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International Trade Theory & Policy - Term Paper Example

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Name: Course: Date: International Trade Theory & Policy Question 1 The GAAT was a multilateral agreement that was established between countries in 1947, which sought to effect a reduction in tariffs and other trade barriers that could hinder the effective undertaking of trade between countries…
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International Trade Theory & Policy
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International Trade Theory & Policy Question The GAAT was a multilateral agreement that was established between countries in 1947, which sought to effect a reduction in tariffs and other trade barriers that could hinder the effective undertaking of trade between countries. GAAT also sought to eliminate regional preferences and thus create a trading environment where all the countries were better placed to undertake trade with each other, without unnecessary prohibitions (GATT, 12). The enactment of this agreement occurred in six rounds, where different aspects of the agreement were agreed, until the final round when all the agreements were then consolidate to form the final agreements, which lasted until 1994, when they GAAT was then replaced by the World Trade Organization. However, the original objectives of GAAT continue to be executed under the umbrella of World Trade Organization (GATT, 33). The objectives of the GAAT were achieved gradually, with minimal achievements in the first and the second round, but a major achievement in the 3rd round, where the countries under negotiations agreed to effect $2.5 billion in tariff reductions (GATT, 11). These concessions kept increasing, with a notable achievement in the 4th round, where a concession worth $4.9 billion of world trade was agreed. This increased in the 5th round with a concession worth $40 billon, and in the 6th round the highest concession of more than $300 billion being agreed upon (GATT, 27). By the close of the eighth round, major breakthroughs had been made, which eventually saw the agreeable reduction of trade barriers between countries, and thus the creation of a more favorable environment for undertaking trade. Question 3 The 8th round of the GATT was proposed to continue advancing the move to enhance trade between countries with minimal restrictions and barriers to trade. Nevertheless, for President Reagan, his proposal for the 8th round was to expand the kind of products that the GATT covered under its tariff removal schemes, and to expand the coverage of the GATT competence to include such products as textiles and services, while preventing the inclusion of agricultural products (Epstein, 7). The president was particularly interested in protecting the agricultural products from the USA from being prone to the tariff regulations that were being established for the other products, and protect the interest of the United States' Export Enhancement Program (Epstein, 12). The 8th round also sought to establish the rules of operation of GATT, establish the necessary non-tariff measures, while also establishing the necessary dispute resolution mechanism that could be applied to resolve the disputes arising amongst the member countries (Epstein, 3). Nevertheless, the 8th round almost came to a stall, with major disagreements arising majorly between some of the European countries, which later came to be known as the Cairns group, and the USA. The main issues was the fact the GATT was operating under double standards, where it required the countries involved under the agreement to liberalize their economies, while giving the USA a waiver for its agricultural products (Epstein, 10). This threatened to collapse the 8th round meeting, and was also the major cause of the failure of the subsequent 1st World Trade Organization meeting. Question 6 Since the establishment of the GATT, the Least Developed Countries (LCDs) have been implored upon to focus on trade as their route to economic growth. However, there has been a looming controversy surrounding this advice. The greatest history of controversy operates on the subject of liberalization, where the developed and hence most powerful countries who are the majority members of the institution, have been pushing for the liberalization of certain sectors of the economies of the LDCs (Chaudhry, 162). This has given the developed countries an upper hand, since they ensure the LDCs are vulnerable to the abolition of the tariffs, while the developed countries benefit in trading freely with such countries. The operation of the GATT has been observed to advance the interests of the developed countries, while the LCDs have been sidelined (Chaudhry, 99). The developed countries are known to push for the incorporation of products which favor then into the GATT tariff regulation system. Such countries have introduced services, intellectual property rights and are now even pushing for the inclusion of government procurements, amongst the products to have their tariffs reduced or regulated (Chaudhry, 133). Considering that currently WTO has 132 country members, amongst which 98 are developed countries and only 34 are developing and least developed countries, the developed countries pushes for their agenda through, while all the time, arguing that resolutions are adopted through a democratic process. Under the current position as it is, the LDCs are the biggest losers of the establishment of the institution, since they are forced to liberalize, thus making their economies weak and prone to revenue reductions through reduced taxes, while the developed countries continue to enjoy the benefit of free trade (Chaudhry, 142). Works Cited Epstein, Susan B. GATT: The Uruguay Round Agreement and Developing Countries. Washington, D.C.: Congressional Research Service, 1995. Print. Chaudhry, Arijay. Gatt: A Developing Country Perspective. New Delhi: Asian Books, 2002. Print. GATT: What It Is, What It Does? Geneva: General Agreement on Tariffs and Trade, 1991. Print. Read More
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