Chapter 10 - Chapter Nations 10 International Cooperation...

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Chapter 10: International Cooperation Among Nations The General Agreements on Tariffs and Trade and the WTO o By raising tariff and quota barriers, each nation believed that it could help its own industries and citizens, even though in doing so it might harm the citizens and industries of other countries o To ensure that the post-World War II peace would not be threated by trade wars we created the International Trade Organization Mission to promote international trade—however, the organization never came into being because of a controversy over how extensive its powers should be. ITO’s mission was taken over by General Agreement on Tariffs and Trade (GATT) o Role of the GATT Goal was to promote a free and competitive international trading environment benefiting efficient producers, an objective supported by many MNCs GATT accomplished this by sponsoring multilateral negotiations to reduce tariffs, quotas, and other nontariff barriers High tariffs were initially the most serious impediment to world trade, the GATT first focused on reducing the general level of tariff protection GATT sought to make sure that there was international trade was conducted on a nondiscriminatory basis with the use of a MOST FAVORED NATION PRINCIPLE—which requires that any preferential treatment granted to one country must be extended to all countries
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Exception to the Most Favored Nation Principles To assists poorer countries in their economic development efforts, the GATT permitted members to lower tariffs to developing countries without lowering them for more developed countries. In the US this is known as the generalized system of preferences. By doing this, it increases the pressures on domestic firms that are vulnerable to import competition from the developing countries. On the other hand, MNCs can reduce their input and prod costs by locating factories and assembly facilities in countries benefiting from generalized system of preferences. Second exemption is for comprehensive trade agreements that promote economic integration such as EU and NAFTA GATT permits countries to protect their domestic industries on a non discriminatory basis, although under GATT rules countries were supposedly restricted to the use of tariffs only. Quotas and other nontariff barriers can often be applied discriminatorily, and they are less transparent—that is often harder to judge their impact… CHECK Many countries adopted quotas and nontariff barriers and remained in compliance with GATT o The World Trade Organization Members are required to open their markets to international trade and to follow the WTO’s rules Three goals Promote trade flows by encouraging nations to adopt nondiscriminatory, predictable trade policies Reduce remaining trade barriers through multilateral negotiations.
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Establish impartial procedures fro resolving trade disputes among members WTO was designed to build on the GATT, the GATT agreement was
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