Is WTO a Necessasity for Global Trade Essay Example | Topics and Well Written Essays - 3250 words

Is WTO a Necessasity for Global Trade - Essay Example The article takes a deeper look at the WTO (World Trade Organisation) as the sole international organisation that deals with the global trade rules between countries. The main function of WTO is ensuring that global trade flows predictably, smoothly, as well as freely as possible. The organisation can be looked at in several ways. First, it is an organisation, which fosters opening of trade. Second, national governments negotiate agreements on trade through the forum. Thirdly, national governments settle diverse trade disputes through it and finally, it operates a trade rules’ system. Essentially, WTO is an effective place in which the member governments attempt sorting out various trade problems they encounter with each other. The WTO entails a set of rules: the core of the agreements of WTO, which were negotiated as well as signed by majority of the trading nations in the world, forms its basis of operations. The agreements provide the member governments with legal ground-ru les for smooth international commercial activities. The agreements are essentially contracts, which bind national governments to stick to their policies of trade within agreed limits and boundaries. Although the agreements have been negotiated as well as signed by national governments, the objective is helping goods and services’ producers, exporters, as well as the importers to carry out their business operations while permitting governments to meet the environmental and social objectives. (Aaronson 1996). The overriding purpose of WTO system is to aid trade to flow freely so long as it has no undesirable side effects since this is imperative for the overall well-being and economic development. That partly implies removal of obstacles. It also implies ensuring that individuals, governments, and companies know the existing trade rules across the globe as well as giving them confidence there won’t be sudden alterations of the policy. In simple terms, the rules must be p redictable and transparent (Jackson 1994). The WTO has many benefits but there are also some critics to its operations and this forms the basis of this paper. Thus, the paper shall examine the functions of the WTO and its achievements and gauge them against the criticism presented by those opposed to its operations to help in giving a comprehensive conclusion regarding whether the WTO is a necessity for global trade or not. Basic Information about the WTO The WTO is based in Geneva, Switzerland. It began its life on January 1 1995 though its system of trading is about fifty years older. The General Agreement on Tariffs and Trade (GATT) has since 1948 provided the system with effective rules. GATT was born by the General Agreement as an unofficial, de factor global organisation. This unofficial defector organisation evolved via a number of rounds of negotiations as members tried to compile an effective plan for their operations. The largest and last GATT round, which established the WTO, is the popular Uruguay Round that lasted between 1986 and 1994. While GATT had chiefly dealt with essential trade in goods, WTO and its accords currently, cover the trade in services, as well as in traded designs and creations and inventions (the intellectual property). By 10 February 2011, the body (WTO) had a membership of 153 nations while its budget for 2011 amounted to 196 million Swiss Francs. The head of WTO is Pascal Lamy (the director-general) who leads its 640 secretariat staff (WTO 2012). Functions of WTO The body is run and managed by its member state governments. All the major decisions of WTO are reached upon by its membership either by their delegates or by ambassadors (who meet frequently in Geneva) or ministers (who typically convene a meeting at least once for every two years). While the member states drive it, the WTO cannot function effectively without its Secretariat coordinating its activities (Aaronson 1996).

Criticism of Absorption Cost System Math Problem

Criticism of Absorption Cost System - Math Problem Example As common sense would have it, fixed cost remains fixed no matter what the level of production is. Hence, in such a case managers often tend to over produce thinking it’s better to allocate the fix overhead over a wider range of output and reducing the cost per unit (since spreading fixed cost over greater units tends to drive down fixed cost per unit and when fixed costs per unit go down then so does the overall costa per unit), thus seeking an increase in profit per unit of output. The lower fixed cost per unit does of course increase the level of profitability. But a couple of factors need to be considered while making the overproduction decision. While over producing tends to allocate fixed cost over a greater units of output, we need to see whether we really need to over produce. Many factors would need to be considered including the demand for the excess produce, storage and handling costs, cash flow situation etc. There would be no point going for over production if the re is no sales market for additional units or the storage costs are high as such a step might actually cost more than the saving done by allocating the fixed overheads on excessive production. It also needs to be considered that what would happen to the excess inventory that would be produced. If the company has not taken care of the market conditions and consequently it produces in excess of its projected sales, then such an exercise would result in excessive stock piling. Clearly the company wouldn’t be profitable in such a scenario. Another key question that needs to be answered is whether the incentive to overproduce allows over producing stock irrespective of stock piling or storage conditions. The excessive inventory that would be produced would be visible to everyone, reflected on managerial accounts as well as in the company’s audited financial statements. It is no doubt important for managers and decision makers to consider here whether the allocation of fixed overheads provides an incentive to overproduce or not. However the danger reflected by the incentive to over produce should not be made the basis of decision making about the allocation of the fixed overheads. I agree with your view that over production results in excess inventory. Yes, sometimes it does happen that excessive production is done at the year-end so that the production costs can be driven down and financial statements are efficiently window dressed to show a good position of the company. However you need to know that there are some products that take a lot of time to be produced and their fixed costs are extremely high. In such a case, I personally think that over production is justified provided there are adequate storage facilities and there is an active sales market. Student’s Response: â€Å"In my experience allocations which are confined to fix overhead is the catalyst to overproduce a less than desirable product. There are two things that definitely go w rong. 1. When management have an incentive to decrease the cost of product, usually this is a force step toward decrease quality of all resource used to make a final product with less capital and in less time.