THE DISADVANTAGES OF NATIONAL TRADE BARRIERS AND RESTRICTIONS

Modern economic theory, which came to include the custom of regulation of trade between countries, via tariffs and outright trade barriers, happened to be born at approximately the same time as the actual development of the nation-state as a political entity.  This accidental combination of events went on to evolve into an arrangement that is today taken for granted by mankind: that the government of a nation constitutes the primary organizational form, as well as managing entity, of economic affairs within the state.  Such a right originates from, and is mainly based upon, the fact that the national government possesses control of that nation's military resources; and can thus enforce such economic controls as it should deem meet to immpose upon its citizens, and its trading partners as well.

But there is in fact no logical purpose in each of a hundred separate nations protecting the producers and manufacturers within each of its respective borders from competition by producers and manufacturers within the other ninety-nine--whose governments are performing the same operations as regards their own producers and manufacturers, concerning the potential competition that they might face from the other ninety-nine.  As a result, instead of a worldwide venue for all producers and manufacturers to market their goods, and from which all the world's people might obtain their requirements on an equal basis, we are divided into a hundred separate enclaves, within which only the products and goods of that particular place are freely purchased and sold.  Beyond these border lines, a producer's products and a manufacturer's goods must navigate a morass of ninety-nine different sets of regulation and restriction, which, at the end of the day, bestow no benefit upon buyer or seller.  (I do not here refer to restrictions or regulations as to safety, health hazards, or the like.  I would, in fact, desire to see a single universal set of safety and health-related requirements of the highest caliber imposed upon all products and goods that are cultivated or manufactured, be they utilized or sold locally or across the globe.)

                                                                      * * * * *

Variouys attempts have been undertaken on an international level to rectify this situation; which seems to corroborate the allegation that it does constitute a condition in need of correction.

In the 1860s, prompted by efforts originated by Napoleon III, it appeared that a new era of freedom of trade might be dawning upon Europe.  Unfortunately, opposition by certain industrialists, and subsequent government distractions concerning warfare, caused an early demise to this new and hopeful trend. 

In 1913, American President Woodrow Wilson attempted to ameliorate America's economic plight by reducing tariffs via the Underwood-Simmons Tariff Act.  Quite simply, reduction of our tariffs would serve to reduce the price of goods for the American consumer, in that foreign producers would not need to add a high tariff premium to their products.  At the same time, American producers would be obliged to reduce the prices they charged in order to compete with their foreign competitors.  It was apparently another good idea by this great visionary; but subsequent events reduced its necessity.  The outbreak of World War I not long thereafter caused American products to become widely demanded throughout the world for a time, and the protectionism afforded by tariffs was no  longer a major concern.  Moreover, America's institution of the federal income tax, via the Sixteenth Amendment in 1913, shifted the nation's primary source of income from tariffs to said tax revenues.

Following World War II, multilateral negotiations were undertaken in efforts to liberate the world from import constraints and other economic barriers.  A result was the International Trade Organization, a "compromise agreement" between American and British negotiators at the Bretton Woods conferences.  By 1950, the United States Senate would disapprove its proposed charter.

In the interim, however, during October of 1947, the General Agreement on Tariffs and Trade ("GATT") was signed by the U.S. and a number of its trading partners, in new efforts to promote "freer and fairer" trade, mainly via reduction in tariffs.  Article XXIV of this Agreement, comprising rules governing regional trading arrangements, provides that:
a.  barriers to trade among participants must be completely eliminated regarding substantially all aspects of trade among signers of the Agreement; and
b.  there shall be no increase in duties or other commercial regulations levied upon imports from non-member countries.

Between 1960 and 1989, international trade grew by leaps and bounds.  This was an effect of an increase in incomes throughout the world, as well as numerous technological advances.  But the division of our planet into an array of separate nations, each with its own economy and economic difficulties, resulted in various setbacks referred to by such negative terms as "trade deficit" and "falling currency."  An extreme example of this was the plunge on Wall Street that occurred in October of 1987.  Described as a day "far worse than 1929," its causes were attributed to factors which included the aforementioned terms: "trade deficits...[and] the falling dollar." (Clifton Daniel, Ed. in Chief, Chronicle of the 20th Century) 

In the late 1980s, as expanded world trade produced a more and more interdependent world, the need for freedom in the marketplace made itself ever more apparent.  British Prime Minister Margaret Thatcher expressed the belief that the unhindered flow of world trade would serve as a guarantee of prosperity.  By 1988, the United States and Canada had signed a Free Trade Agreement, designed to end all trade barriers between the two countries by the year 2000.  And in 1992, a pact of a similar nature was entered by the U.S., Canada and Mexico.

Subsequently, following negotiations begun in 1986, called the "Uruguay Round" of the continuing GATT conferences, and upon final accord at Marrakesh, Morocco, in 1994, the World Trade Organization came into existence.  It has been described as an intended "meeting place where willing nations could sit in equality and negotiate rules of trade for their mutual advantage, in the service of sustainable international development." (New York Times Magazine, Aug. 12, 2002)  Instead, however, the organization has been accused by its critics as having become an unbalanced institution, largely controlled by the United States and the nations of Europe, and especially the agribusiness, pharmaceutical, and financial servicxes industries in those countries.

The European Union constitutes another attempt by a number of nations to open themselves to each other in ways which include economics and trade.  (I will attempt to describe it in some detail in a later post.)

                                                              * * * *

PLEASE LEAVE A COMMENT--HERE--OR VIA E-MAIL, AT oneworld@tampabay.rr.com