Cross-National Cooperation and Agreements
GATT
The General Agreement on Tariffs and Trade (GATT), begun in 1947, created a continuing means for countries to negotiate the reduction and elimination of trade barriers and to agree on simplified mechanisms for the conduct of international trade
WTO
The World Trade Organization (WTO) replaced GATT in 1995 as a continuing means of trade negotiations that aspires to foster the principle of trade without discrimination and to provide a better means of mediating trade disputes and of enforcing agreements
The Effects of Integration
Once protection is eliminated among member countries, trade creation allows MNEs to specialize and trade based on comparative advantage
Trade diversion occurs when the supply of products shifts from countries that are not members of an economic bloc to those that are

International financial market

Foreign Exchange
Foreign exchange is money denominated in the currency of another nation or group of nations. The market in which these transactions take place is the foreign-exchange market. The exchange rate is the price of a currency. The price of foreign exchange is set by D & S in the marketplace
Rationale for trade intervention * Should the national government intervene to protect the country’s domestic firms by taxing foreign goods entering the domestic market or constructing other barriers against imports * Should the national government directly help the country's domestic firms increase their foreign sales through export subsidies, government to government negotiations and guaranteed loan programs
Free trade vs fair trade? * Free trade implies that the national government exerts minimal influence on the exporting and importing decisions of private firms and individuals * Fair trade (also managed trade) suggests that the national government should actively