19.2. Warm-up

Before you start reading the unit think and try to answer the following questions:

1. Is economic integration an important means of liberalization of trade: eliminating domestic

trade barriers, the freedom of movement of capital and labour, etc.?

2. Did the US Reciprocal Trade Agreements Act give rise to the signing of the General Agreement

on Tariffs and Trade (GATT)? What were the goals of signing GATT?

3. What are the main results of signing the US—Canadian Free-Trade Agreement?

19.3. Rapid Reading (skimming, scanning, reading for general understanding

of the basic Text 19.4)

Work in pairs or small groups.

1. Skim the text quickly to find the cardinal principles GATT was based on.

2. Use the headings to form a few questions of your own on each section of the text. This will give you

a personal purpose for reading and will help you to read with more attention and understanding.

3. Scan the text quickly to find that part of it which says about the goals of creating the European

Economic Community. Tell your partner about them.

4. Tell the group whether the information obtained extends your professional knowledge.

19.4. Basic Text. Economic Integration and Trade

Over the last decades new tendencies have developed towards economic integration and liberalization

of foreign trade relations in the world economy. We may give a number of examples of such

integration on the basis of both economic and political factors: in the time of the USSR there were

* North American Free-Trade Agreement — Североамериканское соглашение о свободной торговле

(США, Канада, Мексика).

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the Council for Mutual Economic Assistance (CMEA or Comecon), the European Economic Community

(EEC) in Europe, and more than 150 countries joined the World Trade Organization (WTO).

Historically, the first act on the downward trend of tariffs adopted in the United States was the

Reciprocal Trade Agreements Act of 1934. Specifically aimed at tariff reduction, the Act had two

main features:

Negotiating authority. This Act authorized the President to negotiate agreements with foreign

nations which would reduce American tariffs up to 50 percent of the existing rates. Tariff reductions

were to hinge upon the willingness of other nations to reciprocate by lowering tariffs on American

exports.

Generalized reductions. By incorporating most-favored-nation clauses in these agreements, the

resulting tariff reductions not only would apply to the specific nation negotiating with the United

States, but they would be generalized so as to apply to all nations.

But the Reciprocal Trade Act gave rise to only bilateral negotiations.

a) The World TYade Organization

This approach was broadened in 1947 when twenty-three nations, including the United

States, signed a General Agreement on Tariffs and Trade (GATT). GATT was based on three

cardinal principles:

(1) equal, nondiscriminatory treatment for all member nations;

(2) the reduction of tariffs by multilateral negotiations;

(3) the elimination of import quotas.

Basically, GATT was a forum for the negotiation of reductions in tariff barriers on a multilateral

basis. Almost one hundred nations belonged to GATT, and there is little doubt but that it was an