Identify one major challenge facing the international trading system today. Why is it a major challenge? Is the WTO part of the solution? Explain you answer.
The form of business in the world is changing at a rapid rate. More than before, countries have resorted to seeking for ways to improve the peaceful relations with others, which is a strategy to enhance the trading activities. Trading is defined by Rodgers & Cardwell (n.d) as exchange of goods and services, with the expectation of getting the return. As the time progresses, so is the ways of conducting businesses with other states, hence the need to understand the various transitions that have happened in the realm of commerce. According to Kato (2014), any state has to remain aware of the changes that have happened in different industries. This involves the new amendments in the policies and precepts of the law, that governs the operations. Among the huge investments such as Amazon, have been able to conquer the international markets, as a result of capitalizing on understanding the laws that oversees the various states. This has enabled the company to evaluate the customers’ needs, and provide the services with the respect of the natives’ culture and way of doing things.
One of the major problem that has continually impacted the trading activities is ever changing technology in the field of commerce (Rodgers & Cardwell, n.d). Over the years, the information technology has offered a plethora of opportunities for the industries to grow, and at the same time faced out some of the companies from the market. New technologies are unveiled as the demands for the customers heighten, and the proliferated demand from the management to make more profits. Adjusting to change in the technology is an expensive venture, and new startups find it hard to implement. This leaves a huge gap, and makes competition to be unfavorable. The impact of cost comes in the form of installation and employing technical staff, who are able to innovate creative technologies to ease the flow of operations(Heintze,2007).
Adjusting to change in the technological and economic relations is a huge topic of concern, due to the disruption it causes to the businesses. Organizations are focusing on systems that would enhance the management of books of accounts, controlling the employees and understanding the trends of the customers. One of such a system is ERP, that consolidates the enterprise’s processes in a common database, thus assisting in making workable decisions (Bao & Chen,2013).
The epitome of a trading activity lies on the security of the information, that the buyer and seller exchange in the process of the transaction. With the increased and popularity of offering services beyond the area of operations (international market opportunities) businesses are prone to the challenges that come along with modern technology such as cyber insecurity and high costs of managing huge data. It is one of the area that has attracted considerable number of researchers, some such as Kato (2014) reviewingthe strategies that can be adopted to mitigate the threats of data intrusion, thus promoting the international trade. Although different states, such as U.S have come up with technology policies and regulations to curb the issues of website penetrations, the fight has not achieved much impacts. Companies, especially the financial industry lose close to $400 billionyearly, which mitigates their chances of growth (Miozzo & Walsh,2006).Therefore, this paper will review the secondary sources in regards to the topic that is under discussion, which will shed more insight on the appropriate options that the enterprises can choose to utilize, hence improve their presence in the international face.
The aim of this study is to explore the wider topic of impacts of technology in the trade, which disrupts the way businesses operates in the international market. The study, therefore, entails to consult the secondary sources of information, through critiquing the propositions of various researcher who have done study in the same or similar topic. Thus, it will be possible to give recommendations and find an amicable conclusion, that will offer a solution to this phenomenon. To have a broader perspective of the topic, the work will begin by reviewing the literatures that have discussed the topic that is under consideration. This section will critically evaluate the opinions of different authors, and identify the gaps that were not filled in their studies. In the same vein, it will be followed by the section of methodology and finally conclusion.
According to Fengwu (2010) rise in the supply of labor in the new country poses a danger of unemployment to the natives. He noted that this is one of the major challenge, that is impeding the appreciation of technology in replacing the jobs that are done by people. Although most of the companies wishes to integrate new technology, it becomes difficult to implement as a result of lack of good will from the employees, who perceive the new changes as a way to deny them the jobs. The study conducted by Kato (2014) illustrated that the increased competition in the market, necessitate the businesses to seek for newer technologies, to improve their operations and cut on cost. He noted that duties such as reconciling of accounts, chain of supply among other internal activities, can be streamlined if a more reliable technology is adopted.
In support of his idea, Brickner (2013) conducted a meta-analysis of the multinational companies such as Woolworth, amazon among others, and noted that their increased growth in international states has been contributed to by integration of technology in understanding the demands of the customers. However, it was noted that they did not emerge to the top within a short period of time, for they had to continually change their mode of operations to fit with the current form of doing things. One of the transition they corporately deployed was the use of ERP to manage supplies and huge number of inventories(Fengwu,2010). It is estimated that the systems are costly in terms of labor, since the employees have to be taught how to use it with much ease.
