The Politics of Free Trade Agreements

Seeking to address the liberalization concerns of WTO’s less-developed members, the Doha Development Round was supposed to culminate in 2005 with a new trade agreement.


The envisioned deal concerned the reduction of trade barriers in commodities and services, as well as a new international framework for intellectual property rights. But soon after negotiations began, governments from developing countries — India, Brazil, China, and South Africa — and NGOs (non-governmental organization) began to worry that international negotiations were an obstacle to the governmental protection of developing sectors and regulation of financial services. After the failure of the Cancún proceedings in 2004, trade scholars worried that Doha might not be completed by its original deadline, but kept the hope that negotiations would continue. However, trade talks came to a deadlock in 2006, 2009, and 2011, mainly due to differences in agricultural policies. The US and the EU even backed out of previous agreements to reduce export support and agricultural subsidies, arguing that they did not want to weaken their bargaining positions too early in the Round.

Read also: ITC publishes business guide on new WTO trade facilitation agreement by ITC Communications

Attempts to reconcile disagreements among countries since then have been largely in vain. But in December 2013, new tailwinds seemed to push the Doha Round to more favorable shores. The Bali Ministerial Conference, which concluded with the signing of a package deal on trade customs collection and a post-Bali development agenda, was touted to have “achieved what many believed was impossible”: bringing together the 160 WTO members for the first time in twelve years. But even though the Bali package does not have much to do with free trade — it facilitates the collection, but not the reduction, of custom duties — the agreement still wasn’t signed by all members in July 2014. This time, India vetoed the ratification to gain more bargaining power for Prime Minister Modi’s program of domestic food subsidies. Reuters reported that “trade diplomats in Geneva have said they are ‘flabbergasted,’ ‘astonished,’ and ‘dismayed,’ and described India’s position as ‘hostage-taking’ and ‘suicidal’.”

Perhaps commentators would have been less surprised if they had identified the negotiation deadlock as only the symptom of a more pervasive underlying cause: the national — read: political — interest of all countries at the negotiations table. The bread and butter of WTO member states is the extent to which they can encroach upon private enterprise, and control both product and financial markets. Under these circumstances, committing to open one’s borders to international trade is simply idle talk. Free exchange and competition would undermine the leverage of domestic interest groups, and cut through the structure of government intervention.

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Raising the Global Free Trade & Other Benefits of Business Globalization

Guest Post by Hilary Smith

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When we first think about IKEA, H&M, Shell and other large corporations like these, what do they all have in common? Internationalization.

When growing up, this word was pretty big, but now that we have the internet, the way we do business has been completely redefined, and had enabled nearly everyone with a great product or service to sell it on a global level.

Why is globalization being discussed so much today? It might be simply due to the fact that it has a lot to offer. In addition to the potential for growth, many businesses take themselves to a global level for the first-mover advantage, which is essentially is being the first to get into a specific market and gain all the benefits from being the first.

Let’s take a closer look into some of the other significant benefits of globalization:

New Markets

The possibility for sales in more countries increases drastically because it’s now feasible to send the product to those countries. Logistically, it didn’t make sense for a small-company in Vancouver to send its products to Chile. It just cost too much to do it. But a rapidly globalizing market now has the freedom to exchange goods at will, because the demand is there. Many archaic travel restrictions have been removed, allowing people to travel and become acclimated to different cultures.

Furthermore, these ever-expanding markets of our day have significantly helped countries to raise capital in terms of foreign domestic investments. And as a result, the economy of that country improves.

Cheaper Materials

Small companies handcuffed by high costs for materials now have cheaper options available to them, as they can source needed raw materials, supplies and services locally. This saves businesses money, and allows them to appropriate those funds for different purposes, like hiring new employees, or expanding their company to reach different areas.

Look at it from the opposite perspective: Company A can now offer their product to Company B at a lower rate than Company B is used to. Increased sales allows the new provider to allocate their funds differently. Both of the companies, in this example, win.

Easier Transportation

Quicker, more accessible transportation means that products get to where they need to be in record time, leading to increased consumer satisfaction and money saved. It also means that companies can offer their product to newer markets more reliably, boosting sales at a fraction of the cost it would have just a few years before.

Increased Employment

All this money saved leads to more employment opportunities, and that leads to increased demand for newer, more expensive products.

Think about when you landed your first job. What did you do when you got that first paycheck? You probably went out and bought something. An increase in employment leads to an increase in sales, creating an economic stimulus effect that benefits all parties: the employer, the employee, and the company who is selling the employee that new pair of sunglasses.

The Information Age

The rise in the popularity of the internet has boosted the amount of information that is more easily accessible. Research inevitably saves businesses money because it finds alternative, cheaper ways to spend money, resulting in–you guessed it– more ways to allocate funds to increase business.

Technology and the internet lets businesses advertise in different ways than they had before, and it lets the communicate to potential customers like never before.

Top List of Economically Free Countries of 2013

beckeThe United States came in at number 12. The U.S. was ranked number 6 when President Barack Obama took office in 2009.

Slipping: U.S. Fails to Crack Top 10 List of Economically Free Countries

The economic freedom index, which is jointly published by the Wall Street Journal and the Heritage Foundation, ranks the top 10 countries based on the average of 10 separate measurements, including government spending, fiscal freedom, trade freedom and freedom from corruption.

America’s spot on the 20th annual index is an “unfortunate but foreseeable slide,” said Heritage President and former U.S. Senator Jim DeMint.

“It should stun everyone,” he said, noting that the U.S. has even managed to fall behind Estonia on the index.

America’s place on the index has declined steadily for the past seven years, resulting in its status as “mostly free.” The decline is due mostly to poor showings in “fiscal freedom, business freedom and property rights,” according to the index.

“Fortunately despair will never be part of what we do here at the Heritage Foundation,” DeMint said. “We’re continuing to work on those factors, those inputs, that change the total output of economic growth.”

Hong Kong, Singapore, Australia, Switzerland, New Zealand and Canada, on the other hand, all rank “free.”

Slipping: U.S. Fails to Crack Top 10 List of Economically Free Countries

America’s fall to 12th place comes even as economies in the Asia-Pacific region report slight improvements.

Lastly, the “communist nations North Korea and Cuba brought up the rear of the index. Several war-torn countries, such as Syria and Afghanistan, were not ranked,” the Washington Examinerreported.