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READINGS WEEK 23 SNOW: CHAPTER 9 FREE TRADE
PRECIS
The modern issue of trade probably congealed over whether to import goods and
services that were also produced domestically
During the difficult economic times of the past few years, free trade has transcended
the crisis
US to lead the campaign to reduce or eliminate tariffs worldwide
The removal of barriers to trade emerged as the centerpiece of the economic
globalization movement of the 1990s
Economic downturn at the turn of the millennium an the rise of the global war on terror
took some of the luster from the free trade issue
Globalization continues and proponents and opponents continue to fight over whether
to expand or constrict free trade arrangements
The lessons of interwar economics in turn helped from the international political debate
and its institutionalization the topics of this case
Free trade is said to be beneficial because it unleashes basic economic principles like
comparative advantage and make overall economies (national or international) stronger
and economic conditions within and between countries more vital
Cries to restrict trade tend to be posed in terms of the adverse impact that opening up
trade opportunities has on individuals
Fair traders emphasize the need for compensatory actions for those individuals
adversely affected by what they basically see as the beneficial impacts from free trade
When free traders extol the removal of barriers and anti-free traders deride the
possibility they are not talking about the same thing
The debate is intensely political at both the domestic and international levels
Internationalists generally advocate a maximum involvement of the US in the
international system
Isolationism advocated a much more restrained level of American involvement in the
world
Splendid isolationism sought to keep the US entirely separated from the world, and
especially European politics
Neo-isolationism advocated a restricted level of US interaction from the world, but not
total rejection of the world outside American boundaries
Isolationists are also protectionist because protectionism limits international economic
interactions
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INSTITUTIONALIZING TRADE
The genesis of the contemporary debate over free trade was the period leading the
world war 2
Economic nationalism and protectionism were deemed to be among the chief culprits
for this situation
The erection of tariff and other barriers resulted in retaliation and counter-retaliation
that brought European trade to a virtual standstill
The process of rebuilding the world after world war 2 began early during the war itself,
largely through British and American collaboration
Politically, this collaboration produced thoroughly internationalist constructs such as
the UN charter
Economically it produced a series of agreements to restructure the global economy, a
construct known as the Bretton Woods system
THE BRETTON WOODS SYSTEM AND FREE TRADE
Encouraged and cajoled by the governments of Great Britain and the US 1944 to plan
for the postwar economic peace
The conferees hammered out a series of agreements that produced international
economic institutions that have endured into the 21sr century and have become staple
parts of the system of globalization
Heart of the 1930s economic problem was protectionism
The Bretton woods process was more successful in confronting some of its priorities
than others
The IMF was originally chartered to deal with the problem of currency fluctuations by
authorizing the granting of credits to shore up the weak currencies contributing to
economic stabilization
The World Bank was to assist in economic stabilization by granting lands originally for
reconstruction of war-torn countries and later for the development of the emerging
third world
BRETTON WOODS TO WTO
ITO to provide an institutional basis to promote the reduction of barriers to trade
Second, to create an instrument with jurisdiction and authority to enforce trade
agreements, capability to levy enforceable penalties against sovereign governments
The ITO proposal was undermined by political actions in the US in 1948
Viewed the ITO document as too timid an approach to promoting free trade, who feared
the sovereignty infringement that ITO enforcement provisions represented
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