Global Trading System and the Political Power in the Global Economy

How Does the Operation of the Global Trading System Help to Understand How Political Power Really Works in the Global Economy?
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Rising global commerce flows are a fundamental aspect of globalization. Trade policy liberalization in different developing economies augments international business flows. A global inclination towards democracy has characterized the shift to free trade. The global trading system is a considerably sophisticated interconnection of agreements, regulations, and negotiations which fundamentally facilitate the movement of goods, capital, and services across different countries. Although it is often seen as a neutral mechanism for enhancing the growth and development of the economy, the global trading system's operation manifests how political power plays in the worldwide economy. Noteworthy, political system democratization undermines the government's ability to leverage trade barriers to build political support. In this context, political leaders in countries with strong labor laws are likely to support the reduction of trade barriers due to democratization. This paper will critically analyze the role of the global trading system's operation in understanding the exercise of political power in the global economy. It is derived that the worldwide trading system contributes to understanding political power relationships within the global economy in terms of trade dynamics negotiations, relative bargaining power, conflicts between developed and developing economies, and democratization of trade laws.
The global trading system depicts political power in various ways, including negotiations of trade dynamics. Milner and Kubota (2005) assert that democratic governance is integral in formulating and modeling trade policies in developing states. Substantially, such countries with a clear democratic political space often incorporate liberal trading policies that represent their citizens' preferences and domestic interests; however, in the majority of political systems, including the democratic ones, a few selected government and industry representatives who can access fundamental resources and information conduct trade negotiations (Milner & Kubota, 2005). In this context, such negotiations are subject to manipulation by various political parties considering that they can benefit the negotiations' results. In addition, within the law-driven approach, international organizations' bargaining power derives from procedural and substantive legal endowments. Decision-making guidelines influence agenda-setting and voting authority, which determines ramifications. There is also tremendous conventionality appraising the ramifications of decision-making guidelines on outcomes and bargaining to achieve contracting consensus at the WTO/GATT (Steinberg, 2002). These procedures have been used in international organizations' politics.
Moreover, the influence of political parties or interest groups shapes the trade negotiations' power dynamics through relative bargaining power in various countries. The operations of the global economic system show an intense competition between the two power models: the shadow of the power model and the shadow of the law model. The shadow of law model implies the power of institutions and rules constraining states' operations. On the other hand, the shadow of the power model involves the capacity portrayed by countries to utilize their political and economic resources to formulate the institutions and rules in the context of the global trading system (Steinberg, 2002). Moreover, Steinberg (2002) posits that the correlation between the power models is ever-changing due to the relative bargaining power of various countries and the wider economic and political areas where the negotiations happen.
Consequently, the formation of the World Trade Organization (WTO) was due to trade negotiation dynamics that happened in 1995. The conflicts between the developing and developed countries concerning the rules that governed the global trading system led to such negotiations. Developed states advocated for a comprehensive framework to liberate trade, such as exempting industrial goods from tariffs and ensuring markets are open for intellectual property and services. On the other hand, the developing countries presented concerns that implementing such policies would significantly affect their domestic industries and thus thought preserving their policy space was warranted. The end agreement showed a compromise of the two competing interests whereby the developed states secured fundamental intellectual property and service concessions (Steinberg, 2002). Nevertheless, developing countries benefited from extended transition durations for tariff exemptions and the capacity to retain some policy measures, especially in sensitive industries. In addition, the political dynamics of the global economy significantly depict how different countries resolve their disputes. The WTO offers a dispute resolution framework that member states adhere to while guided by a system of procedures and rules. However, political power significantly influences such systems within or without the organization (Steinberg, 2002). Arguably, the exercise of polit...