Question

Today world trade is regulated by (1.07) a) NAFTA c) WTO b) GATT d) \(\mathrm{EU}\)

Short answer

The World Trade Organization (WTO) is responsible for regulating world trade today. Hence, the correct answer is c) WTO.

Step-by-step solution

Identify the different organizations

NAFTA, WTO, GATT, and EU are all organizations, but they serve different purposes and operate in various regions. Understanding each organization will allow us to determine which one, among these, is responsible for regulating world trade.

Understand the roles of each organization

Let's briefly discuss the roles of each organization. a) NAFTA: This stands for North American Free Trade Agreement. It was an agreement between the United States, Canada, and Mexico to eliminate most tariffs on trade between these countries. This primarily focuses on North America, so this isn't our answer. b) GATT: This stands for the General Agreement on Tariffs and Trade. It was an international trade organization that was created in 1947 to reduce barriers to trade. GATT was replaced by the WTO in 1995, so this also isn't the answer. c) WTO: This stands for the World Trade Organization. Established in 1995, it is the only global international organization that deals with the rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible. This looks like a strong contender for the answer. d) EU: This stands for the European Union. It is a political and economic union of 27 European countries. The EU aims to promote peace, establish a unified economic and monetary system, promote inclusion and combating discrimination, and establish strong international trade policies. However, it is focused primarily on European countries, so this isn't the answer either.

Choose the correct answer

After analyzing the roles of these organizations, we can conclude that the one responsible for regulating world trade today is the World Trade Organization (WTO). Hence, the correct answer is: c) WTO

Key concepts

World Trade Organization (WTO)

The World Trade Organization (WTO) is a critical global body responsible for overseeing and regulating international trade. Established on January 1, 1995, following the conclusion of the Uruguay Round of trade negotiations, the WTO succeeded the General Agreement on Tariffs and Trade (GATT). The primary goal of the WTO is to ensure that trade flows smoothly, predictably, and freely between nations.

By providing a forum for negotiating agreements aimed at reducing trade barriers and settling disputes, the WTO fosters a more efficient and predictable trading system. It also handles trade negotiations, monitors national trade policies, and provides technical assistance and training for developing countries. Membership in the WTO signals a country's commitment to following the rules established under international trade agreements, helping to stabilize trading relationships and promote a level playing field.

North American Free Trade Agreement (NAFTA)

The North American Free Trade Agreement, known as NAFTA, was a landmark trade deal that came into effect on January 1, 1994. It was designed to eliminate most tariffs and barriers to trade and investment among the United States, Canada, and Mexico. One of its main objectives was to increase economic growth by encouraging competition and investment opportunities within North America.

Over the years, NAFTA faced criticism and praise alike for its impacts on job markets, manufacturing, and the environment. As a result of renegotiation efforts, NAFTA was eventually replaced by the United States-Mexico-Canada Agreement (USMCA) on July 1, 2020. The USMCA aims to address various shortcomings of NAFTA, including labor, the environment, and digital trade.

General Agreement on Tariffs and Trade (GATT)

The General Agreement on Tariffs and Trade (GATT) was established in the aftermath of World War II, in 1947, serving as a multilateral agreement aimed at expanding international trade by eliminating or reducing trade barriers such as tariffs or quotas. GATT provided a framework for trade negotiations and a dispute resolution process, playing a pivotal role in the reduction of tariffs and other trade barriers over several decades.

One of the primary achievements of GATT was a series of multilateral trade negotiations known as 'trade rounds.' The last and longest round was the Uruguay Round, which led to the creation of the WTO. Despite its transformation into the WTO, GATT still exists as the WTO's umbrella treaty for trade in goods, under the 'GATT 1994' agreement.

European Union (EU)

The European Union (EU) is a unique economic and political union that encompasses 27 European countries. The EU has its roots in the European Coal and Steel Community and the European Economic Community, formed by six countries in the aftermath of World War II to foster economic cooperation. The idea was that countries that trade with one another become economically interdependent and are thus more likely to avoid conflict.

The EU has since evolved to have its own currency, the euro, used by 19 of its member states, as well as a single market where goods, services, people, and capital move freely. It also has its common policies on trade, agriculture, fisheries, and regional development, aiming to ensure fair competition and promote sustainable growth. While the EU has significant influence on trade within and outside Europe, its primary focus is on regional, rather than global, trade regulation.