World Trade Organization

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Global Trading
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Advantages

• The possibility to increase benefits from
  economies of scale
• The breaking down of global barriers allows
  companies to benefit from the largest and
  cheapest workforces, raw materials, and
  technology
• The opportunity for smaller companies to quickly
  expand globally, having more choices when
  recruiting a workforce and the opportunity to
  target a larger customer base (which translates
  to greater earning potential).

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Disadvantages

• The subjection of human rights and human
  wellbeing to the needs of global capital are some
  theories against a global economy.
• These companies may also gain power greater than
  that of any country, as many pharmaceutical
  companies have been accused of using their power
  to influence governments, so too could these
  super companies but to a much greater extent.
• More disadvantages to having a shared global
  economy is the transportation of resources and
  the impact it has on the environment

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Theories

• This increase in globalization has created many
  new opportunities, such as niche markets, and
  requires everyone to keep up with globalization
  in order to stay competitive

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Imports

• Any good (e.g. a commodity) or service brought
  into one country from another country in a
  legitimate fashion, typically for use in trade.
  Import goods or services are provided to domestic
  consumers by foreign producers

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Export

• Any good or commodity, transported from one
  country to another country in a legitimate
  fashion, typically for use in trade. Export is an
  important part of international trade

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Balance of Trade

• The difference between the monetary value of
  exports and imports in an economy over a certain
  period of time.
• The balance of trade is sometimes divided into a
  goods and a services balance especially in the
  United Kingdom the terms visible and invisible
  balance are used.

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Trade Surplus

• A positive balance of trade is known as a trade
  surplus and consists of exporting more than is
  imported

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Trade Deficit

• A negative balance of trade
• Informally, a trade gap

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Exchange Rate

• Also known as the foreign-exchange rate, forex
  rate or FX rate
• Specifies how much one currency is worth in terms
  of the other
• For example an exchange rate of 102 Japanese yen
  (JPY, ) to the United States dollar (USD, )
  means that JPY 102 is worth the same as USD
• The foreign exchange market is one of the largest
  markets in the world. By some estimates, about 2
  trillion USD worth of currency changes hands
  every day.

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Barriers to Trading

• General term that describes any government policy
  or regulation that restricts international trade.
  
• The barriers can take many forms, including
• Import duties
• Import licenses
• Import quotas
• Tariffs
• Subsidies
• Non-tariff barriers to trade
• Voluntary Export Restraints

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Barriers to Trading

• Embargo
• Most trade barriers work on the same principle
  the imposition of some sort of cost on trade that
  raises the price of the traded products. If two
  or more nations repeatedly use trade barriers
  against each other, then a trade war results.
• Economists generally agree that trade barriers
  are detrimental and decrease overall economic
  efficiency, this can be explained by the theory
  of comparative advantage. In theory, free trade
  involves the removal of all such barriers, except
  perhaps those considered necessary for health or
  national security. In practice, however, even
  those countries promoting free trade heavily
  subsidize certain industries, such as agriculture
  and steel.

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What is the WTO

• Deals with the rules of trade between nations at
  a global or near global level
• An international organization designed to
  supervise and liberalize international trade.
• Came into being on 1 January 1995, and is the
  successor to the General Agreement on Tariffs and
  Trade (GATT), which was created in 1947, and
  continued to operate for almost five decades as a
  de facto international organization.

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Keeping it simple

• Negotiating forum
• Set of rules
• Settles disputes

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Negotiating Forum

• Member governments go to help sort out trade
  problems
• Born out of negotiations
• Everything WTO does is a result of negotiations

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Set of Rules

• Negotiated and signed by the bulk of the worlds
  trading nations
• Legal ground rules for commerce
• Contract binding governments to keep their trade
  policies within agreed limits
• Goal is to help producers of good and services
  conduct their business
• While allowing governments to meet social and
  governmental standards

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Specifics

• 153 members
• represents more than 95 of total world trade
• is governed by a Ministerial Conference, which
  meets every two years
• a General Council, which implements the
  conference's policy decisions and is responsible
  for day-to-day administration and a
  director-general, who is appointed by the
  Ministerial Conference. The WTO's headquarters is
  in Geneva, Switzerland.

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To Do Today

• Research global trading opportunities with other
  virtual enterprise firms.
• Identify barriers to global trading.

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As the semester progresses

• Complete trading transactions with international
  firms.

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Personal Finance

• Continue to work on Lessons 1-5
• Deadline for submission
• Wednesday, October 1, 2008