The General Agreement on Tariffs and Trade (GATT) is a multilateral agreement governing international trade. The WTO also mediates trade disputes between member countries. If the government of one country accuses the government of another country of violating the rules of world trade, a WTO panel decides the dispute. (The panel`s decision may be appealed to an appellate body.) If the WTO finds that the government of a member State has not complied with the agreements it has signed, the member is required to change its policy and bring them into line with the rules. If the Member considers that it is politically impossible to change its policy, it may offer other countries compensation in the form of lower trade barriers for other products. If it decides not to do so, other countries may obtain WTO authorization to increase customs duties (i.e. retaliatory measures) on goods from the Member State concerned in the event of non-compliance with it. There are three different types of trade agreements. The first is a unilateral trade agreement This happens when one country wants to impose certain restrictions, but no other country wants them to be imposed. It also allows countries to reduce the number of trade restrictions. It is also something that is not frequent and could affect a country. Trade pacts are often politically controversial, as they can change economic practices and deepen interdependence with trading partners. Improving efficiency through “free trade” is a common goal.
Governments largely support other trade agreements. One of the motivations for these standards is the fear that unconditional trade could lead to a “race to the bottom” in terms of labour and environmental standards, given that multinationals are singing the globe in search of low wages and lax environmental rules in order to reduce costs. Yet there is no empirical evidence of such a breed. In fact, trade usually involves the transfer of technology to developing countries, which makes it possible to increase wage rates, as the Korean economy – among many others – has shown since the 1960s. In addition, increased revenues are allowing cleaner production technologies to become affordable. For example, replacing scooters produced in India with scooters imported from Japan to India would improve air quality in India. The following video provides a good overview of the IMF and its role in promoting global trade. There are pros and cons of trade agreements. By removing tariffs, they reduce import prices and benefit consumers. Some domestic industries are suffering though….