Question

Most cconomists and people in the business community supported the establishment of (1.07) a) both NAFTA and GATT b) neither NAFTA nor GATT c) NAFTA but not GATT d) GATT but not NAFTA

Short answer

Most economists and people in the business community supported the establishment of both NAFTA and GATT (answer A), as these agreements promote free trade, economic growth, and the efficient allocation of resources.

Step-by-step solution

Understand NAFTA and GATT

Before selecting the correct answer, it's essential to understand what NAFTA and GATT are: 1. NAFTA (North American Free Trade Agreement): A trade agreement established between the United States, Canada, and Mexico to eliminate trade barriers and promote economic integration in North America. 2. GATT (General Agreement on Tariffs and Trade): An international trade agreement aimed at reducing tariffs, trade barriers, and providing a common framework for international trade rules.

Analyze the Opinions of Economists and People in the Business Community

Most economists and people in the business community are generally in favor of free trade agreements because they support the efficient allocation of resources, promote economic growth, and provide consumers with a greater variety of goods and services. Consequently, they would likely support the establishment of both NAFTA and GATT, as both of these agreements aim to facilitate trade and lower tariffs.

Choose the Correct Answer

Based on the understanding of NAFTA and GATT, and the opinions of economists and people in the business community, the correct answer is: A) Both NAFTA and GATT As both agreements align with the general consensus among economists and people in the business community to support the establishment and promotion of free trade to enhance economic growth and efficiency.

Key concepts

NAFTA

The North American Free Trade Agreement (NAFTA) was established to bolster the economies of the United States, Canada, and Mexico through the removal of trade barriers. It aimed to boost trade by eliminating tariffs and fostering economic cooperation between its member countries. This agreement sought to create a more integrated North American market.

One of the key features of NAFTA was its focus on providing equal access to goods and services across borders without the imposition of tariffs or quotas. This was intended to make trade between the three countries cheaper and more efficient.

• NAFTA promoted increased investments across borders.
• It was designed to create more jobs by opening up more opportunities for exporters in each country.
• The agreement also worked on improving intellectual property rights and environmental regulations.

In essence, NAFTA paved the way for a closer economic relationship between its members, impacting millions of consumers and businesses.

GATT

The General Agreement on Tariffs and Trade (GATT), established in 1948, served as a multilateral platform for trading nations across the globe. Its primary purpose was to reduce tariffs and other trade barriers, mechanizing fair international trade practices. By doing so, it aimed to create conditions for economic prosperity and global economic stability.

GATT operated through rounds of negotiations, known as "GATT Rounds," each targeting different areas of trade imbalances and tariff reductions. These rounds brought together countries to negotiate and agree on trade policies.

• GATT led to the establishment of the World Trade Organization (WTO) in 1995, which continued its mission with a broader mandate.
• It fostered a fair trading community by promoting transparency and equality.
• GATT encouraged the settlement of trade disputes through a structured process.

Overall, GATT contributed significantly to the creation of a rules-based international trade system.

Free Trade

Free trade refers to a policy allowing goods and services to move across borders without any barriers such as tariffs, import quotas, or trade restrictions. It is based on the principle that market forces, without government intervention, result in the most efficient allocation of resources, leading to economic growth.

Economists and business communities often advocate for free trade due to its numerous benefits.

• It reduces prices for consumers by increasing competition and offering a wider variety of goods and services.
• Free trade increases the efficiency of industries by exposing them to international competition, prompting innovation and improvement.
• It encourages countries to specialize in the production of goods in which they have a comparative advantage.

While free trade can stimulate economic growth, it can also lead to challenges like job displacement in certain sectors, making it a complex topic within international economics.