Following discussions between the U.S. and Great Britain after World W

Following discussions between the U.S. and Great Britain after World War II, the General Agreement on Tariffs and Trade (GATT) was founded at the dawn of American postwar economic dominance. The U.S. agreed to reduce its traditionally high tariffs if Britain would relax its trading preference for countries within the Commonwealth. The two countries agreed to include other countries under the GATT charter. The GATT stipulated that members must treat foreign participants in their economies the same as domestic firms, and that members would extend to all trading partners concessions awarded to one. The U.S. generally took the lead in GATT talks held every few years by offering generous trade concessions. The growth in world trade and living standards during the first postwar decades seemed to confirm that the system worked. But problems surfaced in the 1960s as foreign-made textiles began to flood U.S. markets. Tensions increased in the 1970s as Japan and other nations expanded their sales of electronic consumer goods to U.S. buyers.

Today, because the U.S. no longer holds the dominant economic position it did in 1950, its ability to use new GATT negotiations to generate trade growth is limited. But a more fundamental problem is that many countries do not subscribe to U.S. notions of free trade. What happens when one country promotes cartels and another breaks them up, or when one government practices bureaucratic intervention and industrial targeting while another refrains? Such differences underlie present difficulties. Firms from countries with less open economies will penetrate more open markets but the reverse will not occur. Although this will be "fair" under the GATT system, countries with more open economies will resist it, and rising frictions will occur.

In effect, core GATT principles discriminate against societies with open economies. While this has always been true, the problem was initially hidden by U.S. economic dominance and by the greater like-mindedness among a relatively small number of GATT members. As GATT membership has grown and U.S. dominance has waned, this flaw has been a primary source of growing tensions.

1. The primary purpose of this passage is to

a)describe the positive and negative effects of American control of the postwar global economy
b)explain that GATT was beneficial to the United States economy before the 1960s
c)argue that GATT principles are responsible for economic disharmony among its member nations
d)demonstrate a link between GATT and recent economic growth in several Commonwealth nations
e)question the view that American economic policies have helped the postwar economies of other nations


2. The author suggests that GATT's fundamental principles

a)will undermine efforts to recruit new members to the agreement
b)have always promoted the economic growth of the United States
c)are too rigid to encourage reforms in the economies of member nations
d)should be reformulated to assist nations with less open economies
e)give some nations an economic advantage over other nations


3. The passage implies which of the following about countries with less open economies?

a)They have tried to change the terms of GATT to favor themselves.
b)They have suffered as a result of intense competition from abroad.
c)They have single-handedly brought about the end of U.S. economic dominance.
d)They have used the terms of GATT to their own advantage.
e)They have permitted foreign corporations to flood their domestic market.


4. According to the passage, which of the following statements is consistent with a basic principle of GATT?

a)Nations should raise tariffs in order to protect their domestic industries against foreign competition.
b)Other nations should follow international economic policies determined by the United States.
c)A trade concession granted to one member nation must be granted to every member nation.
d)International trade negotiations should take place every year in order to solve global economic problems.
e)Member nations may give preferential treatment to foreign industries in order to spur imports.