Copyright 2007 by South-Western, a division of Thomson Learning. All rights reserved.

Trade Institutions and Trade

Policy
Chapter 2
Copyright 2007 by South-Western, a division of Thomson Learning. All rights reserved.
The Historical Dimension
Ancient traders.
Rome and the Pax Romana.
European feudalism in the middle ages.
Protectionism in the 1930s and Smoot-Hawley Act.
The emergence of global division (1945).
Copyright 2007 by South-Western, a division of Thomson Learning. All rights reserved.
Overview of International
Business History
Pax Romana
The roman peace ensured that merchants
were able to travel safely and rapidly on
roads built, protected, and maintained by
the roman legions.

European feudalism
By delivering a portion of their earnings to
a protector, medieval farmers were shielded
from the depredations of outsiders.
While local economies were largely closed,
east-west export /import trade thrived.
Copyright 2007 by South-Western, a division of Thomson Learning. All rights reserved.
Overview of International
Business History (Continued)
Protectionism in the 1930s and the Smoot-
Hawley Act:
The act raised import duties to reduce the
volume of imports into the united states.
The intent increased domestic employment.
Copyright 2007 by South-Western, a division of Thomson Learning. All rights reserved.
Overview of International
Business History (Continued)
The post-war east and west ideological split
The soviet union and the eastern bloc
Council for mutual economic assistance (CMEA or
COMECON).
53 western countries
The international trade organization (ITO) - 1948.
Pax Americana
American peace driven by the belief that
international trade was a key to worldwide prosperity.
Global Division (1945)
Copyright 2007 by South-Western, a division of Thomson Learning. All rights reserved.
Transnational Institutions and
World Trade
General agreement on tariffs and trade (GATT)
World trade organization (WTO)
International monetary fund (IMF)
World bank
Regional institutions
Copyright 2007 by South-Western, a division of Thomson Learning. All rights reserved.
WTO Homepage
Trade Topics
The creation of the WTO has greatly broadened the scope of international
trade agreements.
Copyright 2007 by South-Western, a division of Thomson Learning. All rights reserved.
Transnational Institutions and
World Trade (Continued)
GATT focused on reducing prevailing high tariffs
Most-favored nation (MFN) clause
Each member country of the GATT must grant every
member country the most favorable treatment it accords
to any other country with respect to imports and exports.
World trade organization (WTO) in 1995
General agreement on trade in services (GATS).
Trade-related aspects of intellectual property rights
(TRIPS).
Trade-related investment measures (TRIMS).
Copyright 2007 by South-Western, a division of Thomson Learning. All rights reserved.
International Monetary Fund
(IMF)
Developed out of the Bretton Woods agreement in
1944.
Offers gold and constituent currencies available to
members for currency stabilization.
It was the goal originally to provide for fixed
exchange rates between countries.
Copyright 2007 by South-Western, a division of Thomson Learning. All rights reserved.
World Bank
The international bank for reconstruction and
development
Formed in 1944, it provides economic assistance
for the reconstruction of war-torn and, more
recently, loans to developing countries.
Copyright 2007 by South-Western, a division of Thomson Learning. All rights reserved.
Regional Institutions
European Coal and Steel Community
Customs Unions
European Union (EU)
North American Free Trade Agreement (NAFTA)
Mercosur - Latin America
Gulf Cooperation Council (GCC)
Copyright 2007 by South-Western, a division of Thomson Learning. All rights reserved.
The Effects of Trade
Copyright 2007 by South-Western, a division of Thomson Learning. All rights reserved.
Policy Responses to Trade
Problems
Voluntary import restrictions
Tariffs
Non-tariff barriers
Copyright 2007 by South-Western, a division of Thomson Learning. All rights reserved.
Export Promotion Efforts
Reasons
National need to earn foreign currency.
Encouragement of domestic employment.
Increase in domestic economic activity