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ANALYSIS ON THE ROLE OF INTERNATIONAL ECONOMIC ORGANIZATION ON THE ECONOMY OF NIGERIA: A CASE STUDY OF WORLD TRADE ORGANIZATION

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ANALYSIS ON THE ROLE OF INTERNATIONAL ECONOMIC ORGANIZATION ON THE ECONOMY OF NIGERIA: A CASE STUDY OF WORLD TRADE ORGANIZATION

 

 

ABSTRACT

This research study seeks specifically to ascertain the implications and effects of W. T. O. trade policies on the development of Nigeria economies. It will seek to answer the following pertinent questions: How has Nigerian external trade fared since she became a signatory to the W. T. O. in 1995? How has the adherence to the provisions of the organization affected non-oil exports in Nigeria? How has trade liberalization affected imports into Nigeria? What are the sectoral effects of such imports? Which particular industries are most affected by this liberal import regime? What is the direction of such effects? This research study would be useful in various ways. It will further draw the attention of the government, managers of the economy as well as the general public to the problems associated with the full liberalization of trade. It will also assist policy makers in the choice of policy options as it relates to trade, as issues raised in this study will serve as guide. It will further enhance the available literatures on the trade dynamics between developed and developing countries or between centre states and peripheral states. Finally, it is our hope that the findings of the study will stimulate further researches in this field which will further expand the understanding of the position of third world economies in the global trade system.

 

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The increasing trade interdependence between national economies provides opportunities for the growth of countries. Competition is central to the operations of markets, and also fosters innovation and productivity, all of which create wealth and reduce poverty (Ochem, 2003). To be able to do this however, competition must be free and fair. Statistics have shown that there is a clear link between free and fair trade and economic growth (EUWTO, 2014). The WTO, the principal international organization governing world trade was essentially established for the purpose of liberalizing trade. The WTO provides a forum under which the bulk of the world’s trading nations negotiate agreements concerning the conduct of trade. These agreements provide the legal ground-rules for international commerce and bind these countries to keep their trade policies within agreed parameters (Dhar, 2013). They cover a broad range of goods and services and apply to virtually all government practices that directly relate to trade, including settlement of trade disputes, regulation of trade barriers, tariffs and subsidies, government procurement, trade-related intellectual property rights, and in some circumstances maintenance of trade barriers (for example to protect consumers, prevent the spread of disease or protect the environment) (Sek,2014).  Although negotiated, signed and binding on governments, the goal of these agreements is to help producers of goods and services, exporters, and importers conduct their business, while allowing governments to meet social and environmental objectives. Thus, the system’s overriding purpose is to help trade flow as freely as possible (so long as there are no undesirable side-effects), and ensure that trade regulations around the world are transparent and predictable giving individuals, companies and governments the confidence that the regulations are reliable and not subject to sudden changes. A major achievement of the WTO has been the strengthening of its dispute settlement body with the power to rule on trade disputes and to enforce its decisions.

The Trade Dispute Settlement Mechanism is a system of pre-defined rules giving WTO members, regardless of their political weight or economic clout, the possibility to lodge complaints about alleged breaches of WTO rules and to seek reparation (Dhar, 2013). This mechanism reduces the unilateral defence mechanisms that countries previously tended to adopt, many of which provoked retaliatory reactions from target countries and sometimes led to fully-fledged trade wars (EUWTO, 014). The WTO and its predecessor, the General Agreement on Tariffs and Trade (GATT) has been enormously successful over the last 50 years at reducing tariff and other trade barriers among an ever-increasing number of countries (Crowley, 2003). The predecessor to the WTO began in 1947 with only 23 members; today it has 159 members, comprising approximately 97 percent of world trade. The creation of the WTO represented a significant step towards a more integrated and thus more dynamic international trading system. By ensuring that countries keep up the momentum of dismantling barriers to trade in subsequent trade talks, the WTO also secured the continuous promotion of free trade. With two thirds of its members composed of developing countries, the organization also offers transition economies and least developed countries (LDCs) the possibility of employing trade to advance their development efforts. The bulk of the WTO’s current work comes from the 1986–94 negotiations called the Uruguay Round and earlier negotiations under the GATT. The WTO is currently the host to new negotiations, under the “Doha Development Agenda” launched in 2001.

However, Nigeria’s trade policies seem to have recognized the need for an effective trade policy, in the light of developments in the global scene. The Trade document entitled: Trade Policy of Nigeria is a bold step in recognizing the need to be proactive at both the regional and multilateral levels of trade negotiations. Apart from focusing on the provision of trade support infrastructure required for international standard support services to producers and exporters, the document’s provision have been designed to eliminate trade distortions. Thus, trade information service, quality certification, and control are some of trade support infrastructure identified. The institutional frame work for policy implementation has also been revisited. A National Focal Point (NFP) on multilateral trading matters has been established as a forum for systematic consultation or collaboration among the various government agencies.

