International Trade Agreements Lead To Economic Growth

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Bosnia and Herzegovina: A Bank operation supported reforms to facilitate cross-border trade. The project helped streamline government import-for-export licensing processes, make it easier to obtain authorizations, and reduce licensing costs. The completion of the project saved companies $1.26 million in compliance costs, a reduction of approximately 4%. The reduction in trade-related administrative costs has helped to strengthen the business environment and reduce business costs in the country. By removing trade barriers for businesses, this project has improved Bosnia and Herzegovina`s trade competitiveness and facilitated economic integration with the European Union`s neighbouring market. Mercantilists believed that governments should encourage exports and that governments control economic activity and impose import restrictions when necessary to ensure an export surplus. Obviously, not all nations could have an export surplus, but the mercantists thought that this was the goal and that prosperous nations would benefit at the expense of less prosperous countries. Ideally, according to mercantist theory, a nation would export manufactured goods and import raw materials, which would maximize national employment. From the time of Adam Smith in 1776 to the introduction of GATT in 1947, economic theory of trade evolved quite slowly.

However, since the introduction of GATT in 1947, a number of important changes have been made to the traditional Western economic theory of international trade. These changes largely update the fundamental theory of trade to reflect the new realities of industry and commerce. These considerations underscore the need for further trade liberalization. Although protection has declined significantly over the past three decades, it remains important in both developed and developing countries, particularly in sectors such as agricultural products or labour-intensive industrial and service enterprises (e.g. B construction), where developing countries have comparative advantages. Integration into the world economy has proven to be an effective means for countries to promote economic growth, development and poverty alleviation. Over the past 20 years, world trade growth has averaged 6% per year, twice as fast as world production. But trade has been an engine of growth for much longer. Since 1947, when the General Agreement on Tariffs and Trade (GATT) was created, the world trading system has benefited from eight rounds of multilateral trade liberalization, as well as unilateral and regional liberalization.

Indeed, the last of these eight rounds (the so-called “Uruguay Round”, concluded in 1994), resulted in the creation of the World Trade Organization to support the management of the growing stock of multilateral trade agreements. Proponents of free trade argue that imposing import barriers, even if other countries do, is tantamount to shooting oneself in the foot.