Reference no: EM131037159

Econmic diss

One of the best definitions of Economics is ‘the study of the allocation of scarce resources'. International trade is very much about the allocation of scarce resources. When resources (Land, Labor, Capital, and Entrepreneurial Ability) are allocated to their most efficient use, society is better off. Society is able to enjoy greater amount and types of goods at lower costs. The WTO's purpose is to negotiate lower trade barriers (tariffs and quotas) so that nations can trade more freely. However, some people feel that free trade is not in their best interests.

Do you think the United States should attempt to enforce labor standards and environmental standards on its international trading partners? Why or why not?

The WTO, Trade Liberalization, and Labor Standards

ln November 1999, tens of thousands of people took part in sometimes violent demonstrations in Seattle. The protestors were expressing their opposition to the policies of the World Trade Organization (\A|l-O), which was meeting to reach an agreement on a plan for trade liberalization. The WTO has continued to face protestors at its more recent meetings. The activists are concerned that the over I50-nation WTO is not addressing issues involving worker rights and the environment.

The oblective of the WTO, which was formed in 1995, is to lessen trade barriers. lts main principle is that each country must treat all other member countries equally with regard to trade barriers. For example, if the United States decides to lower the tariff on foreign cars, then it must lower this tariff for o// imported cars. There are exceptions for regional trade pacts and developing countries. lf a country violates the rules, the WTO may levy sanctions against it.

Labor unions, which were heavily involved in the Seattle protests, want the WTO to have labor and environmental standards. For example, they want the WTO to include in international trade rules a minimum age for child labor, the right to organize and collectively bargain for wages, a minimum wage, and working condition standards.

Union members would clearly benefit if these labor standards were adopted. The cost of manufacturing foreign goods would rise and increase.the relative price of foreign goods. As a result, the demand for the products that unions help produce would shift rightward. This in turn would raise the demand for union workers.

However, most WTO member nations believe that making such labor and environmental standards part of international trade agreements would simply benefit union workers in the highly developed nations at the broader expense of consumers in the industrially advanced nations as well as consumers and workers in the developing nations. By increasing labor and production costs in the developing nations, such standards would give an advantage to industrially advanced nations that already meet the standards.

That would reduce imports and raise prices to consumers worldwide. lt would also do great harm to the developing nations by impeding their economic growth. Such growth enables them eventually to afford and implement stricter labor and environmental standards.

Source: Compiled from news rePorts'.