CHAPTER 3 INTERNATIONAL

TRADE
GENERAL AGREEMENT ON TARIFFS AND TRADE
(GATT)

• (GATT) was signed by 23 countries in october 1947

• (GATT) is a legal agreement between many countries, whose overall purpose

was to promote international trade by reducing or eliminating trade
barriers such as tariffs or quotas. \

• The purpose of the General Agreement on Tariffs and Trade (GATT) was to
make international trade easier.
GATT MAJOR PRINCIPLES

1. MOST -FAVOURED -NATION (MFN) TREATMENT

2. RECIPROCITY

3. TRANSPARENCY

4. TARIFF BINDING AND REDUCTION

ROLE OF GATT IN PROMOTING INTERNATIONAL
TRADE
• The GATT was established in 1948 to regulate world trade.

• The main role of GATT in the international trade was regulating the contracting
parties to achieve the purpose of the agreement which were reducing tariffs and
other barriers, and to achieve the liberalization in international trade.
 WORLD TRADE ORGANIZATION

The World Trade Organization (WTO) - is an intergovernmental

organization that regulates and facilitates international
trade between nations.
ROLE OF WTO IN PROMOTING INTERNATIONAL TRADE

• World Trade Organization (WTO) is the only international organization

dealing with the global rules of trade.

• To increase the level of production and productivity with the view to ensuring

level of employment in the world.

• To expand and utilize world resources to the best

 GLOBAL TRADE MAJOR
CHALLENGES

• Economic Warfare
• Geo-politicization
• State Capitalism
• Lack of Leadership
• Power Distribution
• Weaker Underdogs
• Price Fluctuations of Natural Resources
INTERNATIONAL TRADE MODERN THEORIES

• The Heckscher-Ohlin model

• The samuelson and Ohlin model
• The krugman and obsfeld model
• The michael porter model
The Heckscher-Ohlin model
 evaluates the equilibrium of trade between two countries that have
varying specialties and natural resources.

samuelson and Ohlin model

 The increase in income brings about increase in aggregate demand for
goods and services. To produce more goods we require more capital
goods for which extra investment is undertaken.
Krugman model
 The Home Market Effect. Main idea: countries will tend to export those kinds
of products for which they have relatively large domestic demand. Two
industries with many differentiated products within each of them.

Obsfield model
 was centered on seigniorage aspects, the newer models rather focus on
the importance of the governmental target function, which is influenced
by several different issues, such as the effects of high interest rates,
growing unemployment or real overvaluation.
Michael Porter model

 is a business analysis model that helps to explain why various industries

are able to sustain different levels of profitability