In the headlines of newspapers, trade policy most often appears to be a bitter and erausal quarrel. Countries almost constantly threaten to challenge the “unfair” trade practices of other nations. Procedures for the settlement of disputes from the WTO, the European Union, NAFTA and other regional trade agreements are under way. Politicians in national parliaments, denounced by lobbyists, are often threatened with bills that “create a level playing field” or “prevent unfair trade” – although most of these bills aim to achieve these ambitious goals by further limiting trade. Protesters in the street may oppose certain trade rules or the practice of international trade. With all these controversies, the general trend over the past 60 years is clearly to reduce barriers to trade. In 1946, the average tariff rate applied to products imported by industrialized countries was 40%. In 1990, after decades of GATT negotiations, it was less than 5%. One of the reasons why the GATT negotiations moved from the focus on tariff reduction in the early rounds to a broader agenda was that tariffs had been reduced so drastically that there was not much more to do in this area.
U.S. Customs followed this general pattern: after a sharp increase during the Great Depression, tariffs fell to less than 2% at the end of the century. Although measures on import quotas and non-tariff barriers are less specific than those for tariffs, they generally appear to be at a lower level. The world has seen an avalanche of regional trade agreements in recent years. About 100 such agreements are now in force. Some of the most important are listed in Table 7. Some are just agreements to keep talking; others have set specific targets for reducing tariffs, import quotas and non-tariff barriers. One economist described the current trade agreements as a “spaghetti bowl,” like a map with lines that link all countries to trade agreements.
The best known of these regional trade agreements is the European Union. In the years following The Second World War, the leaders of several European nations argued that if they could strengthen ties between their economies, they might be more likely to avoid another devastating war.