EVOLUTION OF GLOBAL FINANCE

Today, MNCs are major players in world business, with their foreign

affiliates accounting for about a third of total world gross domestic
product (GDP).

THE GENERAL AGREEMENT ON TARIFFS AND
TRADE (GATT) AND THE WORLD TRADE
ORGANIZATION (WTO)

GATT was originally signed in 1947 by 23 industrialized nations
including the US, the UK, France, and Canada. In 1995 it was succeeded
by the WTO. GATT has had eight rounds of international trade nego-
tiations, all aimed at reducing trade barriers. In the grim post-war
atmosphere of 1947, the average import tariff in industrialized coun-
tries was around 40%. Today it is around 5%. In the 1960s, the
``Kennedy'' round of GATT achieved an average cut of around 30%,
reducing manufacturers' costs by about 10% by 1972. In the late 1970s,
the ``Tokyo'' round also achieved tariff cuts of approximately a third,
with greater cuts for trade between the most developed countries and
smaller cuts for trade between developed and newly industrialized
countries.

As well as addressing tariffs, GATT also tries to reduce trade

discrimination by insisting that any trade advantage given to one
member country must be given to all other members. Exceptions are
allowed for free trade areas and customs unions such as the European
Union.

GATT THE URUGUAY ROUND

The most recent completed round of multinational trade negotiations
began in Uruguay in 1986 and was finally concluded in Geneva in 1993,
although the US did not approve it until 1994. It is the biggest and most
comprehensive trade agreement ever made, and its supporters claim
that it will increase the volume of international trade of merchandise
by 924% over what could otherwise be achieved.

The three most significant features of the Uruguay round are:

1 Tariffs and protections for agriculture are reduced. Historically,

agriculture has often been the most protected of industries. Uruguay