International Trade Walmart International Trade  Term Paper

  • Length: 10 pages
  • Sources: 7
  • Subject: Economics
  • Type: Term Paper
  • Paper: #14877549

Excerpt from Term Paper :

The Uruguay round would designate that the WTO, through its primary role as a mediator, negotiator, and monitor of international trade policies and disputes, serves by design as a gatekeeper of international trade, offering the structural conditions and assembled authority to exact a legitimate level of authority over its member nations.

A good example of how the WTO has strengthened the international governing community's ability to provide oversights for its member nations comes from the 1994 rounds of negotiation in Uruguay which essentially defined and forged the WTO from the shadows of the GATT. In a consideration, for instance, of the newly afforded power to engage in the process of dispute settlement, we can see that the WTO would have an expansive impact on the power of those who had already acted under the propositions of the GATT. The declaration produced by this round of talks would proceed by stating of its party nations that "recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development." (Mercatoria, 1994) This set of provisions as an impetus for the development of the WTO was to suggest that the failure of the GATT to facilitate the effective growth and development of third world economies was to be directly addressed. Thus, the organization itself would be awarded expanded authorities and entitlements under its new name.

With these new authorities, the WTO would aggressively foster an atmosphere of deregulation for those with the resources to move operations into these developing contexts. The influx of production operations would introduce a bevy of negative conditions for new host nations, with our case discussion on Wal-Mart serving as a particularly effective example of said conditions. What is perhaps most compelling about the meteoric rise of Wal-Mart's relevance to both the nature of America's consumer culture and the scale of its swelling late 20th century economy is its capacity to accomplish this with an absolute commitment to the lowest consumer prices. This is a measure which Wal-Mart has attained almost regardless of the consequences outside of its monstrous market-share. In a collection of critical essays edited by Lichtenstein (2006), entitled Wal-Mart: The Face of Twenty-First Century Capitalism, the reader is given disturbing insight into the duality of Wal-Mart. Lichtenstein describes a chain which simultaneously imposes the expectation of low cost upon its consumer and the practice of globalization as a measure of cost-cutting upon its competitors.

This has a ripple effect on the economy as a whole, cutting through a broad swathe of sectors in a practice which essentially off-shores production, contributes very little spending to local advertising and creates increasingly fewer domestic stock and facility jobs by relying upon a global supply chain. As a result, "with quick and reliable 2-day turn around, Wal-Mart is able to maintain lower levels of inventory and still meet customer demand. These lower inventory levels result in either a reduced floor plan with lower carrying costs and lower interest expense -- or a greater diversity of products on the store shelves." (Collins, 2007) Naturally, this enhances the profitability of the operation but also significantly diminishes the number of jobs created by the chain on the domestic front. This seeming contradiction points to the core irony of globalization with respect to its stated goals of collective economic and social advancement.

Ultimately, given the pattern demonstrated by legislation on trade across the last century, there is no denying that to a large part, globalization is a process which is the inevitable byproduct of an evolution beyond the relevance of the nation-state in a shrinking global village. As many regard it, the endeavor is a naturally occurring "paradigm shift from which there is no escape." (Monshipouri, 2005) And while market theory tends to bear out this resolution, it does not suggest that the approach which is currently being undertaken is the most optimal way to make such a paradigm shift function to the benefit of an international collective. The WTO has afforded the conditions of the GATT a body with the capacity for conscientious oversight and intervention, though it still remains a question largely unanswered as to whether or not the WTO will actually live up to this role. The behaviors and consequences demonstrated by such companies as Wal-Mart seem to suggest that the WTO is deeply biased to the interests of large corporations and developed economies at the expense of labor classes, small business, consumers and developing nations.

Even further, as noted here above, the reliance upon this model of profitability means that Wal-Mart need spend little money outflanking local businesses. Its low prices generally trump those which local competitors -- still reliant upon local production and domestic labor costs -- are able to provide. Thus, even as Wal-Mart disrupts its competitors, it simultaneously damages local advertising businesses. Indeed, Fitzgerald (2002) argues that there has been a stultifying effect on the advertising community even as the Wal-Mart has a detectably negative impact on the local economies where it establishes its presence by pricing out locally owned competition and devastating community prosperity. Research denotes through a discussion that, amongst other small town locations, in such towns as St. Robert, MO, "this isn't all that's happened since Wal-Mart parked its big box out by State Highway 63. The store has killed some important newspaper advertisers." (Fitzgerald, 2002) This is to note that as Wal-Mart has systematically eliminated local competition and undermined labor interests in small communities, it has also willfully resisted the demand to advertise through local or community-based methods. Therefore, its television advertising campaigns have amounted to an active destruction also of many small publications and media outlets which have relied upon such retailers in the past for survival and success.

Concerning that which advertising brings to a local economy, this represents a true paradox of economic principle, with Wal-Mart's enormity going unmatched by its contribution to the markets peripheral to retail. Indeed, for a company "whose annual revenues in 2007 of $375bn were roughly equal to those of the next four global retail groups combined . . . [however], virtually all its growth in the U.S. since the first Wal-Mart store opened in 1962 has been generated organically, rather than as a result of acquisition. Advertising Age estimated global measured advertising expenditure of $734m in 2007, making Wal-Mart the world's #48 advertiser." (AdBrands, 2008) Naturally, this constitutes a serious problem not just to local advertisers and publications but to the advertising sector as a whole. This helps to build the larger argument which surfaces in any discussion on the nature and impact of the War-Mart corporation. That is, its business model and total orientation toward profitability by way of affordability demands it to cut corners in such areas as production, labor, advertising, product quality and community orientation. In the absence of these forces, its benefits to consumers are far outweighed by that which it extricates from the economy. By virtue of its approach, it inherently resists the rational market demand to return its revenues to a healthy economic cycle.

Quite to the point, the process of globalization has had a damaging impact on local economies in the United States and has led to wider exploitation of labor and environmental laxity in the developing world. In both categories, Wal-Mart is a world leader. The literature available to us is quite extensive, with those selections sampled here truly only scratching the surface of this subject. However, what is available is sufficient to demonstrate that Wal-Mart's approach to globalization as a means to exploit nascent markets for the purpose of cost-cutting and its treatment of labor with the same model of low-overhead and high profitability have had the impact of substantially damaging the American economy and the global economy as a whole. The makes Wal-Mart a perfect template for the production and retail sectors in the era of globalization, at least if we are to use this to understand the reasons that free trade has fallen short of its stated goals.

Indeed, at present, the WTO's accomplishments are essentially a decade and a half of unequal standards in trade-partner nations that have not aligned with those held as fundamental in the developed world. Therefore, current free trade legislation has not simply fallen short of its goals for western growth but has even further deepened the crises of economy, civility and ecology for the developing and not yet developing spheres The early gains of globalization to all parties…

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