Question

Explain what the author of International Trade: The Basics present as the 'second golden age of trade'. When and why did it happened and what is GATT that was created during this period.

Answer 1

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Abstract

If we look at the world from trade perspective we can find below revolutionery changes that take place since beginning of trade

Dramatic decreases in transport and communication costs have been the driving forces behind today’s global trading system. Geopolitics has also played a decisive role in advancing and reinforcing these structural trends.

In the last 30 years, world merchandise and commercial services trade have increased by about 7 per cent per year on average, reaching a peak of US$ 18 trillion and US$ 4 trillion respectively in 2011. When trade is measured in value-added terms, services play a larger role.

Between 1980 and 2011, developing economies raised their share in world exports from 34 per cent to 47 per cent and their share in world imports from 29 per cent to 42 per cent. Asia is playing an increasing role in world trade.

For a number of decades, world trade has grown on average nearly twice as fast as world production. This reflects the increasing prominence of international supply chains and hence the importance of measuring trade in value-added terms.

Simulations show that in a dynamic economic and open trade environment, developing countries are likely to outpace developed countries in terms of both export and GDP growth by a factor of two to three in future decades.

By contrast, their GDP would grow by less than half this rate in a pessimistic economic and protectionist scenario, and export growth would be lower than in developed countries

"Golden age of Trade"

In many ways, the world economy has undergone a process of “re-globalization” since the Second World War there is gradual change in economic activity resuming and dramatically accelerating the integration path that was abruptly derailed by the First World War.

Indeed, the world economy grew far faster between 1950 and 1973 than it had done before 1914, and its geographical scope was far wider – ushering in a “golden age” of unprecedented prosperity.

World per capita GDP rose by nearly 3 per cent a year, and world trade by nearly 8 per cent a year. However, there is one important difference between the first and the second age of globalization.

During 19th-century version was accompanied by only limited to basic principles efforts at international economic cooperation, the 20th-century version, by explicit design, was built on a foundation of new multilateral economic institutions known collectively as the Bretton Woods system:

The International Monetary Fund (IMF), the World Bank and the General Agreement on Tariffs and Trade (GATT).

Formation of GATT

Signed: 30 October 1947

Location: Geneva, Geneva Canton, Switzerland

The GATT was first discussed during the United Nations Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO). It was signed by 23 nations in Geneva on 30 October 1947, and took effect on 1 January 1948.

The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas.

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