International Trade institutions Flashcards
Give a brief history of the international trade environment towards free trade
> 1800s mercantilism dominated, while by 1840s there was a move towards comparative advantage and free trade.
> Large growth from 1850 to 1914 caused by empires investing and trading more.
> Golden Age of Globalisation from 1850 to 1914, although USA and Germany used tariffs for infant industries.
> World War I destroys Empire model and leads to tariff wars in Great Depression period: smoot hawley 1930
> Golden Age of Capitalism Post WWII: Bretton Woods in 1944 and now trade based around USSR bloc and USA bloc.
> Bretton Woods abandoned in 1973 as fixed exchange rates are replaced with floating ones.
> tariffs cut, rise of Japan and collapse of Communism. Rise of emerging powers (China, India etc.)
The legacy of BRetton Woods in the Three Pillars
banking-World bank
IMF- Monetary policy and exchange rates
WTO- Trade and trade related investments
Nowadays the IMF and World Bank are monitoring and advice bodies, while WTO provides rules based system with its agreements and dispute procedures.
WTO
Provides a rule based multilateral system, reducing costs for disputes, reducing uncertainty.
The WTO prevents Most Favoured Nation tariffs introduction, and has several agreements like TRIPS ( protecting intellectual property rights), GATT (reduce tariffs and quotas between members), TRIMS (reduce limits on Foreign Investments.
The WTO was mostly set up by USA hegemony in postwar period. Due to lack of hegemon in modern day, there is a move towards bilateral agreements (China with African nations, etc,)
