Regulation of International Trade
Traditionally trade has been regulated through bilateral treaties between two nations. For centuries under the belief in Mercantilism most nations have had high tariffs and many restrictions on international trade. In the 19th century, especially in the United Kingdom, a belief in free trade became paramount. In the years since the Second World War, controversial multilateral treaties like the General Agreement on Tariffs and Trade (GATT) and World Trade Organization have attempted to create a global trade structure. These trade agreements have often resulted in protest and discontent with claims of unfair trade that is not mutually beneficial.
Free trade is usually most strongly supported by the most economically powerful nations, though they often engage in selective protectionism for those industries which are strategically important such as the protective tariffs in agriculture in the United States and Europe. The Netherlands and the United Kingdom were both strong advocates of free trade when they were economically dominant, today the United States, the United Kingdom, Australia and Japan are its greatest proponents. However, many other countries (such as India, China and Russia) are able nowadays to support free trade as they become more economically powerful themselves. As tariff levels fall there is also a great willingness to negotiate non tariff measures, which include foreign direct investment, procurement and trade facilitation.
Traditionally agricultural interests are usually in favour of free trade while manufacturing sectors often support protectionism. This has changed somewhat in recent years, however. In fact, agricultural lobbies, particularly in the United States, Europe and Japan, are chiefly responsible for particular rules in the major international trade treaties which allow for more protectionist measures in agriculture than for most other goods and services.
During recessions there is often strong domestic pressure which is to increase tariffs and to protect domestic industries. This occurred around the world during the Great Depression. Many economists have attempted to portray tariffs as the basic reason that had a serious impact on trade and deepened the depression.
The regulation of international trade is done through the World Trade Organization at the global level, and through several other regional arrangements such as the North American Free Trade Agreement (NAFTA) between the United States, Canada and Mexico, and the European Union between 27 independent states. The 2005 Buenos Aires talks on the establishment of the Free Trade Area of the Americas (FTAA) failed largely because of opposition from the populations of Latin American nations. Similar agreements have also failed in recent years.
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