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Unit 8: World Trade Organization
Questions notes
1. Profile the evolution of the Chinese business environment. Does this evolution strike
you as predictable or unpredictable? Why would its degree of predictability matter
to foreign investors?
2. Do you think the benefits of operating in China outweigh the risks?
3. What would you advise a company to do to maximize its rewards and to limits its
risks?
4. Is it reasonable to expect China to adopt and fully enforce WTO regulations,
particularly regarding intellectual property rights, in the next few years? If it chooses
not to do so, what options would companies have to protect their interests?
5. How do you think the contest between market economics and ideological legacies
will play out in China over the next ten years?
Source: International Business Environment by Raj Kumar
8.6 summary
This unit attempts to give an overview of the functions in as simple manner as possible.
l z The effect of tariff is to raise the cost of imported products and the consumers loose because
they have to pay more for imports.
l z By lowering costs, subsidies help domestic producers to compete against low-cost foreign
imports and to gain export markets.
l z An import quota is a direct restriction imposed by an importing country on the quantity of
some good that may be imported. A voluntary export restraint is a quota on trade-imposed
from the exporting country’s side.
l z A local content requirement calls for some specific fraction of a good to be produced
domestically.
l z An administrative policy is an informal instrument or bureaucratic rule that can be used to
restrict imports and boost exports.
l z There are two types of arguments for government intervention in international trade:
political and economic. Political arguments for intervention are concerned with protecting
the interests of certain groups, or with promoting goals with regard to foreign policy,
human rights, consumer protection, and the like. Economic arguments for intervention are
about boosting the overall wealth of a nation.
l z The problems with strategic trade policy are two fold: (a) such a policy may invite
retaliation, in which case all will loose, and (b) strategic trade policy may be captured by
special interest groups, which will distort it to their own ends.
l z The GATT was a product of the post-war free trade movement. The GATT was successful
in lowering trade barriers on manufactured goods and commodities. The move towards
greater free trade under the GATT appeared to stimulate economic growth.
l z The completion of the Uruguay Round of GATT talks and establishment of the World
Trade Organization have strengthened the world trading system by extending GATT rules
to services, increasing protection for intellectual property, reducing agricultural subsidies,
and enhancing monitoring and enforcement mechanisms.
l z The theory of economic integration refers to the commercial policy of discriminatively
reducing or eliminating trade barriers only among the nations joining together.
lovely Professional university 173
