Effects on Trends in Trade Policy
The modernizing world of 1850-1870 belonged to an age of remarkable growth in international trade, stimulating the largest free market the world had ever seen. Yet by 1914, only 30 years later, the trend towards liberal trade policies had mostly ended, replaced by a revival of the protectionist system. A study of the variation in trade policies over time shows a remarkable growth in the power of interest groups to influence the institutional rules and regulations concerning international economic intercourse. The initial major trend can be partly attributed to international conditions, whereas later trends are more attributable to the relative strength of the interest groups within individual nations and their ability to influence institutional policies. It is, however, necessary to always consider the impact of the international economic situation on the interest groups, as changes in the international arena often played a significant role in determining which interest groups held power at any given time.
A convenient starting point for looking at trends in international commerce policy is Great Britain. Prior to the British initiative towards free trade, there were two main barriers to trade, natural and artificial1. Natural barriers were the long distances to be transversed and the high cost of shipping materials. Artificial barriers included tariffs and at times direct prohibitions on the import of certain goods. As the century progressed both barriers fell drastically due to remarkable advances in technology and through the international leadership of Great Britain. This lasted until the 1870s initiated the return to protectionism.
Britain, as the first serious pundit for free tr...
... middle of paper ...
...rol over the Zollverein and was fearful of an Austrian attempt to join. Thus by liberalizing trade policy Prussia hoped to deter a highly protectionist Austria from seeking admittance.
Spain, the Italian customs union, and Russia all relaxed their highly protectionist laws from 1850 onward as a result of the spectacular economic success of Great Britain and the ratification of trade agreements with adherence to the most favored nation clause. Since all had relatively small industrial sectors, the industrialists as an interest group demanded more protection. Yet due to the political weakness of the interest groups, and the largely despotic nature of the regimes as regards trade policy at the time, protectionism was lowered in spite of the industrial sector. The nations remained generally protectionist, though, and were in no way leaning towards true free trade.
Protectionism is the theory or practice of shielding a country's domestic industries from foreign competition by taxing imports. Between 2000 and 2008 the value of world trade in goods and services rose by 12% a year. However since the global recession in 2008 the value of world trade in goods and services has substantially decreased.
Trade is the most common form of transferring ownership of a product. The concepts are very simple, I give you something (a good or service) and you give me something (a good or service) in return, everyone is happy. However, trade is not limited to two individuals. There are trades that happen outside national borders and we refer to that as international trading. Before a country does international trading, they do research to understand the opportunity costs and marginal costs of their production versus another countries production. Doing this we can increase profit, decrease costs and improve overall trade efficiency. Currently, there are negotiations going on between 11 countries about making a trade agreement called the Trans-Pacific
Even prior to the Austro-Prussian War, there were divisions between the two states. Though they were allies for many years due to the German population that existed in both, they began to both grasp for power within the German states. One example of this power struggle occurred in the Zollverein, an economic association that Prussia led. Prussia did not want Austria to be part of this economic group and thus “blocked Austrian entry into the Zollverein.” In 1849-1850 the states were even on the brink of war. Prussia attempted to create a German union, with itself at the forefront, but Austria “called the Prussian bluff by adopting a belligerent posture.” As a result, Prussia lost what power it had accumulated in the maneuver when it signed the Olmutz Convention, which “re-established the old German Confederation.” Two wars were also influential on the conflict between Austria and Prussia. In the Cri...
Bentley, J., & Ziegler, H. (2008). Trade and encounters a global perspective on the past. (4th ed., Vol. 1, pp. 182-401). New York: McGraw-Hill.
