In the headlines of newspapers, trade policy most often appears to be a bitter and erausal quarrel. Countries almost constantly threaten to challenge the “unfair” trade practices of other nations. Procedures for the settlement of disputes from the WTO, the European Union, NAFTA and other regional trade agreements are under way. Politicians in national parliaments, denounced by lobbyists, are often threatened with bills that “create a level playing field” or “prevent unfair trade” – although most of these bills aim to achieve these ambitious goals by further limiting trade. Protesters in the street may oppose certain trade rules or the practice of international trade. The World Trade Organization (WTO) was officially established in 1995, but its history is much longer. In the years following the Great Depression and World War II, there was a global breakthrough in building institutions that would connect the nations of the world. The United Nations was officially established in 1945. The World Bank, which helps the world`s poorest, and the International Monetary Fund, which deals with issues raised by international financial transactions, were both established in 1946. The third organization envisaged should be an international trade organization, which should manage international trade. The United Nations disagreed.
Instead, the General Agreement on Tariffs and Trade (GATT) was established in 1947 to create a forum that allowed nations to come together to negotiate tariff reductions and other trade barriers. In 1995, the GATT was transformed into a WTO. In the area of trade policy, the struggle often seems to be between national laws that strengthen protectionism and international agreements that try to reduce protectionism, such as the WTO. Why should a country pass laws or negotiate agreements to eliminate certain foreign products such as sugar or textiles, while negotiating the removal of trade barriers in general? A plausible answer is that international trade agreements offer countries a means of limiting their own particular interests. A member of Congress can say to an industry that defends tariffs or import quotas, “Of course they want to help you, but this boring WTO agreement won`t let me. Pro-free trade economists are concerned that some of these regional agreements could promise free trade, but in fact serve as a means for countries, under the regional agreement, to limit trade everywhere. In some cases, regional trade agreements may even conflict with broader World Trade Organization agreements. Another dimension of international and regional trade policy and trade agreements is at the national level. The United States, for example, imposes import quotas on sugar because it is concerned that such imports will reduce the price of sugar and thus violate domestic sugar producers. One of the tasks of the U.S.
Department of Commerce is to determine whether imports from other countries are dumped. The United States International Trade Commission – a government agency – determines whether domestic industry has been seriously harmed by dumping and, if so, the president can impose tariffs to compensate for unjustified low prices. Trade policy is determined at many levels: administrative authorities in government, laws passed by the legislature, regional negotiations between a small group of nations (sometimes only two) and global negotiations on the World Trade Organization.