Supporting Organizations Of International Trade Essay

1978 words - 8 pages

International Trade and policies
Different countries have diverse governments, policies, currencies, monetary systems and many diverse products. This is certainly one motive why international trade is extremely complex. In today’s fast growing market and the development of international trade amongst nations has initiated many policies to be enacted and a need for international organizations. International trade policies entails the joint arrangements between nations (“International trade policy”, 2008). These policies command the terms of trade between the nations involved. As an example, one such strategy is the free trade policy. This policy eliminates trade barriers for product imports and exports. The purpose of this paper is take a detailed look on the promotion of policy and how these policy came alive through the development of different international organizations.
Bretton Woods Agreement
According to Wiggin (2006), “the result of this international meeting, the Bretton Woods Agreement, had the original purpose of rebuilding after World War II through a series of currency stabilization programs and infrastructure loans to war-ravaged nations” (para. 3). The Bretton Woods Agreement was a milestone coordination for monetary and exchange rate administration which was established in 1944. This agreement between allied nations and their individuals in charge called for a fixed exchange rate and funding from international reserves or a global central bank (Pugel, 2012). The Bretton Woods Agreement was established at the United Nations Monetary and Financial Conference which took place in held in Bretton Woods, New Hampshire, from July 1 to July 22, 1944 (“Bretton Woods Agreement,” n.d.).
The principal results of the Bretton Woods conference comprised of the establishment of the International Monetary Fund, the World Bank and the International Bank for Reconstruction and Development. In addition, the agreement offered the outline of an adjustable pegged foreign exchange rate system. Currencies were pegged to gold and the International Monetary Fund (IMF) was given the power to interfere when an imbalance of payments came about (“Bretton Woods Agreement,” n.d.). Each allied nation that signed the agreement assured to preserve its currency at standards within a thin margin to the price of gold (Wiggins, 2006).
The gold standard
The gold standard indicates that all currencies are tied to gold. When all currencies are tied to gold they are ultimately tied to each. A gold standard indicates a monetary system in which a standard weight of pure gold designates the unit of account, and consistent portions of gold attend as the decisive media of reclamation (White, 2012). When the price of gold increases so does the nation’s currency and vice versa. The foreign exchange market should not be the determinate value of the exchange rate. All nations returning to a gold standard would have numerous paybacks. First off, returning to the...

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