1. What is the World Trade Organization? What is its role in the world economy?
The World Trade Organization (WTO) is the only international organization that deals with the rules of international trade. It is a member consensus-based there to lay down the rights of governments in these trade agreements. It is essentially provides the framework of conduct between the two countries.
The World Trade Organization was born on January 1st, 1995. Its rules had mostly been in place since the late 1940’s, but had been operating under the name, General Agreements on Tariffs and Trade (GATT). When the GATT was first presented at a conference in 1947, there were 23 countries that decided to follow these agreements. Today in the WTO, there are 139 countries that are now members. They are responsible for over 95 percent of World Trade. In the first 50 years of their existence, the WTO managed to lower the average tariffs on manufactured goods in developed countries from 40% to 4%
When WTO rules impose disciplines on countries’ policies, it is the outcome of negotiations among WTO members. The rules are enforced by the members themselves under agreed procedures that they negotiated, including the possibility of trade sanctions. The sanctions too are imposed by member countries, and authorized by the membership as a whole.
The objective of the rule-based system of international trade that the World Trade Organization has implemented is to ensure that access to international markets is not disrupted by last second import restrictions and taxes. The WTO imposes a firm discipline in many areas, especially the pricing of exporting goods. The major function of the WTO is to provide a smooth and predictable flow of international trade. They facilitate and administer all trade agreements that member countries take place in. They also take a place in helping settle disputes among member countries, while reviewing the trade policies of member countries to help prevent disputes from happening.
Besides trade in goods, it covers a number of issues related to international trade, such as services, intellectual property rights, anti-dumping, safeguards, non-tariff barriers, dispute settlement, etc., making its approach highly comprehensive.
Over the years, the divide between the developed and developing countries in the WTO has widened, leading to deadlocks in the process of multilateral negotiations. It has also triggered widespread demonstrations (Fig. 5.5) across the world due to conflicting interests of member countries. Although developing countries form a much bigger group numerically under the WTO, the developed countries significantly influence decision-making.
2. Describe the four original dimensions of culture as identified by Geert Hofstede in detail.
Geert Hofstede is a Dutch professor at Maastricht University in the Netherlands who teaches in Organizational Anthropology and International management. He is also a social psychologist who pioneered research on cross-cultural groups and organizations. He is most known for his cultural dimensions theory, which describes national culture through these dimensions. The original four that he developed were Power Distance, Individualism and Collectivism, Uncertainty Avoidance, and Masculinity vs. Femininity. He developed a fifth and sixth dimension later on, which are Long Term Orientation and Indulgence vs. Restraint, however; I would like to focus on the original four.
The first dimension, the Power Distance Index (PDI), is a measurement of how much the less powerful members of societies, institutions, etc. accept that all power is distributed unequally. If a culture, or country, has a high power distance, it means that the less powerful part of society accepts power relations that are autocratic. In a culture, or country, has a lower score on the PDI, it means that the people of society expect and accept power relations that are much more democratic.
The next dimension, Individualism and Collectivism, is integrated with the PDI in the sense that countries with low PDI scores to be individualistic, while countries with high PDI scores tend to be collective societies. According to Hofstede, individualism is the type of society where we find have no or very little ties between individuals. According to individualism, everyone is expected to take good care of herself or himself and his or her immediate family. This means that although one person needs another to be there, they expect that that person will do what it takes to get by. Cultures that are individualistic value personal time and freedom, and they are motivated by material rewards and challenge. It is very common in Western Europe and North America. Collectivism, on the other hand, is when people are born into cohesive societies where they are immediately cared for and everyone in the culture is responsible for the next. There is much more interest placed on the well being of the group rather than the individual. This includes physical, mental, and socio economic well being. Collectivism is very common in countries with heavy cultural denominations such as Africa and the Middle East.
The third dimension, the Uncertainty Avoidance Index (UA), refers to how much a culture feels jeopardized by unclear situations. In cultures with a high UA, ambiguity in everyday life is viewed as a threat. Extreme ambiguity, however, can be seen as a threat in almost every culture. The UA Index heavily focuses on how cultures deal with the anxiety of the unknown. This means that people in cultures with low UA are much more likely to take risk or see new ideas as opportunities rather than threats. People in high UA cultures feel as if they need to have structure and stability rather than facing the unknown.
