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Easing World Restrictions
Easing World Restrictions
Easing World Restrictions
As an offshoot of protectionism countries have bounded together to ease the trade flow
in their respective regions.
WTO Activities:
- Consists of WTO agreements, negotiated, signed and ratified by a large majority of the
world trading nations.
- Forges legal ground rules for international commerce.
- Guarantees trade rights.
- Serves as contracts that bind governments to keep the trade policies within agreed limits
to benefit everybody.
MFN (Most- Favored- Nation) - a WTO status that encapsulates the most basic principle
of non-discrimination. It states that all members shall give equal treatment to the products
and services of all other WTO states/nations.
DSB (Dispute Settlement Body) – handles trade frictions and disputes. Once trade disputes
are settled potential military and political conflicts are mitigated.
TPRB (Trade Policy Review Body) – a forum of all countries to review trade policies of
member countries.
The WTO strives to reduce trade barriers. Over 75% of WTO members are developing or
least developed countries.
Trading Blocs
These are organizations formed by some countries to facilitate trade among themselves
and with other countries.
Types of Trading Blocs:
1. Free Trade Area – members remove all trade barriers among themselves. But they can
improve their own tariffs to non-member countries. Ex. European Free Trade Area
2. Customs Union – members remove all trade barriers among themselves and they have the
same set of external barriers consequently eliminating the need for customs inspection at
international borders. Ex. Customs and Economic Union of Central Africa
3. Common Market – member countries permit full freedom of factor flows (migration of
labor or capital) among themselves, in addition to having a free trade area. Ex. European
Union (EU); Central American Common Market (CACM).
4. Full Economic Union – member countries unify all their economic policies including
monetary, fiscal, welfare policies as well as policies toward trade and factor migration. The
ultimate goal of EC (European Community) is to form one nation. But did not actually
materialize the ECU (European Currency Unit) was replaced by the EURO.
The IMF was formed to ensure stability of the international monetary and financial
system.