International Trade Walmart
International Trade, the WTO and Wal-Mart
The concept of a global community has become one of the defining features of our shared economy. With the internationalization and liberalization of trade throughout the world, there is a thrust toward the removal of barriers for nations and corporations desiring to conduct business across national borders. This has stimulated the creation of such international economic alliances as the World Trade Organization, which is charged with providing oversight for said nations and corporations. But evidence provided in this discussion will suggest that the current conditions promote a deep inequality where those nations and corporations with the greatest resource availability are in a position to exploit labor and consumer markets to a destructive economic end. The case example used for this discussion in the Wal-Mart retail chain, which uses the deregulatory conditions of free trade and the laxity of the WTO in order to profit at expense of both local and global economies.
It is appropriate to initiate this discussion with an explanation of trade liberalization. The process of globalization, spurred by the inception of ‘free trade’ and a strategy of closer economic inter-dependency between nations, has produced a framework for global re-organization. In no small way accelerated by the dissemination of communication technologies such as the internet and mobile cellular devices, globalization primarily concerns the breakdown of barriers to free trade between sovereign states and the elimination of restrictions to the multinationalization of corporations. Its advocates argue that this is contributory to a system which is collectively beneficial to all parties involved. However, the set of talks which have persisted to shape the process of free trade proliferation reveal in their goals, their accomplishments and their shortcomings the inherent complexity and the prevailing obstacles in the realization of globalization’s goals. From the Uruguay Round which perpetuated from 1986 to 1994, to the followup Doha Round which began in 2001 and which remains in a stagnant session, there is clear evidence that the process of free trade remains in conceptual and practical flux as its participants and those who have yet to benefit from its claimed merits work to shape its parameters. As a result of this state of flux, globalization has the effect of not simply failing to serve developing or westernized economies but even worse, of reinforcing negative trends of economic obscurity for developing nations. The early gains of globalization to all parties involved are ultimately undermined by the costs to economy and constitutionality in such contexts.. At the heart of this condition is the World Trade Organization (WTO), a group which came into being in 1995, is comprised of more than one hundred nation state members, who assembled in 1986 in Uruguay with the objectives of improving conditions of trade betwixt unequal economies.
Perhaps nowhere is this clearer than in the effects which trade internationalization has had on the U.S. And global retail markets. This points us in the direction of the organization at the center of this case discussion on globalization. Wal-Mart is an American firm which has long maintained a distinct competitive advantage by operating, producing and distributing at a minimum of cost, passing on bargain standards to the consumer. As the largest corporation in the world, its most powerful retailer and the single largest employer in the world, Wal-Mart would enjoy the resource capacity to seize cost-potential advantages as they have emerged, enabling it to stay at the forefront of the global retail market. However, Wal-Mart’s approach to the opportunities of globalization reveals it to be guilty of extensive human rights violations. Under the thumb of its impetus for low-pricing, Wal-Mart is notorious for squeezing retail items out of its producers at absolute bargain-basement prices. The consequence of this is quite often felt by the production laborers themselves, who are severely affected in terms of equitable living wages. This speaks to the two issues of primary focus on this discussion, which denotes that Wal-Mart is a company which imposes deeply negative conditions upon Americans. Namely, the issues of outsourcing American jobs to cheaper markets overseas and of underselling local competition in American consumer markets are collectively enriching the company by sapping the American economy of both production and labor.
