Week 4 Discussion - Week 4 Discussion: What have been the...

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Week 4 Discussion: “What have been the most important trade policy agreements that the united states government has made in the last 100 years?” Notes: 1. The liberalization of trade can be divided into several stages beginning after the Tariff Act of 1930, usually called the Smooth – Hawley Tariff, which established extremely high protection in the United States (an average tariff level of about 50 percent). Other countries retaliated with their own tariffs, and world trade shrank dramatically. The tariff legislation since that time has occurred largely in response to this impact on the great depression and the increasing economic interdependence of countries. 2. The General Agreement on Tariff and Trade (GATT) took effect in 1947. Under this agreement, countries committed themselves to multilateral bargaining for the purpose of easing trade restrictions in all of the participating countries. From 1947 – 1962, five GATT rounds of trade negotiations were held, in which the participating countries hammered out mutually acceptable reductions of various barriers. The frist round, held in Geneva in 1947, was reasonably successful. However, economists did not judge the next four rounds in 1949, 1951, 1956, and 1962, as having attained much success. 3. The key stimulus for the round was the U.S. Trade Expansion Act of 1962. This legislation authorized the president to negotiate tariff reductions of up to 50 percent, and these reductions could be negotiated through an across – the – board approach rather than an item – by – item. The Trade Expansion Act also introduced a feature of trade policy known as trade adjustment assistance (TAA), which means that, if a tariff reduction injures workers or industries by causing an inflow of imports, displaced workers can, for example, petition for additional unemployment compensation or for help in retaining for other types of jobs. Thus TAA in a broad sense tries to promote international adjustment to changing international conditions and reduction in protection. With the passage of the Trade Expansion Act, the United States moved into multilateral negotiations in Geneva in what became known as the Kennedy Round of trade negotiations, Seventy countries participated, and tariffs on manufactured products were reduced by an average of 35 percent, with at least some reduction occurring in 64 percent of manufactured goods with tariffs. Note that this success was in terms of cuts achieved in manufactured
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Week 4 Discussion - Week 4 Discussion: What have been the...

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