BA Business: Examining WTO's Role in Promoting Global Trade

This report explores the pivotal role of the World Trade Organization (WTO) in fostering international business across various countries. It highlights how the WTO establishes and enforces common policies governing global business activities, addressing factors like economic theories, financial considerations, socio-cultural influences, and political dynamics. The report delves into trade policies such as terms of trade and trade blocs, along with the WTO's mechanisms for resolving trade conflicts. It further examines the impact of financial institutions, economic theories like the Theory of Comparative Advantage, and the influence of technology on international trade practices. The analysis underscores the WTO's contribution to stabilizing political environments, promoting fair trade conditions, and facilitating economic development through international cooperation and the reduction of trade barriers, ultimately enhancing global welfare and economic growth among member nations. Desklib provides access to this document and many more resources for students.

Running head: International Business 1
International Business
Student’s Name
University
Course
Date

International Business 2
Executive Summary
In this report describes how World Trade Organization has promoted international
business in different countries. World Trade Organization plays a vital role in creating and
implementing common policies which used governing business activities within different
countries. This report discuss more factors affecting international business and how World Trade
Organization deal with them in promoting global trade. These factors include economic theories,
financial factors, social cultural factors, political forces and other trade policies. Some of these
policies includes, Terms of trade, trade blocs and Policies on finding solution of the trade
conflicts in between the nations.

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Table of Contents
Introduction....................................................................................................................................3
Analysis and discussion.................................................................................................................4
Practice performed in the international trade........................................................................4
Political factors...........................................................................................................................5
Financial factors.........................................................................................................................5
Economic theory.........................................................................................................................6
Theory of Comparative Advantage..........................................................................................7
Terms of trade............................................................................................................................7
Trade Blocs.................................................................................................................................8
World Trade Organization participation....................................................................................9
Roles of the World Trade Organization in Promoting International Business.....................10
Conclusion....................................................................................................................................12
References.....................................................................................................................................12

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Introduction
World Trade Organization is a body of organization which is intergovernmental and it
regulates international trade all over the world (Hamilton and Webster, 2018). World Trade
Organization (WTO) is the only organization globally deals with business policies between
nations. All these policies were created, agreed and signed by many countries in the world and
the same those rules were accepted and supported from their parliaments (Jin, Ramkumar and
Chou, 2018). All these rules and regulations aim to improve the trade operations and be as
smooth as possible between all interrelated nations. WTO is managed and operated by the
contribution from the countries which are the member of WTO.
Analysis and discussion
This is the main body of the report and it will contain various practices which are
performed in the international business and how are being modified by financial, political,
social-cultural factors and economic theories according to the World Trade Organization
(Kobayashi, Yaguchi & Maekawa, 2018). Also, this will include the various form and location
activities involved in the international business. All this ideal will focus to achieve the analysis
of how the World Trade Organization is involved in promoting global trade within its member’s
countries.
Practice performed in the international trade
Many activities are always performed in the international market according to the rules
and regulation of the World Trade Organization. These practices involve trading with different
products and services from different countries, this involves technology, capital and use of
innovation knowledge across the boundaries of nations. This makes the business to globally
automatic (Ahn, Bahmani-Oskooee and Efstathopoulos, 2018). All this means that several

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factors will much highly be affected by the practice. These factors include political factors,
financial factors, social-cultural factors and finally, the economic factors from different
countries. For international business practice to be carried out successful some barriers must be
removed and this is the apart which World Trade Organization plays in the global market
(Nikitin, 2018). This will ensure smooth and comfortable moved of products and services and
capital across the boundaries. The other factor which has influenced the global business to grow
to a higher level is an innovation of the technology sector. Technology aspect has through
different sectors like communication, transport and data processing.
The practice involved in international business is trading mainly on the exports and
imports of products and services within different countries (Barenberg and Dutke, 2018). This
operation is important since it will improve the economy of the involved countries using the
Balance of Payment concepts.
Figure 1: Industrial Policy and the World Trade Organization (2018).

