Trade fell even faster, causing more unemployment and prolonging the downturn.
After the two world wars, most of Europe and Japan was struggling to feed its people, let alone prosper. Nations became dependent on the revival of world trade for vital income. America, which suffered less from the effects of the wars, was economically dominant and was under pressure to open up its markets to other countries.
2.1 The GATT.
In 1948, the General Agreement on Tariffs and Trade (GATT) was formed in the Cuban capital, Havana. It was the result of 23 countries getting together to sign an agreement to reduce customs tariffs. The Geneva-based organisation helps promote free trade by persuading countries to abolish import tariffs and other barriers to open markets.
The first round of trade negotiations resulted in 45,000 tariff concessions. And five more rounds led to a dramatic drop in tariffs on manufactured goods and a rapid increase in trade, helping to foster the "economic miracles" of Germany and Japan.
The most ambitious round of talks yet was the Uruguay Round started in Punta Del Este, Uruguay, which took place from 1986-93. It included agriculture and services in the negotiations for the first time. But political opposition to free trade grew in the 1990s. French farmers rioted over the organisation's deals, while union activists in the United States smashed Japanese cars.
2.2 The WTO.
Meanwhile, the World Trade Organisation superseded GATT in 1995. The new organisation was given more powers to enforce free trade rules, and a clearer mandate to promote free trade. Membership of the WTO has now increased to 142 countries, with 28 more nations waiting to join.
The World Trade Organisation (WTO) is the policeman of global trade. Its decisions are final and every member must abide by its rulings. When the US and the European Union are in dispute over steel, bananas or beef, it is the WTO which acts as judge and jury.