The final dimension, Masculinity vs. Femininity, shows the roles that each of the two traditional genders play in a given society. In a highly masculine culture, men would tend to be assertive, tough, and almost completely focused on material success. This means that women would tend to focus more heavily on quality of life. In a highly feminine culture, both genders would be more modest and focused on quality of life rather than material success.
3. We discussed the ramifications for Great Britain leaving the European Union. Discuss the possible economic, political and legal ramifications of them leaving. What are the unknown factors?
The United Kingdom leaving the European Union (EU) came as a shock to the entire world. It caused a very sharp, yet short-term, hit to economies across the world, including the Dow Jones, which fell over 600 points in the first day. Brexit has caused a lot of unknown possibilities to cross the minds of many individuals and groups across the world. The United Kingdom and the EU have two years from June 2016 (one year left) to discuss the negotiations of their separation, as well as to completely and formally leave.
For one, the ongoing negotiations between the EU and the United Kingdom have both sides trying to stand their ground. The EU is likely to demand a settlement of all of Britain’s unpaid bills and they may even refuse to discuss any kind of trade deal until the UK agrees to pay them. It is definitely possible that both sides will back off and talk much more reasonably with one another as both the UK and the EU would face major economic ramifications if a trade agreement can’t be compromised. The UK would lose all trade ties with the countries in the EU, and the EU would suffer too. The UK is one of Germany’s largest export markets.
World events could also radically change the context of the Brexit negotiations, during the two years set aside to strike a deal. With Donald Trump in office, the international and global context is uncertain. Whether it be that the U.S. government will wind up wanting to cut down on trading with other countries, or even a war somewhere in the world that the U.K would step into as allies, is all uncertain.
4. Describe a country that is a theocracy and how that impacts their view of the world and how the country is run.
Saudi Arabia is an Islamic theocratic monarchy. It is known to have one of the most tightly controlled governments in the world while being the largest country in the Middle East. There is a large influx of tourists and visitors to Saudi Arabia because it is home to the two holiest places in Islam, Mecca and Medina. Many Muslims from around the world take place in the Hajj, which is a religious pilgrimage to Mecca. Saudi Arabia is also a very wealthy country as its borders contain about a quarter of the entire planets petroleum supply. About three-fourths of the countries money comes from the oil hotbed that they sit on, which has caused much of the country to live very well and the government to control very lucrative assets.
Islam is the state religion of Saudi Arabia, and basically all citizens of the country are Muslim. Saudi Arabia claims to have no laws forbidding Saudi people to practice other religions; the Saudi Arabian society and government heavily discourage people actively practicing other religions in their country. The legal system of the country is based entirely on Sharia law, and the government has stated that the Holy Quran and the Sunni school of Islam are the nation’s constitution. If one has been caught broadcasting another religion, they will most likely be targeted by the Religious Police (yes, they actually have religious police). A Sunni Muslim family controls the ruling House of Saud, the government. Sunni Islam is the State religion of Islam. Sunnis represent an overwhelming majority of the people in Saudi Arabia, while Shiite’s make up the minority. Protesting or contradicting Sunni beliefs and celebrations are heavily discouraged and could cause imprisonment.
Sharia law requires the Muslim people to dress very modestly, and the people of Saudi Arabia strictly adhere to this principle, as they tend to dress in the conservative hijab. Muslim men are expected to wear a generally white robe that covers the whole body as well as a keffiyeh, which is a checkered headdress. The Muslim women are required to wear a full body robe as well as headdress that cover the face. Islamic practice is very strict about modesty and the Saudi Arabian government even expects foreigners to at least make an effort to dress modestly, although they don’t need to adhere to the strict dress code.
It truly is quite amazing to see how much religion influences countries around the world as we, in America, are so accustomed to the law prohibiting the mix of church and state. I believe that a major reason the majority of the Saudi population is predominately Sunni Muslim is because there is such a low tolerance for anybody else, which means people of other faiths have either left or conformed out of fear.