Effects of technological change have immensely influenced the way businesses operate in the international realm. The manufacturing sector is employing sophisticated technologies that facilitates instantaneous production, thus improving the revenues that are collected by the respective companies (Rodgers & Cardwell, n.d). Of late, the advanced technologies have significantly been an issue of concern, due to the huge data that is shared online. According to Spartak (2018) lack of appropriate policies that cut across all the sectors of the economy leave the loop holes for the online aggressors, to infiltrate into the confidential information of the companies. The resultant effect is leakage of information, that can be used by competitors to beat their rivals. The most serious cases have been reported of the industries losing money, something that is identified during the auditing process. The following paragraphs will discuss the various policies regarding the use of technology in the business transactions.
One of such policies is data protection regulation, that was enacted by the EU members, to protect the data of the customers (Landau,2012). According to this regulation, privacy is regarded as the ability to safeguard any information, that is provided by the customer either on request, or voluntarily fed in the websites of the service provider. With the increased rate of online transactions, it is now possible for buyers to complete any transaction without necessarily visiting the premise. This has been made possible by emergence and popularity of online payment methods such as PayPal, Skrill among others. According to Spartak(2018) he noted that the customers provide sensitive information concerning their card and biographical information. The assertion is supported by Jones (2002), who illustrated in his study that most of the people who rely on online platforms to complete payments have no idea of where the information they provide goes to. Ultimately, if the employees of the said platforms fail to uphold the work ethics, the clients remain vulnerable and the data can be utilized to perform unethical activities, such as directing the monies to the wrong recipient. EU members, therefore, mandated all companies dealing with huge data online, to comply with the safety of the customers. The trend is gaining traction even in other states, but the big challenge lies in developing countries, that lack succinct measures to implement new technology policies(Landau,2012).
Due to this, it is becoming difficult for the developed states, that have workable technology policies, to do transaction with the perceived developing states. As retail companies constitute the highest percentage of those who use online platforms, such enterprises fear to extend their bases in states where the security of the digital platforms are not well established. This lowers the extent of sales, and even impedes such companies to enjoy quality raw materials, produced in the third world countries(Spartak,2018).
The Cloud Act passed by the United State after the FBI got stuck while trying to access remote data in the year 2013, was another important milestone in beefing the security of any digital information(Spartak,2018). The phenomenon happened after the FBI realized that a lot of emails involving drug trafficking were stored in the Microsoft servers, outside the soil of the U.S. This complicated the prosecution of the suspects, as there was no law, that regulated the information to be stored in the servers that were situated outside US. The cloud act is a global regulation, and allows the investigative agencies to extract any information they feel pertinent in the servers. According to Jones (2002), the change is important but it violated the privacy regulation, which aims to protect the data of any person or company. He noted that after the act was passed, the rate of international transactions reduced, as the management of the singled companies such as Woolworths confirmed that their international transactions increased the cost of management, since security of individual data was a factor of consideration. The same argument is placed across by Spartak (2018) whose study revealed that startups are unable to remain competitive in the international markets due to lack of enough resources to comply with the technology standards needed by the various governments. Therefore, the trend leaves the giants companies to populate the market, shying off the upcoming companies.
Landau (2012) propounds that even if the states have tried to streamline the transactions that happens online, it has become a stabling block to fully mitigate the major challenges that countries face to trade with others. Digital platforms have become harbors for terrorist activities, some who disguise to be doing honest transactions (Parshutin &Kirshners,2011). It is also difficult to establish what the monies exchanged are used to facilitate, which predisposes various countries into illegal businesses. On revelation of such activities, sanctions are imposed, thus killing the peaceful relations with other states.
As the time progress, so is the changes in the technological realm. In the past one decade, organization relied wholly on human intelligence to identify the market gaps and strategize on the major issues in the economy(Guha,2015). Presently, things have considerably changed. It is now possible to work in a production line, with only machines and a few people to control them. This is the new generation of technology that is revolutionizing the way of doings things, and cutting down the cost of production immensely. For such a system to work well, data must be fed to the machines and for that matter, secret information of the company. For example, robots work based on certain specification of the materials that the company wished to produce. Any access to such information might either stop the production process, or alter the information hence resulting to the production of default products. The venture is an expensive one to companies that have no capital muzzle, and integration of such a system is costly(Fengwu,2010). This has been a major challenge to the startups, that are finding it hard to use sophisticated technologies in offering their services, hence making them not to sustain the competitive edge.
