Paper Topic:

Why countries gain from international trade?

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International Trade

While few doubted , in the post-war era , that in theory free trade produced a more efficient use of the world 's scarce resources , its execution when the allocation of economic power was so lopsided struck various as disingenuous . There were good reasons why the Europeans--and the British in particular--would wish to proceed slowly on the road to multilateralism . As long as the United States dominated the world economy , with Europe and its firms in ruins , it was unclear just how

broadly distributed the gains from trade would be (Fine , 393 ) If free trade benefited the Americans and nobody else , how just could such a policy be

Keynes , while no protectionist , was generally unsympathetic toward postwar American trade policy , which he viewed as dogmatic and detrimental to Britain 's domestic policy goal of full employment . He to retain the Imperial Preference system (Fine , 393 ) as a transition to freer trade , while agreeing that British action in removing preferences might be tied to the lowering of tariffs by the United States (Fine , 393

As ideas about the future trade were being exchanged in 1945 and 1946 , they were accompanied by fears that the United States would soon enter a postwar depression . If that had occurred , the economic repercussions would have been much worse than during the 1930s , given the immense and urgent need for European reconstruction . From Europe 's perspective , the problem was that , in the event the United States slipped into a recession , its imports would likely fall and its exports pushed to third markets . How then would Europe be able to earn the foreign exchange needed to finance reconstruction

These larger concerns about political economy and the future of American-style capitalism colored discussions between the United States and Britain over the trade . The establishment of full employment policies was at the core of Britain 's vision for the postwar world . If democratic governments failed , in the words of political scientist John Ikenberry "to deliver the socioeconomic goods (Rawls , 6 ) the outcome might be the end of democracy after all , a powerful alternative to capitalist democracy then existed in the Soviet Union . Keynes himself argued that democracy was a fragile institution , and that another depression "might easily mean the downfall of our present system of democratic government (Rawls , 6

By 1946 , having established the Bretton Woods system and having held regular rounds of discussions on trade , the United States , Great Britain and other participating countries were ready to move toward drafting a charter for the ITO . In fact , the United States and its allies were pursuing a two-track trade policy at this time . On one track negotiators were working on the GATT , whose primary purpose was to achieve multilateral agreement on the reduction of trade barriers . This was meant to be a temporary instrument upon its establishment , the ITO was intended to subsume the GATT 's functions , as well as tackle the broader issues of trade and employment (Rawls , 6...

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