This is an argument which forms the basis for the critical examination of the firm by Frontline, which is a feature of the Public Broadcasting Station (PBS). Here, a prying investigation into Wal-Mart’s practices and behavior indicates that as much as any force, Wal-Mart is responsible for the degraded quality of the American economy in the face of globalization. Its exploitation of an evolving system of trade has opened it to opportunities for expansive growth and simultaneous disruption of the patterns of American consumer practice. As reported in the introduction to the PBS investigation, “Wal-Mart’s power and influence are awesome,’ [PBS correspondent Hedrick] Smith says. ‘By figuring out how to exploit two powerful forces that converged in the 1990s — the rise of information technology and the explosion of the global economy — Wal-Mart has dramatically changed the balance of power in the world of business. Retailers are now more powerful than manufacturers, and they are forcing the decision to move production offshore.'” (Frontline, 2004)
Here, the discussion proceeds with the argument that Wal-Mart has not simply adopted the types of practices that are forcing American jobs overseas while also devaluing these jobs at the expense of foreign laborers, but additionally, its zealous price-cutting has forced countless competitors to engage the same destructive economic practices simply to remain in business. This renders Wal-Mart not just a negative corporate citizen but more problematically, a largely negative force on a fully permeating economic and social scale. As Smith (2004) contends, “Wal-Mart is one of the key forces that propelled global outsourcing — off-shoring of U.S. jobs — precisely because it controls so much of the purchasing power of the U.S. economy,’ says Gary Gereffi, a Duke University professor who studies global supply chains.” (Smith, 2004)
In no small regard, Wal-Mart’s monumental profitability is a direct outcome of the global business environment fostered by the WTO. Charged with the brokering of financial aid to developing nations, it has become notorious for the inequality of its policy representation and for its impractical demands of repayment from impoverished nations for aid debts. By and large, the WTO has come to be identified with the collateral damage of free trade in the widespread exploitation of third world labor and the ever growing chasm between rich and poor.
In consideration of the global trade agreements and their implications to the global community, it is important to evaluate the relevance of World Trade Organization (WTO). As this discussion will yield, the agreement is the product of a history of international conventions as well as an actuality produced by the trade liberalization sparked after the end of the Cold War. To the latter occurrence, one may attribute the opening of countless new international trade relationships, the deconstruction of politically motivated blockades and the vast flooding of the international community with nations in genuine need of development strategy. To the former, the existence of prior international agreements such as the Paris Convention for the Protection of Industrial Property (1883), the Berne Convention (1886), the General Agreement on Tariffs and Trade (GATT, 1947) and the Patent Cooperation Treaty (1970) would all contribute to the intent and legal precedents of global legislation concerning trade and proprietary behaviors.
Though all of these conventions would promote the idea and the parameters of an international standard on the subjects of trade, it would not be until the establishment of the WTO that any real global mandate could exist for contending with the subject. The WTO would be the result of the Uruguay Round of talks. Though its participants entered with the intent of resolving certain conflicts implicit to the GATT, they exited nearly a decade later under the agreed conception that there was a need for an entirely new form of economic alliance. When the Uruguay Round of trade talks commenced, the intent was to arrive at a set of conditions within which the deregulation of trade could nonetheless provide the protections that were necessary to ensure its success in raising collective economic prospects. Particularly, Uruguay would pay recognition to the demand for more effective prevention of farming subsidies. But even as it attempted to do so, it would be faced with the imposing challenging removing the inherent inequality of nations engaged in the process, and would thus come up somewhat short on many of its goals. Accordingly, one article denotes that “although the 1994 Uruguay Round of trade talks succeeded in bringing agriculture into the rules-based trading system, it did little to actually reduce agricultural trade protection.” (Beirele, 2002) This is because, according to many of its critics, the Uruguay round would be dominated by the interests of the more powerful and industrialized nations and corporations engaged in the proceedings. In many instances, even beyond agriculture, the intentions which emerged during the talks would produce conditions that challenged developing nations to sink or swim.
The Uruguay round would designate that the WTO, through its primary role as a mediator, negotiator, and monitor of international trade policies and disputes, serves by design as a gatekeeper of international trade, offering the structural conditions and assembled authority to exact a legitimate level of authority over its member nations.
A good example of how the WTO has strengthened the international governing community’s ability to provide oversights for its member nations comes from the 1994 rounds of negotiation in Uruguay which essentially defined and forged the WTO from the shadows of the GATT. In a consideration, for instance, of the newly afforded power to engage in the process of dispute settlement, we can see that the WTO would have an expansive impact on the power of those who had already acted under the propositions of the GATT. The declaration produced by this round of talks would proceed by stating of its party nations that “recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development.” (Mercatoria, 1994) This set of provisions as an impetus for the development of the WTO was to suggest that the failure of the GATT to facilitate the effective growth and development of third world economies was to be directly addressed. Thus, the organization itself would be awarded expanded authorities and entitlements under its new name.
