Governance in the Global Economy, Research Paper Example

Introduction

Dependency theory is a conjecture which explains the interaction and relationship between the developed and developing nations of the world. This presumption tends to contravene the popular school of thoughts of economic relationships that are propagated by the free market theory. The theory propagates the element of dependency which was crafted in the year 1950 through the guidance of what is known as Marxian study of the worldwide economy. Contrary to the assertions of the free market concepts which had the view that participation of developing countries in the world economy would be beneficial as the countries would pursue and enjoy equal benefits. Thus, dependency theory propagates the view that such a move would create more problems for the developing nations whereby they will have to depend on their developed counterparts for survival (Matias, 2004).

The cycle of dependency was further extended by the practices exhibited by the developed nations who used the raw materials from the developing countries for their own development. In this regard, the developed countries are perceived as the colonial exploiters who take resources from the developing nations with very little or no compensation. This subsequently leads to a condition whereby the developing nations are placed in a subservient stance where all their benefits are believed to come from the developed countries. The other practice that has extended the dependency is the practice of introducing sanctions on the developing countries, which heavily depend on the developed counterparts for trade and development (Matias, 2004). In this paper we will be exploring how the governance of the global economy is biased towards developed countries.

The aspect of globalization and entities that promote worldwide trade such as the World Trade Organization (WTO) play a great role in marginalization of developing countries. This is also exhibited by differential measures of trade whereby the initiatives such as liberalization of trade benefit developed countries at the expense of the developing nations. This is manifested in the deliberate trade protection policies, which are meant to improve the growth of the developed countries economies (Stallings, 2005).

Institutions used in the global economy have greatly contributed to the marginalization of the developing countries. The author adds that the world trade does not need institutions for global participation in trade. This is mainly fueled by the belief that such institutions are formed by the developed economies with selfish interest for ill acquisition of profits and extreme control of trade. Developing countries are active participants in agriculture and textile industry; however, these two sectors have not realized the anticipated benefits due to trade protectionism by the worldwide trade institutions.

To add to the list of factors that have contributed to marginalization of developing countries, is the issue of difference in political power between the countries. There is a wide belief that developed countries have stronger political powers which tend to enforce their policies on the weaker political powers of developing countries. The strong political powers are used to shape the institutional trade regulations and trade process in the global arena. Consequently, these rules and regulations affect trade and economic development of Least Developed Countries (LDC) (Scherer and Watal, 2008).

The need for trade related aspects on Intellectual Property Rights is to promote equal development of trade in all sectors across the world. In the health sector, this has been a burning issue whereby developing countries are denied the Trade-Related Aspects of Intellectual Property Rights (TRIPs). The issue has placed the WTO in a hot debate with regards to the protection of human rights. Contrary to the general perceptions on international trade bodies of promoting non-bias trade participation, foster bureaucratic fairness and promote transparent relations, the WTO tends to contravene these perceptions especially with regards to the issue of TRIPs (Watal, 2011).

The issue of Intellectual Property Rights (IPR) on trade related aspects tends to attract contentions from various sects of the world. For example, the move by the WTO to amend IPR to enhance access to medicine in the public health sector is still regarded by many countries as a discriminative practice. The amendment is believed to have been done on the grounds of respecting and protecting human rights. The issue raises the question as to whether trade agreements on IPR can only be resolved on the grounds of human rights and not trade and economic development. This instance clearly indicates how international trade entities such as the WTO are being used by the developed countries to slow down the development of trade in sectors such as medicine and health.

In the light of the above observations, issues touching on TRIPs have been evaluated with regards to innovation, technology transfer, investment and international trade. Developing nations have therefore gone ahead to assess the potential economic benefits that will generate from IPRs. However, revelations of the regulations stated in the TRIPs agreements have been criticized to embrace the practices in developed countries. Therefore, a move by the WTO to protect IPR tends to promote development of trade in the developed countries. This has been manifested by the dominance of developed countries IPR possession. Most companies in the developed countries own more patents than the companies in the developing countries. Consequently, in some cases, developing countries are forced to believe that agreements on TRIPs are meant to foster protectionism on a technological stance whereby the developed countries innovate and develop products that are later sold to the consumers in the developing countries (Hoekman and Kostecki, 2008).

Agreements on TRIPs have also been found to create very powerful monopolies that control the market, for instance in the pharmaceutical and technological businesses big companies from the west control almost all the trade activities in these two sectors. Pharmaceutical companies are the most common examples of tools that are used by the developed countries to exploit developing countries. The companies take advantage of their global presence in the international market to charge very high prices for their products in the developing countries (Richman, 2009).

