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Relevance of WTO, TPP & China’s Exchange Rate Policy

Relevance of WTO, TPP & China’s
Exchange Rate Policy
Issues in International Trade & Finance
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INTERNATIONAL TRADE & FINANCE
Abstract
The aim of this report is to discuss some of major issues in the subject of international trade
and finance that is highly relevant in the cu
ent times. In this regard, one of the topics relate
to the utility of WTO especially at a time when there is proliferation of bilateral trade
agreements and other trade treaties. The cu
ent contribution of WTO has been critically
analyzed and also a possible vision for the future has also been presented. Besides, another
elated issue is the utility of various regional trading agreements that have become
increasingly common. To explore more, TPP has been used as an apt example and critically
analyzed to highlight the underlying motives for the various parties to participate in the
agreement. Lastly, the relevance of Chinese cu
ency policy has been analyzed in the wake of
cu
ent fluctuations in the last decade so as to opine on the underlying utility for China and its
impact on the world.
INTERNATIONAL TRADE & FINANCE
Introduction
With the increasing push to globalization, the national boundaries are vast becoming
i
elevant as a global market place has developed which is based on flow of resources as well
as goods and services. In this regards, two aspects are of critical importance namely trade and
international finance. Various trade theories have emphasized how trade could contribute to
the development of countries as it leads to efficient usage of resources. Thus, the need for
free trade has been historically emphasized. In this regards, the role of World Trade
Organization would be critically analyzed so as to opine on the underlying utility of this
ody. Besides, a critical review of the mushrooming trade blocs would also be
iefly
discussed with reference to Trans Pacific Partnership or TPP. Also, in the domain of
international finance, one of the topics of interest for the cu
ent paper would be the fixed
exchange rate policy of China and its implications.
WTO – A failed entity?
WTO came into existence during the 1990’s with great expectations to ca
y on the good
work ca
ied out by GATT (General Agreement of Trade and Tariffs). One of the stated
objectives of the WTO was to boost international trade by lowering down the tariff and non-
tariff ba
iers. In this regard, while the WTO has many mechanisms atleast on paper to ensure
the same, the one principle that stands out is the concept of “Most Favored Nation” or MFN.
As per this concept, it is imperative that member states should treat all the other nations as
MFN and hence do not differentiate between the trade ba
iers applicable for various partners
(Meunier,2009). An extension of the MFN status to all the trading partners would ensure that
the trade ba
iers are minimized as the trade partners act in unison. In order to push its agenda
on free trade and development, discussions are held on an annual basis which paved way to
the ambitious Doha Talks in 2001. However, more than a decade has passed and the talks
INTERNATIONAL TRADE & FINANCE
have not led to any agreement as the interests of the developed and developing nations seem
at loggerheads. A direct impact of this failure of WTO to work out even a single agreement or
treaty amongst nations since inception is that the nations are taking steps to safeguard their
own economic interests. One of the measures in this regards is the execution of bilateral and
multilateral free trade agreement and other trade treaties so as to accord preferential access to
selected markets (Rousseau, 2013). The prevalence of regional trade agreements is captured
in the diagram shown below.
This clearly violates the MFN principle and hence is self-defeating for the WTO. In the wake
of the above developments particularly the deadlock between the developed and developing
world, it seems unlikely that any progress would be made in relation to the Doha agenda any
time soon. However, despite the failure of WTO to ink out any global trade treaty, it would
e inappropriate to conclude that it does not have any relevance or its principles are archaic.
INTERNATIONAL TRADE & FINANCE
The fact that powerful nations such as Russia and China have also joined WTO highlights the
significance of the organization as a forum for trade negotiations. Further, the core principle
or objective of WTO is free trade which is immensely relevant to all the nation states which
is why they are busy working out trade agreements and treaties on regional and bilateral
levels (Draper, 2015). Thus, the prime failure of the WTO is in the negotiations being held
which considering the global supply chain and virtually incompatible gains of the
participating nations, is not a failure. Ever, since the inception of WTO, there has been a ea
change in the global trade patter, nature and also size and scope. Further, there has been a
major shift in the power axis which has tilted towards the developing nations (Rousseau,
2013). Thus, unlike earlier times when the negotiation process was dominated by the
developed parties, consensus reaching has become infinitely...