Managing Global Alliances

 

Introduction

The world was undergoing tremendous change even before the horrors of 11 September. Both democracy and the market economy have proliferated globally since the collapse of communism, and revolutionary developments in communication and information technology have helped trigger an increasing interdependence between countries at an unprecedented pace. Further, the end of the Cold War signaled the displacement of ideological obstinacy in favor of a heated pursuit towards economic advancement and competition for resources and technology. Economic statecraft, whereby nations use trade, loans, grants and investment to influence the action of other states, is now becoming more important.

The process of globalization is commonly recognized to be characteristic of contemporary international developments.  Contemporary processes of globalization have several dimensions or faces: technological, cultural, religious, economic and political. First, it suggests that political, economic and social activity is becoming worldwide in scope. Secondly, it suggests that there has been an intensification of levels of interaction and interconnectedness among the states and societies (Held, 1991). Among these relations are those created by the progressive emergence of a global economy, the expansion of transnational links which generate new forms of collective decision-making, the development of intergovernmental and quasi-supranational institutions, etc. (Giddens, 1990 p. 71).

This paper aims to present discussions regarding the World Bank (WB) and the World Trade Organization (WTO) and their strategies of managing the partner/members as well as the markets they serve. Comparisons were made to give light on the alliances’ motives, logic and purpose, stability and durability, degree of state involvement management and regulation, and the role of cultural differences in management and performance. Lastly, the paper provides several recommendations on the ideal strategies to manage international alliances.

Motives of the Selected Alliances

            The World Bank. In 1944, right after the World War II, 730 policy-makers from 45 different countries participated in the economic conference held in Mount Washington Hotel in Bretton Woods, New Hampshire in order to put order the international finance system and ensure that a liberal capitalist world economy through multilateral institutions that will oversee and administer international free capital movement. As a result, the World Bank (WB) and the International Monetary Fund (IMF) was founded as autonomous agencies of the United Nations (UN) (Orr, 1990). The International bank for reconstruction and Development (World Bank) primarily offers post-war development loans to finance infrastructure projects at the same time promotes private foreign investments through guarantees to investments initiated by private sectors.

The World Trade Organization. The WTO’s institutional directive is obviously indicated in its instituting charter, the 1994 Agreement Establishing the World Trade Organization (WTO Agreement). The introduction of this global agreement highlights that the aims of the WTO are that trade and economic connections among WTO Members are supposed to be carried out with an outlook to elevating the standards of living, guaranteeing full employment and a great and progressively developing degree of real income and efficient demand, and increasing the construction of and trade in goods and services, at the same time as permitting for the most favorable utilization of the world’s resources in line with the purpose of sustainable development, looking for both to look after and conserve the environment and to improve the means for doing so in a approach in agreement with their individual needs and concerns at diverse levels of economic growth” (WTO Agreement, 1st preambular clause).

Logic and Purpose of the Selected Alliances

The WB was repeatedly relied upon by impoverished governments around the world as a contributor of development finance as the key institution which the channels economic support and resources of developed countries to poor nations (Miller-Adams, 1999). It provides long term loans, grants, and technical assistance, to help developing countries implement their poverty reduction strategies. These financial provisions are usually utilized for health and education reforms, environmental and infrastructure projects, including dams, roads, and national parks. In general, WB helps governments of developing countries to fight poverty and to improve the living standards of the people.

Briefly, the principal purpose of the WTO is to double as the instrument through which global trade can turn out to be the means for sustaining the economic growth of Members, specifically the developing and least-developed Members. The economic growth of developing nations, and the employment of trade to attain such growth, has been a very old intention of the multilateral trading system and of the global governance construction of which the WTO is an element (The 2001 WTO Doha Ministerial Declaration, paras. 2 and 3). This intention is ultimately entrenched in the entitlement of individuals to take pleasure in higher standards of living, complete employment, and states of economic and social growth and progress” (United Nations Charter, art. 55(a)) in agreement with the right to sustainable development under international law (The 2000 United Nations General Assembly Millennium Declaration, para. 11). The WTO is the sole global association addressing the international decrees of trade involving countries. Its major purpose is to guarantee that trade runs as efficiently, predictably, and liberally as probable. The end result is reassurance. Consumers and producers are aware that they can take pleasure in safe supplies and superior alternative of the completed products, components, raw materials and services that they utilize. Producers and exporters are aware that foreign markets will continue to be open to them. The consequence is similarly a more affluent, nonviolent and responsible economic world.

Stability and Durability of the Alliances

Developing countries are most of the time confronted with issues on economic and sociological instability. But aside from the economic and social problems that beset these countries, political constraints play a primary role and dictate most significantly the pace of growth and development among Third World countries. Self-vested interest among both the public officials as well as the private individuals in the form of unethical criminal collaboration that directly affects the welfare and social condition of the general public constitutes the serious hindrance to the competitiveness of the domestic state.  The WB and the IMF have always collaborating in initiating joint activities to alleviate the poor living conditions of the people living below poverty level among developing countries. Aside from projects and funding as well as loan allowances and assistance provided by these organizations, the WB and the IMF likewise offer technical assistance and surveillance to Third World countries.

