Bilateral and multilateral trade

Abstract

The article shows that in the efforts to re-establish normal international relations on the basis of multilateral trade, confusion has often arisen concerning the distinction between those which are necessary effects or conditions, and those which are sufficient conditions, and that the disadvantages of bilateral trade have also been exaggerated. The inconvertibility of national currencies was not the cause but the effect of the system of bilateral trade, and the revival of the system of multilateral trade would not suffice to re-establish convertibility. The effects of agreements between groups of States for the purpose of assuring the periodical clearing of active and passive balances are also very limited. The most objectionable feature of bilateral treaties is that they deviate commercial currents from their most economically expedient directions, but they do not necessarily alter substantially the final distribution of the goods. Nor is it true that the system of bilateral trade necessarily determines the divergence, noted in some countries, between direct and indirect exchanges, which may be due rather to the fact that the exchanges are fixed artificially at a level other than the equilibrium rate.

JEL: F10, F13, F31