World Trade Organization: Economic Benefits

Subject: Economics
Pages: 9
Words: 2467
Reading time:
11 min
Study level: PhD


The idea of free trade has been embraced worldwide owing to the vast believe that it leads to profound economic benefits such as creation of employment, foreign exchange gains, and proficiency of production (Rivoli 2005). Many countries, including the rich and developing ones, have entered into the unions where they are required to liberate their trade to get access of other countries’ boundaries in return (Hanson 2013). Some of the most prominent blocks include European Union, NAFTA, and WTO (Proedrou 2011). Whereas this has become a kind of a popular culture and has many benefits to the participating countries, the future of these unions holds a great risk for the developing countries in the face of the rich ones.

Predictably, the benefits that accrue from the unions will diminish gradually leaving the developed countries with more resources than the poor countries (Ross 2012). In an attempt to validate the hypothetical sentiment, this discussion will develop an argument that in the future, the wealthy countries will obtain massive resources from the broke ones through free trade. Particularly, it will thus touch on the factors purported by the WTO free-trade environment so that prosperous members gradually obtain money from the poor oil-producing countries leading to their ultimate depletion and future war.

Competitive Environment

The present condition regarding free trade has become essentially risky due to imbalance of economic power. In this case, most of the European countries are blackmailing their poor counterparts to join the free-trade organization, specifically WTO, on the basis that they can only trade with them under that platform (Schoenmaeckers & Kotowska 2005). This implies that most of the developing countries producing oil indulge in these organizations forcefully rather than willingly.

Using this tactic, the European countries and other rich Asian members, such as Australia, China and Russia, will force the oil-producing countries to participate in WTO and liberalizing their trade (Zajdler 2012). This implies that in the future, the developed countries will manage to force most of the countries producing oil to join WTO (Sharif 2007). Bearing in mind that the minor and oil-producing countries are confronted by severe economic instabilities, besides the fact that they rely on oil as the main source of their funds, they will start competing among themselves in order to get the share of available market. This competition is facilitated by the freedom of potential consumer countries to trade with any of them without restrictions such that if one country is not willing to export their oil, then the consumer will move to a counterpart country (Stiglitz 2010). In such an environment, they will be rendered incapable of controlling their individual prices as they could have done if they had not engaged in free trade. Despite the WTO regulating the oil prices to a certain level, the rich countries will manage to force the prices down to very low levels through this manipulation (Zakaria 2008). In fact, the WTO members regulate the prices of oil by facilitating a price reduction of the member countries, but do not stipulate the minimum rate that the products should be sold. This implies that it is upon the individual countries to decide on their prices. As a result, the competition-based manipulation will be implemented without the intervention of WTO regulatory board. In that situation, it will be treated like a case in which supply and demand forces interact to reduce the prices. This will help the developed countries to buy oil at a lower price rather than the appropriate ones. On the other hand, the poor oil-producing countries do not have the economic capacity to create such an environment in Europe and Asia in order to reduce the price of products sold by those countries.

At the same time, it cannot be disputed that oil-producing countries, and other poor countries depend on a product that gets depleted over time or natural factors whose existence is not guaranteed. For example, developing countries depend on agriculture that largely relies on rainfall and little irrigation. Predictably, the current rate of global warming is expected to rise to be higher level by 2050 such that the amount of rainfall in these countries will reduce profoundly. Consequently, the amount of agricultural goods is expected to reduce while the production of richer countries will rise since they depend on technical good and services. This hypothesis is very strong bearing in mind that these countries are developing their technical skills at an extremely high rate (Kirkpatrick 2010). Besides this unfortunate hypothetical view, the agricultural products that come from these countries are sold without processing. As a result, WTO will help the rich countries to buy unprocessed good at low prices due to competition among producers, process them, and sell them back at high prices. This implies that the developed countries can freely use the products from poor countries to make a profit from the same people who sold the raw material.

When it comes to oil-producing countries, the oil is a natural resource which gets depleted over time. Besides the factor of depletion, the countries sell oil continuously without holding reserves owing to the fact that they need money to fund their weak economy (Nersesian 2007). The worst-case scenario is that the rich countries, such as USA and China, have their own natural sources of energy that they have not exploited since they are capable of getting cheaper oil from foreign countries within WTO (Ghauri & Powell 2008). In this case, China is reserving a lot of coal for the production of electric energy in their quest to develop a sustainable economy (Gilardoni 2008). USA has extensive oil deposits that have not been exploited for future use (Luciani & Henry 2011).

This implies that whereas the deficient countries are selling their oil actively, the developed ones are buying it at cheaper prices and reserving their deposits for forthcoming needs (Friedman & Mandelbaum 2011). If the oil deposits in poor countries probably get depleted or becomes significantly little, the richer countries within WTO will start selling to their counterpart (Rietveld & Stough 2007). At this point, the developed countries will be struggling to acquire enough oil for their domestic use as well as import other good that they do not produce in the country. If the WTO had not facilitated this unhealthy competition, the oil-producing countries, such as Saudi Arabia, Iraq, and Kuwait could sell their oil at appropriate prices so that they can develop other parts of their economy that could become the sources of their income when the amount of oil reduces.

Access to Raw Material

In essence, when the WTO facilitates free trade, it importantly helps to remove the barriers of doing business across borders, but the products provided by various countries remain the same. This implies that the oil-producing countries will be selling oil, while the richer countries within the organization continue to build on technology and selling their product to their developing partners. Simultaneously, the developed countries build on technology to make devices that can transform crude oil to beneficial products such as bitumen and grease (Dyker 2010; Fishman 2006). Sarcastically, the free trade provides that the member countries should grant importing support to their partners. As a result, well to do countries can obtain the crude oil without restrictions even if the developing countries could wish to withhold it for processing. This leads to a scenario in which prosperous countries obtain huge amounts of oil, process it into different products, and sell those good back to the poor countries in other forms.

