chapter  1
19 Pages

Introduction: An overview of the world economy

Most countries have a ministry or department that is exclusively charged with setting international trade policy for the country. This chapter explains why most countries provide protection to domestic industries and what is known as administered protection as it has become difficult for governments to explicitly raise tariffs. It describes the evolution of the global trading system since the Second World War. The World Trade Organization (WTO) is the product of nearly 50 years of international trade negotiations. Economists have advocated a uniform tariff that would solve a number of problems associated with a complicated tariff schedule. A uniform tariff makes lobbying for protectionism much harder. The goal of General Agreement on Tariffs and Trade (GATT) was to reduce the high levels of tariffs remaining since the 1930s. Over the next fifty years, a number of multilateral trade negotiations (MTNs) successfully reduced tariffs. The chapter discusses the troubled state of world trade negotiations and the issues left to be negotiated.