I.                    Chinese Membership to the World Trade Organization

After more than a decade of negotiations, the accession of China in the World Trade Organization opened new doors for the development of international trade. Being among the remaining few communist leaning nation in the world, it the road towards convincing China to adhere to the capitalist notions of world trading and globalization has been long and bumpy. And with this accession, the Chinese market has become open to multinational companies. (2000)


China has been known as the largest textile exporter in the world. The accession of China in the WTO means that production and exportation of textile products would ensure balance in the said industry. This denotes that the market share owned by the Chinese textile manufacturers and exporters are to be mitigated such that fair competition comes into play. (2002,) This is good news for textile companies all over the world, particularly the other member states of the WTO. With the control of the market share and possible espousal of fair competition, major players from the United States and the Pacific Rim could partake in the textile industry.


Another impact of the accession of China in the WTO is that their distribution channels are now open to the other international players. The potential for development and innovations in the distribution channels of China is imminent. With possible policy changes such as the reductions of barriers in the distribution and distribution services, opportunities for foreign firms are available. (2000) It will provide them the liberty to tap areas in the country where firms could acquire a considerable competitive advantage in the international setting.


   


II.                  Inward Foreign Direct Investments

Inward FDIs includes all the investments coming from nations external to the territory of a state. With the advent of globalization and emergence of multinational firms, this phenomenon has become a standard among countries. International organizations like the WTO have created greater possibilities for these investments to be accessed by nations by reducing the existing trade barriers among its member countries.


With the surge of these investments in several states, national governments have to take action. There are several approaches wherein countries manage their inward FDIs. In the context of China, government controlled corporations still holds on to a great deal of power in the market since they possess a good number of loyal followers in the consuming public. (2000) In terms of policies, the Chinese government consistently tries to protect their local industries against these FDIs. However, with their accession to the WTO, their actions are limited. In a study of  (2002) they discovered that the inward investments provided by FDIs have prompted reforms in the policies of the government by developing high-tech and innovative products by the local firms.  Subsequent effects of these reforms entailed improved export performance through the government’s initiative to encourage a more diversified type of inward FDI.


 


Another country that has been among those who made the most of inward FDI is Mexico. It has been among the top recipients of FDI inflows for several years already. (2000) This country has managed these FDIs by continuously and religiously monitoring the monetary policies implemented in the state. With the country constantly taking care of its interest rates, exchange rates, and inflation rates, firms have persistently preferred Mexico over other countries because of its sound monetary policies. (2000)   


 


III.                Stable Exchange Rates

 


The East Asian crisis in 1997 is a primary proof that management of exchange rates is essential in the economy of a state. This crisis has considerably affected the developing countries in the said region. With these economic upheavals in the said year, the exchange rates management of each state in the said region has failed to cope with the changes considerably. ( 2002) In the said crises, a common phenomenon that has been identified in all the affected nations is that there has been a reckless lending among the financial institutions in the region. (1998) In this manner, government institutions charged of monitoring and helping these financial institutions, central banks, to regain their balance fall short of what is expected of them. This brought about increase in insolvencies and collapse in asset prices and thus an unstable exchange rate.


 


With the help of the International Monetary Fund (IMF), particularly with their structural adjustment packages, the countries affected by the crisis have stabilized their economic systems and eventually provided the strength of their individual currencies. ( 2001) With these, the governments in the East Asian region implemented courses of action that stabilized their exchange rates. The IMF instructed them to reduce the spending of the government. This will allow the deficits they have incurred to considerably be reduced. Moreover, the IMF has also instructed them to uncompromisingly raise the interest rates in their economic systems. (2001) In so doing, the confidence in their state’s fiscal solvency is restored and the exchange rates are protected from any other impending crisis similar to that took place in 1997.    


      


IV.               Firms and Foreign Direct Investments

 


In this globalized setting, firms tend to take on other markets in order to generate more profit. With the emergence of companies like the WTO, access to the market has been considerably easy for companies and corporations. Market access means that the barriers for trade are predominantly lessened once a member nation signs in at the agreement. (1995) This is to encourage international trade by means of negotiations.


 


Firms also tend to invest to other countries because there is a high possibility of having an equal playing field. It is a principle that WTO members adhere to: the espousal of fair play among the member countries in terms of trading. (1995) As the main purpose of the organization is to liberalize trade by lowering tariffs, it is also the commission of the organization to establish fair competition in this aspect. The institution of rules and regulations specifically present that the organization is trying to establish a set of criterion to whether an action of a member country is considered fair or unfair. It is also in these rules that the organization would be able to tell the governments of every member nation how to act in response in the occasion they encounter any form of unfair play.


The liberalized pattern of trading as well as the possible access to cheaper expenses (as operations and expenses are subject to exchange rates) makes these international firms take their investments to foreign soil. With the emergence of such organizations as the WTO, the possibly of failure has been significantly reduced. This makes foreign direct investment ideal for firms because it is financially appealing and entails less cost in implementing.


 



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