The United States has for over two centuries been involved in the growing world economy. While the U.S. post revolutionary war sought to protect itself from outside influences has since the great depression and world war two looked to break trade restrictions. The United States role in the global economy has grown throughout the 20th century and as a result of several historical events has adopted positions of both benefactor and dependent. The United States trade policy has over time shifted from isolationist protectionism to a commitment to establishing world-wide free trade. Free trade enterprise has developed and grown through organizations such as the WTO and NAFTA. The U.S. in order to obtain its free trade desires has implemented a number of policies that can be examined for both their benefits and flaws. Several trade policies exist as options to the United States, among these fair trade and free trade policies dominate the world economic market. In order to achieve economic growth the United States has a duty to maintain a global trade policy that benefits both domestic workers and industry. While free trade gives opportunities to large industries and wealthy corporate investors the American worker suffers job instability and lower wages. However fair trade policies that protect America’s workers do not help foster wide economic growth. The United States must then engage in economic trade policies that both protect the United States founding principles and secure for tomorrow greater economic stability.
In 1776, even as Adam Smith was championing the ideals of a free market economy, he recognized that the interests of national security far outweighed the principles of free trade. More then two centuries later, that sentiment proves to still be accurate and in use. Since the early 1900s, the United States has used this precept to defend its position on trade barriers to hostile nations, and through the majority of the century, that predominantly referred to the Soviet Union and its allies.
With so much focus on the positive elements of free trade, the negative aspects of an open system are often overlooked. However, they do exist, and protectionism is needed. Consequently, safeguards are built into the system. States look out for their own good, whether that is through the use of escape clauses or the choice of the optimal forum for dispute settlement based on the precedent they do or do not want set. This paper argues that protectionism is valuable and inherent in the current system; however, not enough. Powerful states exploit weaker states, and “free trade” exacerbates the problem. I will first discuss why free trade does not work. Then, I will explain how the current system enables the inherent protectionist attitude of states. Finally, I will analyze the fairness of the system.
There was a long-standing rivalry between Austria-Hungary and Russia due to their interests in the Balkans. Russia saw her role as leading and supporting her fellow Slav peoples in the Balkans. This Pan-Slav concept provided an ideal excuse to interfere in the Balkans and to extend Russia's influence towards the Eastern Mediterranean. Ideally Russia wished to open the Dardenelles straits to its warships. Austria-Hungary was concerned that this Russian encouragement of nationalism may threaten her borders and inspire nationalism within her own empire. In turn, Germany recognised that as Austria's closest ally her fate was linked with that of the Austro-Hungarian Empire. Austria-Hungary was anxious to prevent Russian encroachment in the Balkans. This aim would be best served by the elimination of Serbia, Russia's Balkan ally. In 1878, Russia was humiliated at the Congress of Berlin when her proposal for a Greater Bulgarian state was rejected and Austria-Hungary occupied Bosnia to maintain order amongst the nationalist revolts.
Roberts, Russell. (2006). The Choice: A Fable of Free Trade and Protectionism. New Jersey: Prentice Hall.
Topic: Analyze the validity of the objections to free trade and critically discuss the role of international organizations in regulating trade between counties. Does how the control of trades has impacted positively or negativity on a company of your choice.
Besides that free trade encourages strengthen the development of a country’s institutions, in order to protect the country’s eco...
While free trade has certainly changed with advances in technology and the ability to create external economies, the concept seems to be the most benign way for countries to trade with one another. Factoring in that imperfect competition and increasing returns challenge the concept of comparative advantage in modern international trade markets, the resulting introduction of government policies to regulate trade seems to result in increased tensions between countries as individual nations seek to gain advantages at the cost of others. While classical trade optimism may be somewhat naïve, the alternatives are risky and potentially harmful.
Gilpin, Robert. Global Political Economy: Understanding the International Economic Order. Princeton: Princeton University Press, 2001. Print.
Another economist Douglas Irwin wrote a book titled “Against the Tide”. The book is an Intellectual History of Free Trade; it is an interesting, educational account of how free trade appeared and of how the concept of free trade has coped with two centuries of attacks and criticism.
After the failed International Trade Organization, Rodrik discusses the Bretton Woods Agreement, the transition from the General Agreement on Tariffs and T...