GATT has been called the " most ambitious and comprehensive global commercial arrangement in history (Haverty 2). This Agreement created the World Trade Organization (WTO), the group that would settle disputes between countries about trade rules. It also opened up the agriculture and textile industries to free trade, where they were heavily protected before (Harris 1).
In Goldsmiths notes he quotes David Ricardo, a British economist in the early nineteenth century, was one of the first to write about free trade. Ricardo believed that, "each nation should specialize in those activities in which it excels, so that it can have the greatest advantage relative to other countries." Ricardo's ideal situation would have been that each nation narrow its focus of industry on what they are really good at producing, and get rid of the things that they are not so good at. The nations would then export their surpluses and import products that they no longer manufacture. If international trade followed Ricardo's model, he believed that, "efficiency and productivity would increase, and prosperity would be enhanced" (Goldsmith 1). However, James Mills, another early .
trade theorist explained in 1821, "The benefit which is derived from exchanging one commodity for another arises, in all cases, from the commodity received, not the commodity given" (Harris 2). In other words, it is imports that make money and not exports. No wonder Bass went out of the country. Make it cheaper, and then import it to the US consumer.
How does all this work? GATT is an agreement that was meant to encourage international trade, over time. The agreement will change the way US companies produce and sell products and services at home and internationally. Tariff cuts are what make GATT so effective in increasing international trade. If you don't have to pay tariffs to export your products to another country, you have just greatly expanded the market for your goods.
