18
GLOBAL FINANCE
calls for an average reduction of agricultural tariffs on imports of
37%.
2 Uruguay bans restrictions on the import of services such as banking,
insurance, computer consulting, legal services, and accounting.
3 Increased protections for intellectual property. Local laws usually
protect domestic intellectual property, such as copyrights, patents,
and artistic works, but internationally ``piracy'' is common. Uruguay
requires its signatories to protect foreign owners of intellectual
property to the same degree as they protect their own.
A major criticism of GATT is that it lacks teeth; compliance is voluntary.
Developed countries have generally complied with GATT agreements,
but there have been numerous cases where some have not. A disagree-
ment between the EU and the US in the early 1990s over oilseed
subsidies resulted in the EU refusing to comply with some GATT
recommendations for several years and only capitulating when the US
threatened to impose tariffs in retaliation.
The WTO is intended to solve this problem by a streamlined disputes
system with binding arbitration; more than half of the disputes brought
so far have been between the US and the EU.
THE INTERNATIONAL MONETARY SYSTEM (IMS)
18701914
Gold had been used as a store of value for millennia, but by the
late nineteenth century world trade had increased so much that
there was a need for a more sophisticated system of a more formal-
ized system of settling international trade accounts. Countries began
to set their currency at a certain value relative to gold and the
``gold standard'' became the accepted international monetary system
within Western Europe in the 1870s, with the US adopting it in
1879.
It was a period of low inflation, and the ``rules of the game''
were clear. Every country set the rate at which its currency could be
converted to gold. For example, sterling was pegged at £4.2474 per
ounce of gold while the US dollar was pegged at $20.67 per ounce.
The pound/dollar exchange rate was therefore calculated as shown in
