International trade in the post-WWII era

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International trade in the post-WWII era.


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Following the end of WWII, the allies decided that a prosperous and lasting peace depended not only on the creation of a stable international political order based on principles embedded in the United Nations (UN) Charter, but also on the creation of a stable liberal international economic order. The twin pillars of the international financial system, the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), emerged as the institutional alternative to the regionalism characteristic of international financial practices in the post-WWI era.

An international trading system, built on free trade principles, was also considered as an alternative to the protectionist global trade regime that evolved, especially after the depression. State foreign economic policies followed the pattern of the United States, which opted to manage domestic economic policy partially by implementing the Smoot-Hawley Act, an act which promoted tariff based import reduction. Contrary to their international financial counterparts, international trade agreements evolved into their current institutional form during the course of almost a fifty year history.

The trade compliment to the post-war international political economy the International Trade Organization (ITO) was negotiated in Havana, Cuba. Political disagreements ultimately spelled the end of the ITO as a formal organization, yet participants considered trade issues important enough to resurrect portions of the ITO charter and transform them into a less formal, free standing trade agreement known as the General Agreement on Tariffs and Trade. (GATT). Figure 1 briefly outlines the history of G...