| Trade can promote development if backed by
trade agreements and trade law
Trade specialists can help
promote trade if they implement the agreements
and enforce the law
WTO and
other trade agreements
The preamble of the General Agreement on Tariffs and
Trade (GATT), signed shortly after the World War II in 1947, promulgates
that one of the fundamental purposes of trade is economic development. For
over half of the century, GATT and later on the WTO have been promoting
economic development through the facilitation of cross-border trade. The WTO
member states seek to raise living standards, ensure the growth of GDP,
develop the full use of the resources and expand the production and exchange
of goods. These objectives are achieved through the substantial reduction of
tariffs and other trade barriers as well as the elimination of
discrimination in international trade.
Various economic theories support the proposition
that effective trade fosters economic development. “Trade and competitive
markets lead countries to specialization in certain products in which they
retain comparative advantages over their trading counterparts. Such
specialization reduces the average cost of production due to economies of
scale and the collective welfare of countries increases when they exchange
specialized products and thus reallocate resources in a more efficient
manner.”[1][1] “Modern commerce needs large markets and modern trading rules
that permit industry to compete in the global marketplace, to prevent
pollution that crosses borders, and to assure adequate protection of health
and safety by discouraging a regulatory race to the bottom.”[2][2]
Look at the example of China whose economy in recent
years, particularly since it became the WTO member, has been growing at
staggering pace. The development is fueled by the increasing exporting
activity, foreign investment and high efficiency in manufacturing processes.
A similar objective is sought to be achieved in
Central America through the Central American Free Trade Agreement (CAFTA), a
free trade agreement signed by the United States with the governments of
Nicaragua, Honduras, Guatemala, Costa Rica, El Salvador, and the Dominican
Republic.[3][3] The critics argue that CAFTA is a tool that is used by the
U.S. to promote its economic and political policies, to impose control over
the agricultural sector and as a result of its implementation North
Americans will be loosing jobs to Central Americans. On the contrary,
proponents believe that trade liberalization, globalization, and economic
development policies provide opportunities for growth in developing
countries.
Frequently, it is noted that traditional trade
liberalization and economic development goals anchored in trade agreements
have been unnecessarily expanded to include non-economic priorities with
some political flavor. For instance, the proposed Free Trade Area of the
Americas agreement (FTAA) incorporates rules promoting the rule of law,
democratization, and equitable distribution of economic, political, and
social resources.[4][4]
Rule of law and economic
development
The lack of rule of law hinders the implementation
of free trade agreements and forestalls economic development. Empirical
studies have proved that rule of law and properly functioning court systems
positively affect the growth of the GDP.[5][5] It encourages private
business as well as foreign investment by providing certainty and
predictability in contractual relationships and their enforcement. Effective
protection of investment and property rights attracts more liquidity to the
markets.
Furthermore, regard or disregard for the rights of
“others” is also a major factor in economic development.[6][6] Legal regimes
that protect third parties, acting as buyers, sellers, creditors, borrowers,
investors, bankers and their intermediaries, facilitate the emergence of a
well-functioning commercial marketplace.[7][7] Accordingly, the rule of law
and the protection of third parties play a vital role in economic
development.
The role of Trade
specialists
Another crucial element of economic development is a
proper implementation and enforcement of legal and trade rules in daily
practice. The enforcers are obviously judicial and state institutions that
oversee the entire state, including economic and trade structures. Those who
implement trade and economic objectives may be grouped in the category of
trade specialist. Trade specialists and professional institutions work with
the rules set out in free trade agreements on daily basis. Whether these
entities issue certificates of origin, prepare studies on the impact of
proposed investment on environment and culture, transport goods or provide
banking services, they are looking for the best solution that would satisfy
interests and needs of the people living in the country and their activity
thus benefits the entire economy.
Trade specialists operate within a spectrum
delineated in trade agreements and other measures that promote economic
development. Their presence backed up by strong and efficient legal systems
is indispensable for the future and success of any country.
References
[1]Richard E. Caves et al., World Trade and Payments:
An Introduction 38-48 (7th ed. 1996).
[2]Coll. Sav. Bank v. Fla. Prepaid Postsecondary
Educ. Expense Bd., 527 US. 666, 703 (1999).
[3]See
http://www.ustr.gov/Trade_Agreements/Bilateral/CAFTA/CAFTA-DR_Final_Texts/Section_Index.htm
l.
[4]See
http://www.ftaa-alca.org/alca_e.asp .
[5]David Dollar, Governance and Social Justice in
Caribbean States 1-2, p. 11 (World Bank Development Research Group, Report
No. 20449, 2000).
[6]Boris Kozolchyk, A Roadmap to Economic
Development through Law: Third Parties and Comparative Legal Culture, 23
Ariz. J. Int'l & Comp. L. 1 (2005).
[7]Id.
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