A Brief History of Trade – Part 3
(Cont.from Part 2) Bilateral and multilateral trade began to develop in the mid 19th century with the primary focus on national advantage as being the determining factor on whether to open a country’s borders to imports or not. Building on the work of economists such as David Ricardo and his father, James Mill, John Stuart Mill went on to prove that a country with the trade monopoly on international markets could make use of tariffs to manipulate the terms of trade between countries, which is likely to result in reciprocity – the granting of benefits in return. It was argued that this form of trade was superior to the policy of free trade and was later proposed by Mill as a protection for fledgling industries as they tried to compete in a world which was rapidly becoming industrialized. Today, trade tariffs play an important role in the supply and demand of international trade.
Following the Great Depression of 1929, where the lack of free trade was cited as a principal cause, and while World War II was still raging, the Bretton Woods Agreement was signed by 44 countries in an effort to bring down trade barriers between countries, and establish rules and regulatory authorities relating to international trade and economics. This led to the creation of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development, which later became two separate entities – the World Bank and the Bank for International Settlements.
Free trade and agreements on tariffs between countries continued to develop as the 20th century drew to a close. Some notable achievements during this time included the lifting of barriers for trade between European Union member nations in 1992; the drafting and implementation of the 1994 North American Free Trade Agreement (NAFTA); the creation of the World Trade Organization in 1995 on the recommendations specified in the 1994 GATT Marrakech Agreement; and the signing of the Central American Free Trade Agreement in 2005. The first decade of the 21st century has seen amazing technological developments, with stock market trading seemingly moving at the speed of light. Events leading up to and continuing through the current global recession have also revealed just how closely woven global economies have become – certainly a far cry from the primitive trading of goods and services that took place millenniums ago.