            In the 1990’s the WB and the IMF launched Heavily Indebted Poor Countries (HIPC) initiative to decrease the burden of developing countries concerning external debts to international financing institutions, organizations and developed countries. The guidelines and policies enacted by both organizations have been purposely conceptualized to link national policies, donor support, and development outcomes needed to reduce poverty in low-income countries through concessional lending and loan assistances of both organizations. These developmental projects and financial loans were monitored in order to determine and assess the result of the aid initiated by both organizations. Other evaluation procedures include the review of economic policies among developing countries and recommending corrective reforms to support the progressive objectives of WB and IMF. Aside from developmental activities and projects, the WB and the IMF are also working together to make their member countries financial sectors well-regulated by identifying the strengths and risks of a particular country’s financial system and economic policies (http://www.imf.org/external/about.htm).

Decisions in the WTO are characteristically acquired by consensus among every member nations and they are approved by members’ legislative bodies. Trade hostility is directed into the WTO’s dispute settlement procedure where the center is on understanding agreements and pledges, and how to guarantee that nations’ trade policies stick to them. By lessening the trade obstructions, the WTO’s scheme similarly collapses other barricades involving peoples and nations. The World Trade Organization (WTO) Dispute Settlement Understanding (DSU) evolved out of the ineffective means used under the General Agreement on Tariffs and Trade (GATT) for settling disagreements among members.  Under the GATT, procedures for settling disputes were ineffective and time consuming since a single nation, including the nation whose actions was the subject of complaint could effectively block or delay every stage of the dispute resolution process (Bello and Holmer, 1994).  It remains to be seen whether countries will comply with the new WTO dispute settlement mechanism, but thus far the process has met with relative success.

The WTO’s strengthened dispute resolution mechanism was designed to have the authority to sort out this “fine line between national prerogatives and unacceptable trade restrictions” (Abels, 1996).  Several of the supplemental agreements to the GATT created during the Uruguay Round, such as the SPS Agreement, sought to specify the conditions under which national regulations were permissible even if they had the effect of restraining trade.  The United States, perhaps more than any other country, has found itself on both sides of this delicate balance.  In 1988, it was the United States who pushed for strengthening the Dispute Settlement provisions of the GATT during the Uruguay Round, in part because Congress was not convinced that, “the GATT, as it stood, could offer the United States an equitable balance of advantage” (Abels, 1996). 

Degree of State Involvement Management and Regulation

State sovereignty is classically defined as being characterized with (1) the state’s supremacy over domestic matters, (2) state’s exclusive right to regulate its territory and its citizens, and (3) state’s right to guide its internal and external affairs without foreign interference (Marti-Martinez, 1996). Moreover, sovereignty “is the power that… enables entire body politic to exercise some control over its destiny” (Cahn, 1993, pp. 150-167). Tsai (2000) emphasized further the concept of sovereignty by contextualizing it under the aspects of defensive and affirmative distinctions. Accordingly, “defensive sovereignty is the state’s inalienable right to avoid being adversely affected by decisions and events happening outside its jurisdiction while affirmative sovereignty is the state’s right to determine its own policies and developmental course” (Tsai, 2000, p. 1317). The definitions address common theoretical notion of the absolute nature of state sovereignty.

Along with the encompassing responsibilities and influence of the WB and the WTO are the issues on preservation of state sovereignty among their member countries.  The international laws that serve as guidelines and control of the activities of the WB and the WTO have been widely criticized for restricting and controlling individual state power and economic governance among developing countries that receive financial aids from the mentioned international financing institutions.  Political analysts have been citing cases of state sovereignty infringement by the WB and the WTO particularly when economic provisions and conditions of these organizations are in conflict of interest with a developing country’s national economic policy. Since developing countries are in debt with the financial aids and loans, complete and full enactment as well as observation of local policies is undermined in order to submit to the terms presented by the WB and the WTO.

The relationships between the WB and the developing countries which they assist financially are governed with terms of conditionality or “the linking of the disbursement of a loan to understandings concerning the economic policy which the government of the borrower country intends to pursue” (Mosely, 1992, p. 129). Under this conditional finance relationship, the WB have the right to independently examine a debtor country’s need of financial assistance and the prerogative to require adoption of some recommended economic policies amendments of the state before issuing the requested development aid (Swaminathan, 1998). WB decides the credit limits provided to a country’s domestic bank, decrease in the fiscal deficit, exchange rate depreciation as well as trade liberalization policies (Taylor, 1987). Most of the time, the conditionality policies of the WB exceeds the macroeconomic recommendations for the country and through time, such practice has evolved into detailed economic reforms for the debtor which affects domestic governance of the assisted country resulting governance issues (Shihata, 1991).   