To complement the assertion indicated above(Spartak,2018) highlighted in his study that about 70% of the total companies that rely wholly on technology have reported the cases of data intrusion. This translates to the issue of cyber insecurity something that has for years been in the center of discussion among the various nations. In regards to the international trade, lack of security in anything exchanged via the internet, makes the companies vulnerable to data alteration. The most dangerous of it, is the usage of digital platforms to finance the terrorist activities, who later destabilizes the economic activities of the attacked nation. Study conducted by Landau (2012) exposed that the United States spends about 16% of its discretionary budget to counter terrorism, which amounts to around $186.6 billion per year. This is a huge amount of money to be raised by third world states, that in most cases do not manage to finance their budget. Furthermore, Jones (2002) affirmed that states that are largely affected by terror attacks become static in their productivity, and even other countries withdraws their transaction activities with them.
In the same vein, adjusting to change in the technological relation is a major challenge due to the differing technology policies in the different states. While the western countries such as U.S have strict measure to avert any attempt to defraud the online users, developing states have not established meaningful strategies to enhance online security. The poor leadership in these states is the major cause, which leaves the countries prone to illegal activities. More than before, crimes are highly proliferated in the digital platforms, and even terrorism is becoming an internet thing(Mowery,1994). However, Brickner (2013) objects the argument that firm policies would help to improve the international trade. In his study, he noted the need of enactment of the available policies rather than setting new ones. His paper alienates new acts with the improvement of trade, which extrapolates on the need of leaders and other stakeholders in implementing what is already available.
Digital technologies not only help in creation of new products, new forms of trade, but also creates new opportunities and lower the trade cost. These are instrumental factors of consideration, that have prompted the WTO, to support the member states in implementing workable digital platforms. One way the organization has managed to do this is through not imposing custom duties on electronic transmissions (Rodgers & Cardwell, n.d). This entails that anything that is sold through the digital platforms should not be taxed the custom duty, only applicable to the member states. The move was geared towards encouraging the states, to utilize a plethora of opportunities that are in the online platforms. Due to this, a number of companies have started selling products overseas, because the cost of shipping the products is low, compared to when the custom duty was imposed.
Moreover, WTO reduced tariffs of ICT products within the member states (Rodgers & Cardwell, n.d). Any electronic product is expensive to import or export, which forces the consumers to buy from the local market. Due to the high cost of buying, companies that have busy line of production would be scared to install new technology machines, and opt to remain with the traditional method of production. Such, WTO made it easier for the member states to access the equipment and machines at a lower cost, since they can be bought tariff free. Similarly, the organization has a strong base of support staff, who address to the concerns of the customer protection(Spartak,2018). This comes in form changing the policies based on the prevailing technological advancement, which certifies that any digital transaction is safe for its members.
The previous paragraphs discussed the available policies that control the use of technology in international trade, the reasons why the topic is considered a challenge and the response of the WTO in regards to the issue. The current section discusses the research methodology used to examine change in technology in the international trading system.
Research with an inductive drive mainly depends on qualitative data to describe what is happening in the organization and the characteristics of the phenomena which enables the researcher to apply qualitative research methodology to this study. In this case, the study entailed reading through the secondary sources of data, that was primarily drawn from the peer reviewed journals and books. The arguments of different authors were reviewed and critiqued, to have a deeper understanding of the topic that is under study. The qualitative method was chosen for this study as it enables researchers to have access to information that cannot be accessed through quantitative methods. Hence, qualitative methodology allows a greater capacity to gather meaningful and in-depth data from participants’ experiences and feelings about the concerned matters opposed to a quantitative method that is based on numbers.
The reviewed papers illustrated that the change in technology is a major issue of concern in the international economies. This was reported to have been caused by the improvement of the knowledge in the arena of information technology, which exposes the companies to the threats of intrusion. The consequence was loss of finance or leakage of confidential information that is used to stall the productivity of the companies. This is a big threat to the market, as it results to delayed supply or production of default products that fail to meet the international standards.Similarly, it was reported that the advancement in technology has brought an equal measure of challenges that are in linear form to the advantages.
The topic is wide and further exploration to determine the major challenges that the companies face are needed, in order to come up with the strategies to mitigate the spread of the impacts to the rest of the world. Conclusively, the current work affirmed that some of the available policies to control the digital market are Cloud Act and Data Protection Policies. Also advancement of technology is a challenge in the international market because of increased costs of procuring new machines and the security of the data. Likewise, WTO has responded by reducing the tariffs of ICT products and not imposing custom duties on electronic transactions.