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Principles of Economics- Mankiw (5th) 191

Principles of Economics- Mankiw (5th) 191 - CHAPTER 9 A P P...

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CHAPTER 9 APPLICATION: INTERNATIONAL TRADE 197 Tariffs and Trade (GATT), which is a continuing series of negotiations among many of the world’s countries with the goal of promoting free trade. The United States helped to found GATT after World War II in response to the high tariffs imposed during the Great Depression of the 1930s. Many economists believe that the high tariffs contributed to the economic hardship during that period. GATT has successfully reduced the average tariff among member countries from about 40 percent after World War II to about 5 percent today. The rules es- tablished under GATT are now enforced by an international institution called the World Trade Organization (WTO). What are the pros and cons of the multilateral approach to free trade? One advantage is that the multilateral approach has the potential to result in freer trade than a unilateral approach because it can reduce trade restrictions abroad as well as at home. If international negotiations fail, however, the result could
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