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Through the use of World Trade Organization all practices have been neutralized
regardless the several factors which are discussed below.
Political factors
International business cuts across several boundaries thus experiencing different political
status. Traders from different regions need to feel comfortable and secure when traveling to other
countries and perform successful business regardless of the difference in political status. World
Trade Organization is important to govern the rule which will control all political status of
different countries. The rules and regulation of the international business are set and
safeguarding the foreigners trading (Bowie, 2018). If the countries exercised conducive political
environment the international will be highly practiced since they will be no fear of the unseen.
The countries will more feel more encouraged to import and exports the product which they do
not have. Through the exchange of the products and services this way, it improves the standard
living of the citizen in that country (Yildirim, 2018).
Financial factors
No business can be performed successfully without money. Capital is a very vital factor
for every business in the world. World Trade Organization helped this business in many ways.
Global financial institutions have been established with a common currency or having affordable
exchange rates (Blundell-Wignall, Atkinson and Roulet, 2018). Example of those financial
institutions is like World and International Momentary fund. These financial institutions are used
to grant the loan to any trader or government regardless of the geographical area, only that focus
on the customer to meet only the requirement. Common and fair means of exchanging currency
is set around the world at a standards rate according to each country’s economy.

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Economic theory
World Trade Organization has an economic impact on international business. This is
because is the body which develops policy over the business. Most economists today they desire
to have free trade through the development of international bodies like the World Trade
Organization, International Monetary fund, and the World Bank. Another agreement which was
developed after the second world and is important up to date is the General Agreement on Tariffs
and Trade (GATT). These agreements improve the trade among nations which supported the
development and implementation of those tariffs. These trade tariffs have a direct impact on the
growth of small companies and business within the local countries and internationally (Zaman,
2018).
However, since the economic theory is progressively evolving substantially it pushes out
also the World Trade Organization policies and General Agreement on Tariffs and Trade to grow
also. As these bodies grow also the economic sector of the business and countries at the same
rate (Shadikhodjaev, 2018). The exports and imports of crucial products and services improve
the economy at greater percentage since this involves an exchange of currency and improve the
ways most things are local and expand them to be done internationally.
Theory of Comparative Advantage
According to the economist, Ricardo shows that is important to have a comparative
advantage so more in the countries which have national production centers. This theory of
comparative advantage holds that "even if a nation is able to produce all goods more cheaply
than another nation, both nation can trade under conditions where each benefit", therefore this
theory increasing the efficiency of comparative advantages within different Nations. This theory
further was developed to discuss the factors of production with the countries which are used to

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export and import commodities from other countries (Ezeani, 2018). This is important to the
countries whose production is relatively less abundance since it will be allowed to import the
commodities from the countries which have abundance production of the commodities. This
factor of production is explained well using two countries (Portugal and England) using two
product (Wine and Textile). Portugal as a country has relative have abundant labor while
England has relatively abundant of capital, while the production of wine entails abundant labor
and that of textile requires relatively heavy and large capital. Therefore, each country to have
both benefits of the production of wine and textile they should engage themselves in free trade
between those two countries, since this will improve the conditions of the economy between
those two contrives. England and Portugal each would be able to export and import what is
requiring for its country freely without more trade challenges in between (Gooberman, 2018).
Considering such factor of comparative advantage, the economist concluded that this theory of
comparative advantage it acts like cornerstone towards the international Trade economy growth.
Terms of trade
World Trade Organization improves the world trade between nations through the use of
"terms of trade" concept in governing the countries which need to obtain or release import and
export from another respectively. Terms and condition may act as a challenge and also as the
benefit in improving trade of another country on another side the welfare of the country is
diminishing (Abel, 2018). Terms of trade are influenced by the government policies as the same
as demand and supply of the commodities. World Trade Organization policies act as a protector
towards the negative impact of these factors between different countries. For example, if one
country like Japan demands aircraft from American and then they agree in returns the Japanese
will produce and exports Television to the Americans, this will be agreed as a term of the trade.

