ABSTRACT
The genesis of the GATT in 1947 was the inter-war experience of
beggar thy neighbor protectionism, competitive devaluation, and
capital controls.1 Following the adoption of the so-called Smoot-
Hawley Tariff Act, which raised average US tariffs from 38 to 52 per-
cent, US trading partners imposed retaliatory trade restrictions. A
domino effect resulted, as trade flows were diverted to other markets,
protectionist measures were taken there, and further retaliation
ensued. Once the Second World War was over – indeed, before it was concluded – political leaders sought to establish international institu-
tions to reduce the probability of a repeat performance. New interna-
tional bodies were designed to manage international relations and
monetary and exchange rates (the UN and the IMF) and to assist in
financing reconstruction and promoting economic development (the
World Bank). An international organization was also foreseen to
manage trade relations, the International Trade Organization (ITO).
Greater trade was expected to support an increase in real incomes, and non-discriminatory access to markets was expected to reduce the
scope for political conflicts or trade disputes spilling over into other
domains.
