Due to the prevalence of free trade agreements and the establishment of the General Agreement on Tariffs and Trade (GATT), which later became the World Trade Organization (WTO), one can reasonably assume without much prior knowledge or experience that trade is something that is valued among the nations of the world. Why exactly countries value trade is much more complex and harder to fully understand. In order to understand why trade is important, we must first understand the disadvantages of autarky, or economic independence. Complete isolation from trading without the outside world may indeed have some benefits, such as protecting domestic jobs in certain sectors. However, this isolation also means that the state must find a way to produce
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Even though its predecessor, General Agreement on Tariffs and Trade, was formed more than six decades ago, there has still been a noticeable failure to foster truly “free” trade. While there have numerous “rounds” conducted in GATT and the WTO, as well has many more Regional Trade Agreement’s (RTA’s), no two states have been able to create and agree to a commitment to a tariff-free treaty. There are several potential reasons for this lack of free trade. What is perhaps the most significant obstacle to true free trade is the lack of an effective enforcement mechanism to keep governments accountable for cheating and attempts to exploit another country. Governments cannot be sure that other governments will hold up their end of the bargain once one is agreed to. There is no 3rd party to punish another government, unlike having a police and judicial system to punish criminals within governments. Without an enforcement mechanism in place, states will always be worried that they will be the ones to get the short end of the deal. As Oatley puts it, “governments are unable to conclude agreements that make them all better off because each fears getting the ‘sucker payoff (Oatley 2012).’” Another potential obstacle to truly free trade is that trade negotiations are highly complex and dynamic. There are countless different categories made up of an innumerable amount of different products that are constantly being added to through innovation. For example, flyable consumer drones, virtual reality and driverless cars were all mere concepts just a decade ago. Even today, the U.S. government is still trying to come up with a coherent set of standards and regulations for driverless cars so that car manufacturers can get more such vehicles to
Even though its predecessor, General Agreement on Tariffs and Trade, was formed more than six decades ago, there has still been a noticeable failure to foster truly “free” trade. While there have numerous “rounds” conducted in GATT and the WTO, as well has many more Regional Trade Agreement’s (RTA’s), no two states have been able to create and agree to a commitment to a tariff-free treaty. There are several potential reasons for this lack of free trade. What is perhaps the most significant obstacle to true free trade is the lack of an effective enforcement mechanism to keep governments accountable for cheating and attempts to exploit another country. Governments cannot be sure that other governments will hold up their end of the bargain once one is agreed to. There is no 3rd party to punish another government, unlike having a police and judicial system to punish criminals within governments. Without an enforcement mechanism in place, states will always be worried that they will be the ones to get the short end of the deal. As Oatley puts it, “governments are unable to conclude agreements that make them all better off because each fears getting the ‘sucker payoff (Oatley 2012).’” Another potential obstacle to truly free trade is that trade negotiations are highly complex and dynamic. There are countless different categories made up of an innumerable amount of different products that are constantly being added to through innovation. For example, flyable consumer drones, virtual reality and driverless cars were all mere concepts just a decade ago. Even today, the U.S. government is still trying to come up with a coherent set of standards and regulations for driverless cars so that car manufacturers can get more such vehicles to