International Business Law: Overview of General Agreement on Tariffs and Trade and World Trade Organization
GATT & WTO
January 30, 2011
GATT & WTO
People of the late 20th and 21st century understand world trade as a large part of the US economy and have not known a world without trade among many countries. This has not always been the case, however. Schaffer, Agusti & Earle (2009) explain that shortly after World War I, the Herbert Hoover administration passed the US Smoot-Hawley Tariff Act of 1930. This act attempted to limit the importing of goods to the US by charging high tariff rates on those goods. Other countries responded by charging high tariffs on goods imported into their county. The combination of the Smoot-Hawley Act and other country’s responses slowed world trade dramatically and showed how interrelated all of the world’s economies had become. Then, in 1947 the General Agreement on Tariffs and Trade (GATT) was created to help eliminate trade barriers worldwide. As the world saw in the 1930s, world trade is a key aspect of economies around the world. Although it is important, it also needs to be regulated in order to protect a nation’s industries from too much foreign competition. Regulating imports can help a nation in many other ways also. Schaffer, Agusti & Earle (2009) explain many reason that it is important for a nation to regulate imports: the taxation of imports will help raise revenue, the country can regulate what is imported and protect domestic production, they can prohibit imports of goods from countries that go against their beliefs, protect natural resources and ban imports that are bad for the environment and keep products up to a certain safety standard. There are also direct and indirect non-tariff barriers to trade. Direct non-tariff barriers to trade include things like embargoes and quotas. Embargos are “either a complete ban on trade with a certain foreign nation or a ban on the sale or transfer of specific products or technology” (Schaffer, Agusti & Earle, 2009 p. 290). Quotas are restrictions
January 30, 2011
GATT & WTO
People of the late 20th and 21st century understand world trade as a large part of the US economy and have not known a world without trade among many countries. This has not always been the case, however. Schaffer, Agusti & Earle (2009) explain that shortly after World War I, the Herbert Hoover administration passed the US Smoot-Hawley Tariff Act of 1930. This act attempted to limit the importing of goods to the US by charging high tariff rates on those goods. Other countries responded by charging high tariffs on goods imported into their county. The combination of the Smoot-Hawley Act and other country’s responses slowed world trade dramatically and showed how interrelated all of the world’s economies had become. Then, in 1947 the General Agreement on Tariffs and Trade (GATT) was created to help eliminate trade barriers worldwide. As the world saw in the 1930s, world trade is a key aspect of economies around the world. Although it is important, it also needs to be regulated in order to protect a nation’s industries from too much foreign competition. Regulating imports can help a nation in many other ways also. Schaffer, Agusti & Earle (2009) explain many reason that it is important for a nation to regulate imports: the taxation of imports will help raise revenue, the country can regulate what is imported and protect domestic production, they can prohibit imports of goods from countries that go against their beliefs, protect natural resources and ban imports that are bad for the environment and keep products up to a certain safety standard. There are also direct and indirect non-tariff barriers to trade. Direct non-tariff barriers to trade include things like embargoes and quotas. Embargos are “either a complete ban on trade with a certain foreign nation or a ban on the sale or transfer of specific products or technology” (Schaffer, Agusti & Earle, 2009 p. 290). Quotas are restrictions
References: Schaffer, R., Agusti, F., & Earle, B. (2009). International business law and its environment (7th ed.). Mason, OH: Cengage.