The World Trade Organization or WTO is an international organization, whose mission is to harmonize trade between nations. This implies that the trading rules are to be applied on all goods originating from one country and destined for another country. This has made the trade of goods simpler and more convenient. However, it has also come under fire from many quarters due to the excessive privileges that some nations enjoy and at the same time hinders the free flow of goods. To understand the case in point, the recent amendments to the Free Trade Area of the World Trade Organization have provided for a more balanced trade scenario.
The most important provision of the present rules and regulations is that of protecting foreign enterprises from having to pay duties and taxes when importing or exporting goods to other countries. Other nations feel that this practice is an attempt by the World Trade Organization to increase their hold over the international trade. It is believed that the purpose behind this was to increase political leverage over other nations which in turn can increase economic leverage over them. The fear here is that the practice might hamper the free flow of goods and that may lead to the diminution of foreign trade.
Another contention against the free trade area is that it encourages protectionism, or the practice of preventing other nations from exporting goods to you. Though it cannot be denied that this practice may be somewhat common, it does not seem to be very widespread. There is another contention that it denies the right to choose a different provider if you so desire. But this is not mentioned here, since the effects of protectionism might be quite adverse.
On the other hand, protectionism might have some advantages as far as increasing trade is concerned. A higher trade deficit is a good sign for the economy of a nation, since it implies that it is selling goods and services at a cheaper rate than it is buying. One should note that while the export increases the income of a nation, the imports will necessarily imply an increase in costs. This means that unless the government is able to substantially reduce the cost of imports, the resulting deficit will not be very large.
So as to ascertain whether a nation has a surplus or deficit, one must look at the total exports as well as imports. Exports refer to the goods and services which are manufactured by the foreign resident company and which it wishes to sell. Imports refer to those goods and services which are purchased from another foreign firm. The difference between the two quantities is the country’s surplus or deficit.
It is believed that a nation’s trade surplus is a measure of its economic fitness. It indicates that the country is doing whatever it takes to increase the rate of exports while it is holding down the rate of imports. Hence, the main motive of a nation’s trade deficit is and always will be, the ability to increase its income through exports.
As we know, World Trade is the forum of international trade. It brings together exporting nations and importing countries of the world for a global market. The main purpose of this trade is to facilitate the economic growth of both parties. However, the role of the other players in this game also needs to be recognized and appreciated. Free trade area around the globe can bring good development to the countries’ exports and import sector. Moreover, it also helps developing countries to build stronger and more prosperous future.
One of the most important features of World Trade is that it encourages international cooperation. The rules and regulations of this trade area are designed to reduce the barriers of trade and to promote free trade. So, a country that wishes to join any of the world trade areas like import and export, must first and foremost look for an open and free trading environment for itself. The first aspect that you should look into is your own government’s policy on trade.
For a country to become free to trade in any of the products it wants, it has to have the policy of free trade. It means no barriers should be imposed on the import of the goods from other countries. In addition to that, the government should promote and encourage the growth of the domestic production of its own indigenous goods. This can only happen if the government will start to promote and provide support to its own domestic industries. You should understand that the success of any trade depends upon the ease with which the goods are transported from one place to another.
Now, let’s move on to the other aspects that you must take care off when looking for an effective and comprehensive import export strategy. When you start looking at these aspects, you realize that the rules of World Trade differ from country to country. Each one has its own rules and regulation for the import and export of goods. That’s why you need a comprehensive strategy that could take care of all the different aspects.
Let’s discuss the importance of trade deficit for a moment. As far as the US is concerned, it’s quite obvious that the country’s trade deficit is always a negative factor for its exports. In this regard, the government has always maintained a very strict policy of not allowing a trade deficit of more than 3%. If you have a zero trade deficit, then you will definitely feel the presence of an increasing number of imports and exports.
You may think that a zero trade deficit is a great achievement for the US economy. However, you should not forget that it will directly affect the US trade deficit and this can have a major impact on the overall economic performance of the country. This is the reason why the US authorities have always kept a close eye on the trade deficit and try to keep it below any specific level. At the same time, they encourage the growth of domestic production of the country’s own goods. This is another important aspect that you must consider when trying to develop an effective and beneficial free trade policy.