Similarly, an inter-ministerial Trade Policy Advisory Council, a Nigeria Trade and Competition Commission and a National Council on commerce are among the trade institution scheduled for establishment. The document also identifies possible challenges in the process of implementing the policy and recommends an appropriate implementation strategy. However, as has often been the Nigerian experience, most of the provisions of the document have, so far, not been implemented.

The General Agreement on Tariffs and Trade (GATT) was established in 1947, but it was January 1995 that it was replaced by the World Trade Organization (WTO). This was an historical land mark in the world trading system. The World Trade Organization (WTO) is significantly different from General Agreement on Tariffs and Trade (GATT) in many respects, perhaps most profoundly in the sense that while the GATT only provided a provisional avenue for dialogue and coordination of the rules and regulations on international trade, the WTO Commitments are full, permanent and enforceable. Moreover, while the provisions of GATT were mainly applied to merchandise, the WTO Commitments have extended the frontiers of trade to include services and trade-related aspects of intellectual property. Apart from attempting to correct the selective nature of multilateral agreements that were introduced to GATT in the 1980s, the introduction of a single undertaking clause makes most of the WTO provisions multilaterally binding without an exception. The mechanism for settling disputes in the WTO framework promises to be faster and more effective than in the old GATT system.

Nigeria as a developing country, the notable changes in the World’s Trading System (WTS) have been in the alterations to the structure of special and differential treatment and, hence, the ability of Nigeria to cope with the requirements for effective participation in the process of taking advantage of the system and in defending her rights.  Prior to the Uruguay Round (UR), multilateral trade negotiations had been the main feature of trade among developing countries; special and differential treatments were usually handed down to developing countries in the form of exemptions (Oyejide, 2004).

The WTO has changed all that. Now, special and differential treatments are mainly in the form of longer periods of implementation and a lower rate of reduction in commitments. The expanded range of issues that has to be taken on boards, as a result of a single undertaken clause, also complicates participation by most developing countries. As most of the commitments are time bound and coupled with lack of capacity to effectively participate, Nigeria like most developing countries is overwhelmed by the range of complex issues. The post 1995 period has also witnessed a significant increase in the number of countries acceding to the multilateral trade institution; from 134 countries in 1994, WTO members had increase to 144, as of April 2002. Two members, Cambodia and Nepal, were also welcome to the fold at the 5th ministerial conference held in Cancun in September 2003. Currently, 26 Countries are at various stages of accession to the organization. As the multilateral trading system becomes more complex, its membership has also been expanding and WTO members currently account for 90 percent of the world trade. Membership of the WTO has also increase in tandem with the number of regional trading arrangements (RTAs). While about 98 regional integration agreements were notified to GATT from 1947 to 1994 (WTO, 1995), the number of such agreements had increased to 176 as at the end of December 2003 (WTO, 2003). The phenomenal increase in the number of RTAs, which has taken place in parallel with increasing activities at multilateral level, is a pointer to the important role assigned to trade in the growth and development processes of world economies.

1.2 STATEMENT OF THE PROBLEM

Most of the current discussions about international organizations refer to the

legitimacy and effectiveness of the decisions (Ziegler and Bonzon, 2007). The problem of legitimacy is directly related to the influence of the international organizations and often to state sovereignty. The principle of consensual decision-making is the main subject of critics, being argued that they shall be made only at formal level and must reflect the power relations between states, taking the form of a weighted voting under major interests. Informal practices that lead to decision involve the emergence of some specific groups with some sort of composition, who deliberately exclude other countries (Kim, 2009). The principle of consensus practiced within the international organization has always meant that all parties have to agree upon a specific issue, but in practice tis voting system can be hidden; reality proves that the voting share of wealthier countries is more important than of poorer countries (Low, 2011). For historical reasons, many being highly criticized by the developing world, the system is tilted in favor of the rich and powerful countries. For example, whenever developing countries have the chance to gain from free trade, they have confronted quotas or voluntary export restrictions, dumping, safeguards or other forms of limitations. Moreover, instead focus on enhancing consumer welfare, the trading system strongly supports manufacturers or exporters, leading to protectionism. Much of the criticism results from the perception that trade was raised to a very high rank, while other values were slaughtered (Guzman, 2004).

          Despite differences of perspectives, critics and supporters agree that international cooperation is needed to tackle with trade and non-trade issues, such as the environmental problems, intellectual property, investments, health, international finances, modern industrialization, crises and so on. The isolationist approach of most of the international organizations ignores the wishes of member countries, conclude with building different kind of agreements in their detriment, this resulting in rules and norms that rule out concern and wishes to correct the

failures of environmental or social issues. We cannot speak about coordination as long as rules always prevail over other agreements and hold the monopoly on international cooperation (Pauwelyn, 2005). Many countries like Nigeria feel excluded or left behind by the decisions of the international organizations and for the most of the poor countries, participation in the international system remains a distant dream. For example, the international trade system is perceived as a fortress, all the discussions being held behind closed doors and favoring the powerful producers and exporters. The international organizations are seen as closed systems and those who are within those are bounded to their commitments taken in “packages”, with no way out or a way to comment upon them, because of the economic reality or simply because of an implementation mechanism more and more strict. And this results in the lack of legitimacy, poor support and a lack of loyalty to the values that underline the system itself (Sutherland and all, 2004).