Most developed countries tend to inhibit the inception of pharmaceutical patents in the developing countries due to reasons of insecurity. The USA and Canada have several times instituted sanctions on pharmaceutical patents from the developing countries due to terrorism.

The trends tend to increase drug monopolies in the developing countries and hence creating a situation of Medical apartheid. Certain provisions of WTO requires the institution of IPR in developing countries to take place by 2016, however, such are moves are not expected to affect pricing and access to medicine in developing countries. This has been evaluated on two different drug cases which are ARV drugs used in the treatment of HIV and Malaria drugs. Despite the fact that most developing countries have the raw materials used in manufacturing such drugs, monopolistic nature of the companies in the developed economies will not enable the patients in the developing economies to acquire the drugs at low prices. In some countries such India and Brazil, intense foyer from the NGOs and government entities have forced to international pharmaceutical companies to lower prices of ARV drugs. TRIPs have also affected access to such drugs in developing countries given the provisions on agreements which tend to establish the grounds to grant the licenses and freedom to developing countries before they can produce the drugs (Hoekman and Kostecki, 2008).

In addition to trade the above issue of IPR, processes and meetings at the international front on trade issues tend to discriminate developing countries. These processes and institutions determine the politics of power. There are beliefs that developing countries do not get equal treatment in the international bargaining table where issues are ratified. Decision making on important issues such as transparency, competition policy, investment and trade and procurement facilitation is entirely decided on the basis of consensus (Richman, 2009)

Decision making process in the WTO is guided by four major approaches. These approaches have different operational modalities; however, the most important aspect in these approaches is the impact on developing countries. The most common approach is called one-participant-one vote system whereby the vote casted by a participant during the decision making process is entirely based her economic power. Despite the fact that this approach of voting tends to promote the provisions of chapter 9 of WTO agreements which state3 that all the members have the equal opportunity to participate in the voting process irrespective of their economic power, the approach tend to limit the voting rights of textile monitoring body where most trading interest of developing countries are found (WTO, 2004).

Section 9 of the WTO agreements also provides that decisions will be arrived by majority of the votes shed, however, striking enough, this provision does not favor developing countries given that fact they are the majority of the votes. The difficulties in influencing financial decisions in IMF where developing countries constitute more than 80% of the votes are also very eminent. Powerful economies like the USA highly influence decisions due to their veto power. This therefore reveals that with regards to voting WTO is therefore a sympathetic ground for developing countries. However, the principle of one vote one-participant-one has not been lauded in helping developing countries at the negation table since most of the counties are not ready to embrace principle and take advantage of it. The second of approach voting in WTO meetings and decision making is widely guided by the principle of consensus. The principle states that decisions will be arrived when the members present in the meeting unanimously propose a decision (WTO, 2007).

In conclusion, all the decisions and voting processes tend to embrace the veto powers of powerful developed economies and therefore decisions made on world trade issues by international institutions will always be at the interest of the developed countries and hence marginalizing developing countries in various areas of trade and economic development (WTO, 2004).

References

WTO (2004) Agreement establishing the World Trade Organization, http://www.wto.org/english/docs_e/legal_e/final_e.htm.

Richman, B. (2009) ‘Consensus, ICANN and the public interest: pressing issues, Berkman affiliate analysis’, Workshop presented by the Berkman Center for Internet and Society and the Markle Foundation, Los Angeles, Organization, http://www.wto.org/english/docs_e/legal_e/final_e.htm.

Hoekman, B. M., & Kostecki, M. (2008) The Political Economy of the World Trading System: the WTO and beyond, 2nd edition, Oxford: Oxford University Press.

Stallings, B. (2005). The New International Context of Development. In Global Change, Regional Response: The New International Context of Development, edited by Barbara Stallings. Cambridge: Cambridge University Press http://users.ox.ac.uk/~ntwoods/.

Watal, J. (2011). “ Pharmaceutical Patents, Prices, and Welfare Losses: A Simulation Study of Policy Options for India under the WTO TRIPS agreement, ” World Economy, vol. (23),.5, pp. 732-752

Scherer, F. M., & J. Watal. (2008). “Post-TRIPS Options for Access to Patented Medicines in Developing Countries,” Journal of International Economic Law, no. 5, pp 913-939.

Matias, V. (2004). Technology, Finance and Dependency: Latin American Radical Political Economy in Retrospect“. Pp. 540-545.

WTO (2007) General Council Informal Meeting (28 March), Internal Transparency and the Effective Participation of all Members, Main Points raised by Delegations, JOB(00). http://www.wto.org/english/docs_e/legal_e/final_e.htm.