Oldest Trade Agreement

Since Adam Smith published The Wealth of Nations in 1776, the vast majority of economists have accepted the thesis that free trade between nations improves overall economic well-being. Free trade, generally defined as the absence of tariffs, quotas or other government barriers to international trade, allows each country to specialize in products that it can produce cheaply and efficiently compared to other countries. Such specialization allows all countries to earn higher real incomes. From 1948 to 1994, GATT introduced the rules for much of world trade and presided over periods when some of the highest growth rates of international trade were recorded. It seemed well established, but during those 47 years it was a preliminary agreement and an interim organization. One of the best examples of mercantilist trade policy at that time was the British Navigation Act of 1651. Foreign vessels were prohibited from participating in coastal trade in England and all imports from continental Europe were to be transported either by British vessels or by vessels registered in the country where the goods were manufactured. For many countries, unilateral reforms are the only effective way to reduce barriers to internal trade. However, multilateral and bilateral approaches – removing trade barriers in coordination with other countries – have two advantages over unilateral approaches. First, the economic benefits of international trade will be strengthened and strengthened if many countries or regions agree to remove trade barriers. By expanding markets, concerted trade liberalization enhances competition and specialization between countries, increasing efficiency and consumer incomes.

At the same time, removing barriers to international trade could create more opportunities. While tariffs have decreased significantly over time, non-tariff barriers, such as regulation and technical standards, can often create greater barriers. « Areas that are ready for improvement include strengthening intellectual property rights in developing countries, implementing a more coherent approach to managing the unfair benefits of so-called enterprises, and removing unnecessary restrictions on foreign investment, » said Christine McDaniel, senior Research Fellow at George Mason University.