The World Trade Organization and The Theory of Absolute and Comparative Advantage

2197 WordsJul 13, 20189 Pages
Why the famous theory of absolute and comparative advantages did not work when the GATT and WTO were created? In the world of internationalization and globalization, which worships money and encourages ever growing trade, it is very difficult to find a model and further implement it into the modern system so that it would be efficient, eco-friendly and yet economically viable for all participants. Most suggested models are in my opinion out of date and do not answer the current world trends and challenges. And surely the trade system we have at the moment cannot claim to be free. Under globalization, all national economies are integrated into one global economy and must obey the laws laid down by a global economic institution—currently…show more content…
The Bretton Woods Institutions were than set up. It was also decided that the International Monetary Fund (IMF) would mainly focus on short-term balance-of-payments financing (the current account of the balance of payments), while the International Bank for Reconstruction and Development (World Bank) would concentrate on long-term lending (the capital account). That function, however, was largely taken over by the Marshall Plan, leaving the World Bank to focus almost entirely on lending for the development of underdeveloped countries. The General Agreement on Trade and Tariffs (GATT) was signed in 1947 as a global international organization that specifies and enforces rules for the conduct of international trade policies and serves as a forum for negotiations to reduce tariffs and other barriers to international trade. In 1995, it was replaced by The World Trade Organization (WTO) with a striking 146 members. The WTO is frequently lumped together with the World Bank and IMF, because the three institutions have common policy goals of so-called free trade, free capital mobility, and export-led growth – in other words, globalization [2]. The GATT was only about trade of goods between countries and it's rules focused on tariffs and quotas – traditional trade measures. A tarriff being a tax charged when a good crosses a border and a qouta - a quontitative limit about how much of an import a country will take. This was the

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