The paper 'General Agreements on Tariffs and Trade' is a wonderful example of a Macro and Microeconomics Case Study. International trade has thrived over the years, and it has provided the global population with numerous benefits. It has enhanced competitiveness across the world and ensured that consumers get the products they desire (Economy Watch 2010). However, international trade has not always been effective. Events like the two World Wars and protectionist measures by governments hindered trade to a significant degree. These problems were overcome through negotiations and the signing of agreements that provided guidelines on how countries should engage in international trade.
The General Agreement on Tariffs and Trade (GATT) is an example of an agreement that was created to assist in the regulation of international trade in goods (World Trade Organization 2015a). This paper will examine the state of international trade after the Second World to build an understanding of the conditions that led to the realization of GATT. A review of GATT and a discussion of some of its accomplishments will follow. The essay will conclude with an explanation of the differences between GATT and the now functional World Trade Organization. The General Agreement on Tariffs and Trade The period between the two World Wars convinced policymakers in the US that international trade was one of the key factors that can lead to world peace (Office of the Historian, 2015).
The Great Depression occurred during this period, and one of its consequences was the adoption of protectionist policies by governments. Policies such as high tariffs worsened the economic situation, and the start of the Second World War resulted in the further destruction of economies.
After the conclusion of the war, the US and its allies wanted to ensure that they would recover from the effects of the war and the Great Depression in the shortest time possible. They agreed that the liberalization of international trade was the way forward. This would be achieved through three main steps. The first step concerned the creation of the International Monetary Fund to facilitate the transfer of international payments. The formation of the World Bank, which would assist Europe and Japan to recover from the desolation of the war, was the second step.
The third step involved the creation of an international trade organization to facilitate free trade. GATT arose out of the third step. The treaty was agreed upon during an international conference that was held in Geneva in 1947. The treaty acted as the draft agreement that would be in place until the nations agreed on the structure of the eventual international trade organization that would regulate global trade (Choi 2015). This agreement covered a total of 23 countries, and it led to promises to control 45,000 tariff rates (BBC 1998).
The agreement became effective on January 1, 1948 when the 23 countries signed the agreement. A total of 53 countries signed the agreement in a subsequent UN conference that was held in Havana in March 1948 (Office of the Historian, 2015). However, there was strong opposition in the US Congress that meant that the proposed International Trade Organization was never created. Eight further negotiations allowed GATT to regulate international trade for a period of around 50 years before the World Trade Organization’ s formation (Sharma n. d).
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