International Trade Law Essay Example | Topics and Well Written Essays - 3750 words

International Trade Law - Essay Example The researcher of this essay describes the development of the customs unions and free trade areas that adheres to Article XXIV of GATT that also generates a production effect that results in amore efficient use of world resources. Eliminating the tariff barriers means being able to compete against lower-cost and more efficient producers. Inefficient domestic producers drop out of the market resulting in a decline in home output. Although a customs union may add to world welfare by way of trade creation, its trade diversification effect generally implies a welfare loss. The formation of a customs union will increase the welfare of its members as well as the rest of the world, if the positive trade creation more that offsets the negative trade diversion effect. In extreme cases where the union is made up of the entire world, there can only exist trade creation and not trade diversion. The scope of trade diversion is smaller when the customs union’s common external tariff is lowe r. The transition for a Market-Oriented Economy, that was describes in the essay requires giving up ownership of privately owned properties and removing central planning systems for decent living standards. Therefore, to maintain healthy market economies would require: establishment of sound fiscal and monetary policies; removing price controls; opening economies to competitive market forces; establishing private property rights and a legal system to protect those rights; and reducing government involvement in the economy for an open trade.