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Them finally, Japanese starts producing aircraft meanwhile, this means that the favor of trade
goes to the Japanese and therefore, the American will suffer in terms of the business. The
Japanese will have a large supply of Television in America and the same time alternative supply
of aircraft within the country (Han and Niosi, 2018). However, if these countries will continue
with the same game they will worsen off the economy and terms of trade towards each other. In
this instances now World Trade Organization comes in and resolve this issue concerning the
terms of trade between the countries.
Trade Blocs
World Trade Organization and General Agreement on Tariffs and Trade they believe that
reducing barriers of trade within multilateral basis it will enhance greater and more benefits in
expanding the production basing to the comparative advantage. According to the General
Agreement on Tariffs and Trade argues that some countries should have been given equal and
the same opportunity regarding the barriers if they belong to the trade bloc (Ogbor and
Eromafuru, 2018). The policies from these organizations allow the fair and free trade within
those countries and create barriers to the countries which are nonmembers. Creating these blocks
have improved the trade between countries thus improving the countries' economies and the
living standards of the citizen living in it. These blocs create free trade among the countries and
purchase the products at the lower price for the members. Also, this encourages low import cost
of the products thus becoming efficiency in creating global welfare within the trade. This creates
healthy competition among the member of the bloc without facing any discrimination in the trade
like those non-members.
The diversity of trade is enhanced thus incurring low traffic on collecting the imports
from the partner's countries, the imports commodities will be having duty free from the bloc

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partners. This improves the global welfare of the nations as the aim of the World Trade
Organization towards the global business (Gökmen, 2019). These blocs minimize the
consequences which might occur within the business in the future, therefore eliminating possible
barriers between the trade partners.
Figure 2: International business environment, Hamilton, (2018)
World Trade Organization participation
Using all the above-discussed points, the World Trade Organization is able to promote
and create a conducive environment of the global business. Stabilizing the political status of the
different nations by creating common and favorable governing bodies will promote the trade.

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Nations will be free conducting exports and imports with a reasonable duty thus improving the
national balance of trade between the countries. Creating favorable terms and condition in the
World Bank and International Monetary Fund organization helps the countries to develop and
implement economic developments within their countries. These developments will help to
create long lasting growth towards the local and international trade (Payosova, Hufbauer and
Schott, 2018).
World Trade Organization helps to set the favorable terms and condition which will favor
all countries which are within the membership of the international business. This promotes
international trade since no country will be able to discriminate the other because are commonly
governing by the same terms. Also, the World Trade Organization helps to create trading
regional bloc where these terms of trade will be implemented. These blocs help to improve and
maintain quality services and product within the boundaries of operations (Priem, Wenzel and
Koch, 2018).
Roles of the World Trade Organization in Promoting International Business
Roles of World Trade Organization plays an important role in building up policies and
regulations which will monitor the conducive environment of the international business. This
helps to reduce barriers in financial assistance and creating privacy of the intellectual properties
and rights (Nicodano and Regis, 2018). Also, Roles of World Trade Organization helps the
members of the organization to enjoy smooth, free and greater trade regime. Roles of the World
Trade Organization in Promoting International Business comes as a replacement of the General
Agreement on Tariffs and Trade. The following are the main responsibility Roles of World
Trade Organization which helps in promoting international business.

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- To monitor the administrative agreement signed up and passed by the member
countries in the forum. This will make sure the original goal of the agreement is
achieved according to all members (Ennis, Porter, Noon and Zapata, 2018).
- To develop and implement tariffs cuts down and non-tariff measures. This helps to
promote the balance of trade within the countries. A positive balance of trade of a
country enhances faster economic growth within the trading countries.
- In the case of trade conflicts, always Roles of World Trade Organization is ready to
get the solution and harmonious the conflicts. Trading with more countries always
they are high chances of conflicts because each country has its own culture of doing
things (Benjamin, 2018). Therefore, in case of any differences before they bring
negative impacts on the trade Word Trade Organizations to come in between and
solve the issue.
- Word Trade Organizations used to act as a consultancy to the member's nation of the
body. Nations within the body used to get advisory services on how to promote the
trade within and outside the country (Compagnone and Simon, 2018). This helps to
create health and profitable business resulting in a successful implementation of a
business idea with minimal errors. Consulting is important since it will make the idea
more viable than it was before.
- Word Trade Organizations promotes international business by creating a common
global platform where all members can negotiate on the terms and condition towards
the trade operations. This improves the transparency within the countries who are
involved in the international trade.