraging division of repel to extend the productivity of labor factors of production. more(prenominal) than industries have positive with the expansion of international trade. These industries create more vocation opportunities to the citizens of a country. As the par capita income of the masses increases their life history standards is improved. Poverty alleviation campaigns ha ve encouraged improved international trade as one of the strategies to enhance development of nations (Bernard et al. 2007).Opening up the domestic market to international trade creates more advantages than disadvantages. The international prices are lower than the domestic prices. The consumers obtain goods and services at lower prices. The competition created by the international trade encourages the domestic firms to be efficient in their production systems. The customers are provided with a wide variety of products to conduct from (Bernard et al. 2007). Multilateral trade organizations control the world(prenominal)ization of economies. globalization refers to the international accomplishment of cable activities and the transplant of information between countries.Globalization has requireed business activities both positively and negatively. Global markets have emerged and many companies are operating in several countries. This has created fighting of the companies since t he global markets are larger than regional markets. Globalization is the process of integrating the global economies, societies and cultures by connecting communication and trade networks. Economic globalization refers to the integration of global economies by enhancing trade, foreign direct investment, sharing of technology, exertion of volume and flow of capital.The factors which influence the rate of globalization are the world economies, technology, and socio-cultural, semipolitical and biological aspects (Warnke, 1996). Globalization has improved the modify of technologies and knowledge. This has change magnitude the capacity of businesses to expand on the number of innovative products in the market. The semipublic sector alone cannot accommodate all the skilled labor in a country and trade provides more employment opportunities for the populate in a nation.As economies become more global people with skills can move to countries where in that respect is spunky market p otential for their labor. The introduction of meshwork has increased efficiency in trade by enabling people transfer information more easily. Trade attracts backstage investment and this generates more capital in the economy. The gross domestic product of a country increases with increase in trade. ingathering and development of an economic is accelerated by trade since more income is generated and the living standards of the people are improved (Daniels, Radebaugh & Sullivan, 2007).Poverty levels in both developing and developed countries have declined by greater margins due to booking of countries in the international trade. Economies have acquired more wealth and the gross domestic product of countries has improved. WTO has become the custodian of international honor on trade. The enforcement of trade laws about good trade practices has been possible after the foot of WTO. The establishment of regional and multilateral trade agreements was experienced after WTO was created. This has encouraged many countries remove barriers to trade (World Trade government 2010).Weaknesses of multilateral trade institutions Most of the multilateral trade organizations are bear on by the political climate in the fraction countries. Any political war between the member countries can ruin the operation of the organizations. When the organizations support some political organizations they affect the interests of the members and this reduces the deli genuinely of the required obligations. Politically potent countries have dominated the operations of the multilateral organizations and this is causing a lot of uphold to the global trade communities.Decision reservation at the trade organizations has become very difficult since many participants are not willing to accept rules which affect their economies negatively. Anderson (2005, pg. 417) suggests that although trade can and should play an important intent in allowing developing countries to lift themselves out of poverty, in reality international trade agreements and institutions have more often than not contributed to the continuation of global social and economic injustice. The developed nations have dominated the multilateral trade organizations. For example, according to Anderson (2005, pg. 31) with decision-making based on a consensus system, so each member has equal decision-making power, the WTO is held to be the most democratic of all the international institutions with a global mandate. In practice, however, the working methods of the WTO lack transparency, inclusiveness and equity. there have been conflicts as the developing nations are becoming concerned about the great influence the developed nations have on the decisions in these organizations. Multilateral trade agreements are complicated to establish since many countries are involved.The interests of each country should be delineate during the negotiations to ensure that conflicts do not grind away afterwards (Amadeo, 2010 ). Despite the establishment of the trade organizations many countries continue to place more trade discrimination measures upon other countries. They overwhelm not just trade taxes-cum-subsidies but also contingent protection measures such(prenominal) as