Imagine you"re living in a world where there are no regulations for trade. Everyone would set their own trues and run after them. This could result in disastrous trade wars. However, we do not have these wars. Why? Because we have organisations like GATT (General Agreements On Tariffs and Trade) and WTO (World Trade Organization) which shape the world trade for us. .
Under what circumstances were these organizations founded? GATT was founded after some disastrous economic crises in 1930s. The great depression of the 1930s affected a majority of the world population. The average unemployment rate around the world was about 30%. This depression started with the Stock Market Crash of 1929. The world was in need of a stimulus, but governments were cutting their spending as much as possible. Nations formed barriers to trade, such as the Smoot- Hawley Tariff. It became a law in US in June of 1930, and led to a significant decline in on world trade. US were aiming to protect its domestic industry from foreign competition by this tariff. The great hegemon was not leading the world out of the depression. (DFAIT, "History-, p. 1) .
Other countries also followed US's path and the result was a decline in the world trade from monthly average of 2.9 billion $ in 1929 to 1 billion $ in 1933. In 1933, unemployment in the industry world reached 30 million. US's tariff failed and its unemployment rose from 3 million in 1930 to 13 million in 1933. These were the reasons why countries agreed to join GATT after the WWII; they didn't want depressions to happen again. (DFAIT, "History-, p. 1) .
GATT was an organization formed in 1947 in Geneva. After the Word War II ended, "the world leaders wanted to avoid "destructive pre-war isolationist economic policies" and agreed to unify under GATT. It was an international organization designed to protect free trade. "It wasn't a formal institution with enforcement powers; instead, a commercial treaty.
