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INTERNATIONAL

TRADE ARRANGEMENTS

by Dr Koos Coetzee, an independent agricultural economist

T growth. In its latest World Economic Outlook the
he recent trade war between the USA
Trade restrictions result in lower economic
and China once again highlighted
International Monetary Fund reports that global
the importance of international trade
relations. Trade wars and trade re-
economic growth continues to be weakened by
strictions are not a new phenomenon.
tensions. They estimate that the US–China trade
In 1651 and 1660, England promulgated the rising trade barriers and increasing geopolitical
Navigation Acts that excluded foreign ships from tensions will cumulatively reduce the level of global
carrying goods from British and colonial ports to GDP by 0,8% by 2020 and that the uncertainty
Britain. In the mercantilist period, countries im- around the United Kingdom’s exit from the EU
posed various restrictions on foreign trade. (Brexit) poses further risks to economic growth
Adam Smith explained the reasons for the globally.
removal of trade restrictions in The Wealth of
Nations published in 1776. If countries produce THE WORLD TRADE
those goods for which they have a comparative ORGANIZATION (WTO)
advantage, and buy those goods that other After the Second World War, and following the
countries produce more efficiently, society as a success of the Bretton Woods Conference on
whole would benefit more than when everyone international financial arrangements, countries
tries to produce all goods themselves. Freer trade started to discuss the formalisation of inter-
theoretically leads to higher total benefit for all. national trade policy. This action, largely driven

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