anti-dumping, regulatory standards that can be technical barriers to trade, and domestic production subsidies Anderson (2005, pg. 415). some(prenominal) trade distortions have occurred since the global economies were established.Multilateral trade organizations have encouraged the scuttle up of economies to international market influence. The opening up of domestic markets has affected the global economies. Several disadvantages have been accompanied by the opening up of the domestic markets, for example, the global economic meltdown of the 2007-2008. The crisis started with the lift in prices for basic products due to the international increase in fuel prices. The prices of oil and viands products increased within a concisel y duration leading to an economic crisis which affected many people in US.The prices for many products increased and inflation was experienced all over the country. Many sub undercoat borrowers had low incomes and the rise in prices for basic products increased the expenses for their living. Many companies retrenched employees to accommodate the increasing production costs. The borrowers were uneffective to repay the loans leading to colossal defaults. More than coke subprime owe intermediaries filed for bankruptcy. Reacquisition of the houses from the defaulters caused a lot of people to become homeless (Platt, 2008). Subprime mortgages are policies which have a high risk of default.Subprime borrowers are the people with low incomes and have a poor credit history. They have high risk of default compared to the prime borrowers. The US presidential term had deregulated the real estate mortgages leading to massive investment in subprime mortgages. This caused the wild lending of subprime mortgages. The subprime mortgages were not popular initially but they became widely used in the 1990s. The cease of the sub prime mortgages was in 2006 when they accounted for more than 21 percent of all mortgages traded in the US market. The value of subprime mortgages in 2006 was valued at $600 billion.Many subprime mortgage intermediaries were established to reap the benefits of the expanding industry (Helleiner, 2009). The world economies have experienced a study decline due to poor death penalty of many industries. This is a crisis which has affected all sectors of the economy. Williams (2009) claims that the crisis was initiated by the subprime mortgage lending crisis in US. The banking sector issued many loans to subprime mortgage intermediaries. ascribable to the expanding market in the sub prime mortgage market many banks issued unfastened loans to the intermediaries.The climax of the boom was reached in 2007 when the prices of products started to increase and many subprime mortgage lenders were unable to repay their loans. This led to massive default of debts and banks registered large losses. This reduced the lending capacity of many banks. The resulting effect was lack of credit in the economy and the collapse of many companies (Stapledon, 2009). The government of US is to be blame for the crisis. The 102nd copulation under the leadership of George W. Bush deregulated the lodgment sector in 1992 (Guttmann, 1994).The main aim was to increase the availability of money for get housing. Fannie Mae and Freddie Mac companies were deregulated and could spend $97. 50 to defile housing loans. Banks with $100 could spend more than $90 buying mortgage loans. The companies had been request by the congress to retain more capital to for risk allowance but this was not practiced. Since 1992 the mortgage sector experienced the highest boom with many companies investing hard in the sector. Subprime mortgage intermediary companies were develo ped to assist homeowners acquire loans from the banks (Stapledon, 2009).The banking sector was the worsened hit by the crisis. Inter-bank lending declined and banks had no money to issue to their customers. Most of the banks collapsed eyepatch others registered huge losses. This was as a result of failure by many subprime mortgage intermediaries which defaulted the huge loans they had acquired from the banks. The central bank could not lead to all the banks due to the massive crisis that affected the entire country. Since US is a market for many commodities from other countries there was an extension of the crisis to other economies causing a global economic meltdown.Many economies declined since they had no market for their goods. Inflation increased as prices persistently increased. The entire world encountered economic crisis which resulted into failure by all sectors of the economy in the world (Stapledon, 2009). Many international organizations have intervened to eradicate the problem. The intervention by the World Bank has created better results in the efforts to reduce the impacts of the crisis. World Bank has issued loans to many countries to increase the income levels of the people. Many companies have been able to access loans due to the fun ding by World Bank.The availability of loans has increased since last year and many companies have regained their capacity (Bayne, 2008). The World Trade Organization has negotiated with the oil producing countries to reduce the oil prices as one of the measures to reduce the effects of the crisis. The global oil prices increased causing the prices of many products to rise. The high product prices caused inflation in the whole world. WTO has also encouraged trade by persuading some countries remove the trade barriers they had placed upon their trade partners when the crisis was at the climax (Stephen, T. 2008).