Creating International Trade Organizations (Case Study Answer)

After the World War II, global leaders sought to create permanent agreement that would complement the financial institutions, IMF and World Bank, to ensure that the economic reactions triggered by Smoot-Hawley never took place again. Increasing percentage of tariffs and joblessness while decreasing the trade and income can trigger the likeliness of having a war. The ITO is a triumph for American foreign policy. Its agenda was not only focused on trade but also the rules on employment, commodity agreements, restrictive business practices, and investments. The U.S government are in favour of this because this will boost the country’s domestic employment and U.S can exercise government leadership because ITO can serve as a diplomatic tool. However, leading nations did not ratify ITO, including the U.S, and settled to GATT which focus is limited to the reduction of industrial tariffs.

The ITO charter will promote freer trade and raises output level between countries because of multilateral agreements between the partner countries. The charter also creates rules to increase trade efficiency that updates the participating countries and banks to international standards of trade and commerce. However, the decisions made by the ITO were dominated by larger member economies who have more voting power. There is a tendency that every time a country suffers economic shock, it is very tempting for the leaders to export their problems onto their trading partner. Governments around the world are under the constant pressure to protect domestic industries.

International institutions are necessary because it is diplomatic tool that provides peace and harmony between foreign countries. These kind of institutions provides assistance to help strengthen members institutional capacity because no country is an island when it comes to economic and financial stability.

Every international institution should have the power to oversee the domestic policies of each member country because...