The Benefits of Reducing International Trade Barriers

As you read this section, think about the products or services you use daily that are possible due to international trade. How would you have to adapt if governments began to restrict international trade?

KEY TAKEAWAYS

  • Free trade is encouraged by a number of agreements and organizations set up to monitor trade policies.
  • The General Agreement on Tariffs and Trade (GATT) encourages free trade by regulating and reducing tariffs and by providing a forum for resolving disputes.
  • This highly successful initiative achieved substantial reductions in tariffs and quotas, and in 1995, its members founded the World Trade Organization (WTO), which encourages global commerce and lower trade barriers, enforces international rules of trade, and provides a forum for resolving disputes.
  • Providing monetary assistance to some of the poorest nations in the world is the shared goal of two organizations: the International Monetary Fund (IMF) and the World Bank. Several initiatives have successfully promoted free trade on a regional level. In certain parts of the world, groups of countries have joined together to allow goods and services to flow without restrictions across their mutual borders. Such groups are called trading blocs.
  • The North American Free Trade Association (NAFTA) is an agreement among the governments of the United States, Canada, and Mexico to open their borders to unrestricted trade.
  • The effect of this agreement is that three very different economies are combined into one economic zone with almost no trade barriers.
  • The European Union (EU) is a group of twenty-seven countries that have eliminated trade barriers among themselves.