At the core of the organization recognized as the multilateral trading system are the WTO’s agreements, discussed and sanctioned by a great majority of the world’s trading countries, and approved in their legislative bodies. These agreements are the officially authorized essentials for global commerce. Fundamentally, they are contracts, promising member countries vital trade rights. They similarly compel governments to maintain their trade policies within established restrictions to everyone’s advantage. The agreements were discussed and ratified by governments, but their principle is to assist producers of goods and services, exporters, and importers carry out their business. The objective is to progress the wellbeing and interests of the citizens of the member countries.

A major and foremost disadvantage for developing countries in acceding to the WTO is their capacity to be heard in the decision making of the organization. Issues and proposals for restructurings in the WTO’s decision-making processes increased in eminence first following the fall down of the 1999 Seattle Ministerial Conference, on account of which Members undertook to have debates associated to internal transparency and involvement. The last foremost formal debate among Members on these concerns transpired for the duration of the July 2000 assembly of the General Council. Throughout that gathering, the then-General Council Chairman, Ambassador Kare Bryn of Norway, required to recognize, anchored on his discussions with Members, what he sensed were the typical of the debates (WTO, September 2000) with regards to internal accountability and involvement towards acquiring a consensus (WTO, February 2001).

Succeeding WTO procedure-associated documents, like the TNC Negotiating Principles and Practices (WTO, February 2002) and the draft manuscript of the Procedures for the Appointment of Directors-General have indicated to Ambassador Bryn’s declarations as pinpointing of “best practices” in the context of internal accountability and the involvement of Members in decision-making in the WTO (WTO, January 2003). Nonetheless, a number of Members have carried on expressing reluctance, exemptions, prerequisites or commentaries relating to Ambassador Bryn’s declaration (WTO, July 2002). This successfully denotes that there is no consensus, particularly from developing nations, on the points acknowledged by Ambassador Bryn as “best practices” for WTO decision-making procedures with regard to internal accountability and the involvement of Members.

Impact of Cultural Differences in Management and Performance

Culture is the system of shared beliefs, values, customs, behaviors, and artifacts that the members of society use to cope with their world and with one another, and that are transmitted from generation to generation through learning. It comprises all the knowledge and values shared by a society or the attitudes and behavior that are characteristic of a particular social group or organization. It is the accumulated habits, attitudes, and beliefs of a group of people that define for them their general behavior and way of life; the total set of learned activities of a people. It is apparent how the relatively liberal Western culture and the relatively conservative Eastern culture pose differences when compared. It is a common knowledge that Americans and Europeans are perceived to be more independent, competitive and aggressive in the way they deal with situations and people compared to Asians whose approach to communication is grounded on the belief of the goodness preserving and maintaining harmonious relationships within the business organization.         

In the book entitled Personal Relationships across Cultures by Robin Goodwin (1999), Trompenaars (1993) pointed out that business relationship in particularist cultures like in China tend to be less stiff and formal between employers and employees but the commitment between them is strong. In the same book, Shenkar and Ronen (1997) found that Chinese people communicate in a way that upholds traditional values of harmony and kinship affiliation as compared to North Americans. Japanese entrepreneurs, on the other hand, are considered neutral in this respect because they feel that expressing emotions in the workplace is “unprofessional”. Other cultures, that are considered to be relatively affective, feel that the indifference of neutral colleagues in the office is a manifestation of dislike and superiority among co-employees. 

Inescapable as it may seem dilemmas and issues brought about by different cultures are unavoidable and should be expected at organizations composed of different people from with different.  The differing cultural orientation result to different social and economic considerations thereby leading to inevitable opposing views and takes during decision-making process. International or global alliances and organizations like the World Bank and the World Trade Organization are not exempted from concerns rooted in varied cultural perspectives. Dealing properly with situations such as instances of principled power struggle will be of much help in running and managing global alliance networks and members. Addressing conflicts and working out understanding by compromising for the good of all will pave the way to maintain smooth working relationships and conflict resolutions for the successful attainment of the organizations’ mission and objectives.

Conclusion and Recommendations

Since globalization represents the shift of the main venue of capital accumulation from the national to the supranational or global level (Teeple, 2000) and due to the adverse effects of such phenomenon, international businesses plan to venture into new horizons catering to the needs of the new markets and countries. Over the past half century, the developing countries have grappled with their relationship to the world trading system, the role of their trade policies in their economic growth, and the influence of the world economy on their prospects for growth (Krueger, 1995). The eventual recognition of the developing states and their contribution to the world economy enable firms to expand and apply their operations to such countries.

Unlike local and national organizations, global alliances are tasked with bigger responsibilities which made them highly accountable to every decision and policy they make. The vast influence and significant impact of the decisions and laws that result from intensive deliberations of member representatives of the World Bank and the World Trade Organization are normally faced with cultural challenges that threaten the stability and durability of the alliance which subsequently may lead to difficult realization of the goals of the organization. The conflicts which arise from differing cultural interpretation should be in the realm of constant evaluation and adjustment. Resolving immediately the differences that hinder the effective and efficient function of global alliances should be critically reviewed in order to promote development and growth of every member.    

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