With these new authorities, the WTO would aggressively foster an atmosphere of deregulation for those with the resources to move operations into these developing contexts. The influx of production operations would introduce a bevy of negative conditions for new host nations, with our case discussion on Wal-Mart serving as a particularly effective example of said conditions. What is perhaps most compelling about the meteoric rise of Wal-Mart’s relevance to both the nature of America’s consumer culture and the scale of its swelling late 20th century economy is its capacity to accomplish this with an absolute commitment to the lowest consumer prices. This is a measure which Wal-Mart has attained almost regardless of the consequences outside of its monstrous market-share. In a collection of critical essays edited by Lichtenstein (2006), entitled Wal-Mart: The Face of Twenty-First Century Capitalism, the reader is given disturbing insight into the duality of Wal-Mart. Lichtenstein describes a chain which simultaneously imposes the expectation of low cost upon its consumer and the practice of globalization as a measure of cost-cutting upon its competitors.
This has a ripple effect on the economy as a whole, cutting through a broad swathe of sectors in a practice which essentially off-shores production, contributes very little spending to local advertising and creates increasingly fewer domestic stock and facility jobs by relying upon a global supply chain. As a result, “with quick and reliable 2-day turn around, Wal-Mart is able to maintain lower levels of inventory and still meet customer demand. These lower inventory levels result in either a reduced floor plan with lower carrying costs and lower interest expense — or a greater diversity of products on the store shelves.” (Collins, 2007) Naturally, this enhances the profitability of the operation but also significantly diminishes the number of jobs created by the chain on the domestic front. This seeming contradiction points to the core irony of globalization with respect to its stated goals of collective economic and social advancement.
Ultimately, given the pattern demonstrated by legislation on trade across the last century, there is no denying that to a large part, globalization is a process which is the inevitable byproduct of an evolution beyond the relevance of the nation-state in a shrinking global village. As many regard it, the endeavor is a naturally occurring “paradigm shift from which there is no escape.” (Monshipouri, 2005) And while market theory tends to bear out this resolution, it does not suggest that the approach which is currently being undertaken is the most optimal way to make such a paradigm shift function to the benefit of an international collective. The WTO has afforded the conditions of the GATT a body with the capacity for conscientious oversight and intervention, though it still remains a question largely unanswered as to whether or not the WTO will actually live up to this role. The behaviors and consequences demonstrated by such companies as Wal-Mart seem to suggest that the WTO is deeply biased to the interests of large corporations and developed economies at the expense of labor classes, small business, consumers and developing nations.
Even further, as noted here above, the reliance upon this model of profitability means that Wal-Mart need spend little money outflanking local businesses. Its low prices generally trump those which local competitors — still reliant upon local production and domestic labor costs — are able to provide. Thus, even as Wal-Mart disrupts its competitors, it simultaneously damages local advertising businesses. Indeed, Fitzgerald (2002) argues that there has been a stultifying effect on the advertising community even as the Wal-Mart has a detectably negative impact on the local economies where it establishes its presence by pricing out locally owned competition and devastating community prosperity. Research denotes through a discussion that, amongst other small town locations, in such towns as St. Robert, MO, “this isn’t all that’s happened since Wal-Mart parked its big box out by State Highway 63. The store has killed some important newspaper advertisers.” (Fitzgerald, 2002) This is to note that as Wal-Mart has systematically eliminated local competition and undermined labor interests in small communities, it has also willfully resisted the demand to advertise through local or community-based methods. Therefore, its television advertising campaigns have amounted to an active destruction also of many small publications and media outlets which have relied upon such retailers in the past for survival and success.
