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March, No. 236

Globalization involves increasing integration of economies around the world, from the national to the most local levels, thereby promoting international trade in goods and services and cross-border movement of information, technology, people and investments. This article examines the benefits and costs.

Last Updated: 03/28/2007

Globalization and the Benefits of Trade

Robert L. Thompson

Since the conclusion of World War II in 1945, international trade has been greatly facilitated by agreement among trading countries on a set of rules for international trade, known as the General Agreement on Tariffs and Trade (GATT). These rules were developed through a series of eight “rounds” of international trade negotiations between 1947 and 1994. Through these negotiations, export subsidies were banned on everything but agricultural products, and import tariffs on manufactured goods were reduced to inconsequential levels. As a result, trade in manufactured goods has grown rapidly, achieving an unprecedented level of specialization and exchange among countries.