The trend toward more liberalized multilateral trading would soon begin to slow by the late 19th century with the world economy falling into a severe depression in Lasting until , the depression served to increase pressure for greater domestic protection and dampen any previous momentum to access foreign markets.
Regionalism versus multilateralism (English) | The World Bank
Italy would institute a moderate set of tariffs in with more severe tariffs to follow in Only Great Britain, out of all the major Western European powers, maintained its adherence to free-trade policies. As for the U.
But during the latter half of the century, protectionism significantly increased with the raising of duties during the Civil War and then the ultra-protectionist McKinley Tariff Act of All of these protectionist measures, however, were mild compared to the earlier mercantilist period and in spite of the anti-free trade environment, including a number of isolated trade wars, international trade flows continued to grow.
But if international trade continued to expand despite numerous hurdles, World War I would prove to be fatal for the trade liberalization that had begun in the early 19th century. The rise of nationalist ideologies and dismal economic conditions following the war served to disrupt world trade and dismantle the trading networks that had characterized the previous century.
The new wave of protectionist trade barriers moved the newly formed League of Nations to organize the First World Economic Conference in in order to outline a multilateral trade agreement. Yet, the agreement would have little effect as the onset of the Great Depression initiated a new wave of protectionism.
Multilateralism and the WTO
The economic insecurity and extreme nationalism of the period created the conditions for the outbreak of World War II. With the U. While the IMF and World Bank would play pivotal roles in the new international framework, the ITO failed to materialize, and its plan to oversee the development of a non-preferential multilateral trading order would be taken up by the GATT, established in In less than five years after the GATT was established, Europe would begin a program of regional economic integration through the creation of the European Coal and Steel Community in , which would eventually evolve into what we know today as the European Union EU.
Thus, regionalism did not necessarily grow at the expense of multilateralism, but in conjunction with it.
The push for regionalism was likely due to a growing need for countries to go beyond the GATT provisions, and at a much quicker pace. Following the breakup of the Soviet Union, the EU pushed to form trade agreements with some Central and Eastern European nations, and in the mids, it established some bilateral trade agreements with Middle Eastern countries.
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