Concerning that which advertising brings to a local economy, this represents a true paradox of economic principle, with Wal-Mart’s enormity going unmatched by its contribution to the markets peripheral to retail. Indeed, for a company “whose annual revenues in 2007 of $375bn were roughly equal to those of the next four global retail groups combined . . . [however], virtually all its growth in the U.S. since the first Wal-Mart store opened in 1962 has been generated organically, rather than as a result of acquisition. Advertising Age estimated global measured advertising expenditure of $734m in 2007, making Wal-Mart the world’s #48 advertiser.” (AdBrands, 2008) Naturally, this constitutes a serious problem not just to local advertisers and publications but to the advertising sector as a whole. This helps to build the larger argument which surfaces in any discussion on the nature and impact of the War-Mart corporation. That is, its business model and total orientation toward profitability by way of affordability demands it to cut corners in such areas as production, labor, advertising, product quality and community orientation. In the absence of these forces, its benefits to consumers are far outweighed by that which it extricates from the economy. By virtue of its approach, it inherently resists the rational market demand to return its revenues to a healthy economic cycle.
Quite to the point, the process of globalization has had a damaging impact on local economies in the United States and has led to wider exploitation of labor and environmental laxity in the developing world. In both categories, Wal-Mart is a world leader. The literature available to us is quite extensive, with those selections sampled here truly only scratching the surface of this subject. However, what is available is sufficient to demonstrate that Wal-Mart’s approach to globalization as a means to exploit nascent markets for the purpose of cost-cutting and its treatment of labor with the same model of low-overhead and high profitability have had the impact of substantially damaging the American economy and the global economy as a whole. The makes Wal-Mart a perfect template for the production and retail sectors in the era of globalization, at least if we are to use this to understand the reasons that free trade has fallen short of its stated goals.
Indeed, at present, the WTO’s accomplishments are essentially a decade and a half of unequal standards in trade-partner nations that have not aligned with those held as fundamental in the developed world. Therefore, current free trade legislation has not simply fallen short of its goals for western growth but has even further deepened the crises of economy, civility and ecology for the developing and not yet developing spheres The early gains of globalization to all parties involved are ultimately superceded by the costs to economy and constitutionality. Until it is executed with proper enforcement of international standards in environmental regulations, labor conditions and corporate restraint by the WTO and its individual member states, free trade will continue to bear the same destructive implications as did the incarnations of imperialism which came before it. At present, the Doha Round is in session, but stalled based on core principle disagreements within the world community. It is essential that these disagreements are resolved to the equalization of differing economic scales and with the delineation of clearer regulatory oversight for the behaviors of such corporations as Wal-Mart. This should include equalizing forces such as stricter environmental regulations and the extension of a global living wage.
Indeed, companies such as Wal-mart are a clear demonstration of how international trade has been largely mismanaged as a result of both its fundamental favoritism for development nations and its emphasis on full deregulation. We can see in the discussion here that Wal-Mart is not just guilty of offenses which are ethically questionable but also of practices which are destructive to the economy overall.
Works Cited:
AdBrands. (2008). Wal-Mart Stores (U.S.). AdBrands.net.
Beierle, T. (2002). . From Uruguay to Doha: Agricultural Trade Negotiations at the World Trade Organization University of Connecticut: Discussion Papers.
Collins, J.C. (2007). Supply Chain. Accounting Software Research. Online at http://www.asaresearch.com/ecommerce/supplychain.htm.
Doha WTO Ministerial. (2006). Ministerial Declaration. The World Trade Organization.
Fitzgerald, M. (2002). Wal-Mart’s Deadly Impact On Advertising. Editor & Publisher. Online at http://www.editorandpublisher.com/eandp/news/article_display.jsp?vnu_content_id=1501039
Frontline. (2004). Is Wal-Mart Good For America-Introduction. PBS.org.
Mercatoria, L. (1994). WTA/WTO and GATT Uruguay 1994. University I Oslo.
Monshipouri, M. (2005). Identity and Human Rights in the Age of Globalization: Emerging Challenges in the Muslim World. Global Policy
Forum. Online at http://www.globalpolicy.org/globaliz/cultural/2005/0502identity.htm
Smith, H. (2004). Who Calls the Shots in the Global Economy? PBS.org.
World Trade Organization (WTO) (2001). DOHA DECLARATION: Declaration on the TRIPS Agreement and Public Health. WTO: Ministerial Conference.
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