If the oil-producing countries decided to process oil locally and sell the refined products at higher prices, their counterpart form developed continents have the opportunity to sell the processing machines to them. Since these machines are complicated, they go back to the developers and secure experts who can operate those machines at high wages. In fact, this trend will continue in such a way that the developing countries will produce very complicated devices by 2050, and ones that the consumers need experts from their countries to operate. Whereas most economists argue that WTO and other organizations that facilitate free trade provide the poverty-stricken countries with job opportunities, most of them only secure jobs with low wages whereas citizens from the advanced countries acquire high-paying jobs. This creates a scenario where the wealthy countries have an opportunity to outsource more money from the least-developed countries than the ones their citizens receive.

In fact, this situation is expected to intensify by 2050 considering that the developed countries have set out to train personnel who are highly skillful. This will take place amidst a situation where the poor countries will be in dire need of improving their technological standards. As a result, the develop countries in WTO will take advantage of their needs to secure more jobs and reduce their level of employment. This undertaking will be reinforced by the fact that they have free-trade agreements allowing them to trade freely with the economically needy partners. The WTO relations will allow more people from rich countries to reside in poverty-stricken countries thus securing more credible and jobs that are paying high wages.

Purchasing Power

The idea of purchasing power is another factor that puts the poverty-stricken countries in a very tricky and disadvantaged position as compared to their rich partners. In this case, the economy of wealthy countries allows them to have a higher purchasing power than the economically handicapped ones (Baldwin & Macdonald 2009). Whereas free trade appears to present the weak countries with the opportunity to access the advanced countries more freely, they can hardly buy enough and substantial good in contrary to the prosperous ones (Manzur 2008). This condition is actualized by the fact that the currency of affluent countries has higher value than the poor ones (Boudreaux 2008). This implies that developing countries could need several units of their currency in order to obtain a single product from the developing ones (Ma & McCauley 2010). On the other hand, the developed countries, such as USA, UK, France, and Germany need few units to purchase a commodity which is as significant as the product they sold to their counterparts in regard to their respective need (Bruce & Michael 2007). In the future, the rich countries are expected to drive their economy to higher heights through development of more efficient and updated technology. Unfortunately, the poor countries are growing at a very low rate that can hardly compete favorably with the well-to-do members of WTO (Brym & Lie 2010). In that situation, the liberalization of trade will continue providing the superiors with the chance to buy more goods and services from the minor ones. On the contrary, the purchasing power of the depleted members will remain either constant or progress gradually. As a result, the future of WTO holds many opportunities for the developed countries rather than the poor ones. In any case, the existence of this free-trade policy will present the inferior members with more economic dilemmas and difficulties that paralyze their economies.

Population Imbalances

In the modern world, there are profound imbalances and disparities of population between the poor and rich countries. In essence, it is evident that the developed countries have been capable of controlling their population by implementing family planning strategies such as medical and surgical methods (Haugen 2012). This has been done in an attempt to regulate the number of people in these countries and attain sustainable population that can be nurtured by their respective economies. Additionally, the citizens have adopted the ideology of family planning in a manner that the practice is integrated in the cultures. On the other hand, the poor countries have conserved their traditional mentalities, cultures, and ideologies of birth (Maddison 2006). In fact, it has been completely difficult to convince the citizens from these countries to adopt family planning. In some traditions, it could be viewed as going against the core values of the communities (Clinton 2007). Further, it has been stigmatized as a secretive European plan to reduce their population in order to colonize them once again (Connelly 2008). The pertinent issue here does not revolve around the question of whether this propaganda envisages some truth or not. Instead, the crucial aspect is that the sentiment has successfully convinced the citizens to renounce family planning. This implies that whereas the developing countries are making a successful plan to maintain sustainable populations, the poor countries are elevating the number of people whose needs are directed to the respective countries. The worst scenario is that the populations are not only big, but they also have a high dependency ratio. This implies that the biggest portion of the population comprises of dependants while the productive ones are very few. This situation will destabilize the respective economies internally. In addition, the external destabilization will provide yet another opportunity for the superior countries to money from the inferior ones. In the case of oil-producing countries, big populations will put pressure on the income received from the oils (Merino 2010). The better part of the revenue obtained from oils will be used to cater for basic needs of the countries such as creation more health and educational facilities. On the other hand, the rich countries will be concentrating on developing their economy. As a result, they will develop facilities that the poor countries have not been able to make in their local setup.

This scenario will elevate the position of superior countries and reduce the competitive advantage of the inferior ones.

War within Arabian Countries

Understandably, Arabian countries are the major producers of oil in the worlds owing to extensive deposits within their regions. However, the Arabia countries have been confronted by a serious political and social crisis that has posed a great question regarding their economic stability and the ability to sustain a favorable environment for growth. In essence, we have seen countries such as Libya, Iraq, and Afghanistan, having sea severe crisis. These crises provide the superior countries that are within WTO and other trading blocks to indulge in their countries in the pretext of maintaining peace. Nonetheless, the real sense, these countries find anopportunity toaccess oil deposit during unrest. Whereas this could be termed as speculative, it is evident that Afghanistan has been under the surveillance of USA for some substantial time. In the future, there is a possibility that cases of war could occur more profoundly than the current situation. This will thus increase the possibility of having scenarios such as the one in Afghanistan. In fact, it is possible that strategic members of WTO could evoke conflict with their counterparts over unfair rules because most of the decisions are made by the superiors in the absence of the poor countries. These are the opportunities that these countries will use to acquire such oil mines.


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