Most of the critics relate easily to the existing democratic deficit within the international organizations (Elsig, 2007). Unlike the early period of their existence, the lack of legitimacy of these organizations is no longer offset by progress towards globalization.

Cooperation in an anarchic era seemed easier than nowadays, in an environment governed by rules and procedures. Increased political participation and the insistence of the members to veto decisions becomes suffocating in further liberalization and increased welfare, but also in preventing the adoption of the reforms needed to balance the system and being in favor of developing countries.

The international organizations have changed the nature, purpose and structure of

the multilateralism and globalization. They have become the main target of the lobby groups and civil society, fact which led to excessive politicization (Mercurio, 2007). Critics say that the big number of members do not easily allow the organization to reach a consensus or to effectively address the burning issues of the 21st century, this leading to blockages and disagreements during negotiations (Sun, 2011).

1.3 OBJECTIVE OF THE STUDY

  1. To examine the WTO general agreement on tariffs and trade with its member nations.
  2. To identify the areas of trade agreements between and WTO and its member nations.
  3. To examine the role of WTO in the development of Nigerian economy.
  4. To evaluate the Nigeria’s trade policy and economic development in the light of WTO.
  5. To examine the the effect of WTO on small and middle business growth and development in Nigeria.

RESEARCH QUESTIONS

  1. Does WTO has a general agreement on tariffs and trade with its member nations?
  2. What areas the areas of trade agreements between and WTO and its member nations?
  3. What are the role of WTO in the development of Nigerian economy?
  4. Does Nigeria’s trade policy and economic development tailors in the light of WTO?
  5. What are the effects of WTO on small and middle business growth and development in Nigeria?

1.5 RESEARCH HYPOTHESES

H0: There is no significant relationship between the Nigeria’s trade policy and economic development and role of WTO in the development of Nigerian economy.

H1: H0: There is a significant relationship between the Nigeria’s trade policy and economic development and role of WTO in the development of Nigerian economy.

H0: WTO does not effect in the growth and development of small and middle business in Nigeria.

H1: WTO effects in the growth and development of small and middle business in Nigeria.

1.6 SIGNIFICANCE OF THE STUDY

In Nigeria, the number of studies conducted so far on international aids and under-development in African- the Nigeria experience is limited in number, in which further study is required. Therefore this study will help in filling knowledge gap in such area. As commonly known aid is a back bone of the Nigerian economy, therefore the expected outcome from this study could also be useful in improving policy design, institutional setup, implementation, monitoring and evaluation of international aid. Besides, it can evoke further study in the area.

1.7 SCOPE OF THE STUDY

This study focuses on analysis on the role of international economic organization on the economy of Nigeria : a case study of world trade organization.

1.8 LIMITATION OF THE STUDY

  1. a) The Limitation of the study among other things include inability to access adequate data as regards to the topic understudy and as a result of most of the students in Delta state University.
  2. b) Much time was spent on carrying out this research study from the printing and distribution of questionnaires to the target population, rather than whole population which was difficult to do;
  3. c) Funding: carrying out this research involves a lot of money. This includes travelling from one town to the other gathering vital data for the study; money was expended on the printing of questionnaire, typesetting and binding of the research work into a booklet; indeed, generous incentives for both field officers and respondents in order to elicit their co-operation.
  4. d) Respondents: The researcher was faced with the problem of some respondents not co-operating fully in the providing answers to the questionnaire, seeing the exercise

as an unnecessary distraction from their businesses. There was also the problem of some respondents having misconception about the whole exercise, because they thought providing certain information about them on issues were going to implicate them.

  1. e) Materials: The availability of some vital materials for the study was not without difficulties. Vital documents like journals, literature and other relevant sources of secondary data collection were encountered with some degree of hardship. Accessing the Internet for vital and relevant data was also not easy.

 

1.9 DEFINITION OF TERMS

Aid: Aid is define to mean all financial transactions made or guaranteed by one government to another.

International Aid: International aid can be defined as financial flows from donor. These could be donor countries or even multiple organizations. View all notes to developing countries as well as countries in a transitional status. Such financial donations may include the funding of official financial loans, economic aid, funding trade, funding charity organizations, as well as military, security and political aid.

Development: Development is define to include; progression, movement and advancement towards something better. Hence it is improvement on the material and non-material aspects of life involving actions, reactions and motions.

Underdevelopment: This define as the state of an economy where levels of living of masses are extremely low due to very low levels of per capita income resulting from low levels of productivity and high growth rates of population.

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