The Convergence of International Accounting Standards and Practices

1
The Convergence of International Accounting
Standards and Practices

• Cynthia Jeffrey
• Iowa State University

2

• How different is accounting internationally
  (across countries)?
• What historical factors have contributed to these
  differences?

3

• Each nation has its own accounting rules that
  tend to mirror certain elements in that nation.
• A country's economic, legal, and political
  systems stages of technological development or
  sophistication culture and tradition and
  various other socioeconomic factors all influence
  the development of accounting standards and the
  accounting profession in that nation.

4

• These differences have led to significant
  diversity in accounting standards from one nation
  to another.
• Given the growth of international business
  activity, and especially international
  investment, comparability of accounting standards
  has a high priority.
• International diversity in national accounting
  standards has the potential to diminish the
  international flow of investment capital and
  thereby hinder economic development and the
  efficient international allocation of resources.

5
What are the international responses to
across-country accounting differences?

• Reconciliations versus mutual acceptance versus
  one set of global accounting standards and
  practices.

6
Convergence of Accounting Standards

• It is useful to think about a continuum ranging
  from total flexibility and diversity to total
  uniformity.
• Convergence implies a more flexible approach
  whereby a limited set of alternatives are
  acceptable, compared to standardization, which
  implies a state of uniformity.

7

• What kinds of problems are allegedly caused by
  international accounting differences?
• Potential inefficient allocation of scare
  resources.

8
Convergence of Accounting Standards

• Arguments for convergence
• Not only can convergence help with resource
  allocation, but a multinational accounting firm
  and the preparers of financial information, can
  make a strong argument for increased convergence.
  
• The burden of financial reporting would be
  lessened with increased convergence, which would
  simplify the process of preparing individual and
  group financial statements.

9
How Different is Different?

• Example The News Corporation (an Australian
  firm) reported 1992 earnings of 502 million
  (Australian dollars). Under US GAAP, earnings
  would have been about 421 million (Australian
  dollars). The difference is about 16 of income
  under Australian GAAP.

10
Potential Costs?

• As an example of the financial cost of complying
  with the differing accounting rules in different
  countries, an article in WSJ described the costs
  incurred by an international firm which sought to
  sell an offering of securities in the US, Canada,
  and the UK.
• The offering required three sets of financial
  statements and finally cost 2.8 million to get
  the 55.5 million offering registered.

11
Difficulties

• In general, there are difficulties in comparing
  income, net assets, and shareholders equity
  across countries.

12
International Barriers to Convergence

• 1. Accounting itself is a judgmental and social
  discipline, reflecting the needs of its
  particular business environment
• 2. National traditions, educational
  opportunities, and business and accounting
  attitude differences among nations
• 3. Legal and economic differences among the
  nations
• 4. State sovereignty
• 5. Economic gaps between developed and
  developing nations.

13
Recognition Criteria Differ

• What items are recorded in the financial
  statements, at what times?
• Intangible assets, certain leases, goodwill

14
Measurement Criteria Differ

• Historical cost versus inflation adjustments
  versus fair values

15
Disclosure Rules Differ

• What should be reported in the notes and
  supporting schedules?
• Management compensation

16
Broad Categorizations

• TYPE A
• True and fair view
• Shareholder orientation
• Disclosure emphasized
• Tax rules separate
• Professional Standards

• TYPE B
• Legal-oriented view
• Creditor orientation
• Secrecy is emphasized
• Linked to tax rules
• Government rules

17
Example of Specific Policies

• Depreciation over useful lives
• Limited or no use of legal reserves
• Lease capitalization
• Cash flow or funds statement

• Depreciation by tax rules
• Extensive use of legal reserves
• No leases capitalized
• No cash flow or funds statement

18
Examples of Countries

• United Kingdom
• United States
• Australia
• Canada

• France
• Germany
• Spain
• Italy

19
Historical Reasons for Differences

• Predominant modes of financing and ownership.
• Banks, and small groups of owners
• Government
• Shareholders
• Each of these different types of financing
  arrangements implies differences in what
  accounting information is needed for decision
  making.

20

• Legal system
• English common law versus codified law systems
• Differences in approaches to securities
  regulation
• Use of financial reports for taxation
• Audited reports for capital markets versus for
  tax calculations

21
What kinds of issues are allegedly raised by
International Accounting Differences?

• The holding of shares across international
  boundaries is becoming more common, so more users
  are confronting noncomparabilty of financial
  statements
• It is sometimes alleged that international
  capital flows are needlessly hampered by the need
  for users (investors) to develop their own
  comparability adjustments.

22

• Multinational firms are expanding their
  operations cross-nationally, so more preparers
  are confronting noncomparable accounting
  standards and rules

23

• What is viewed as acceptable or even desirable
  accounting practice in one country might be
  viewed as unacceptable or even misleading in
  another country.
• Example LIFO inventory valuation in the United
  States.

24

• Internal performance evaluation in large
  multinational firms might be affected by the use
  of different accounting and measurement systems

25

• Large CPA firms are expanding their wold-wide
  operations and facing attestation engagements
  under widely varying accounting and reporting
  systems. What does an audit report mean if there
  are divergent practices across countries?

26

• The US accounting system (part of the overall US
  securities regulation system) is allegedly
  needlessly stringent and discouraging to
  international capital flows
• Worldwide equity capitalization (one measure of
  the demand for capital) is current estimated at
  about 17 trillion. (Privatizations in China,
  Europe coming)

27

• There is intense competition for non-domestic
  listings, particularly among the NYSE, NASD, and
  the LSE. This competition could increase to the
  extent the European exchanges develop new
  alliances (remember the proposed alliance between
  the LSE and the Frankfurt exchange--derailed
  because of an unfriendly takeover bid for the LSE)

28
Convergence

• Convergence refers to the process of increasing
  the consistency and comparability of accounting
  across countries, with the goal of removing
  (alleged) impediments to international capital
  flows.

29
Is it Possible? Or Desirable?

• To the extent that accounting differences result
  from underlying differences in economic, legal,
  social, and other environmental factors,
  accounting convergence may simply not be
  appropriate.

30

• The differences in accounting are so deep and
  numerous that they are structural in nature and
  it would take extremely strong actions to remove
  them.
• Some countries do not have a long tradition of a
  strong accounting profession while others do.
  Government intervention would be necessary to
  achieve convergence, and this raises problems of
  nationalism.

31
Two Approaches to Convergence

• 1. Evolution in the development of accounting
  principles.
• This approach recognizes the reasons for the
  differences in accounting principles countries
  with different economic and legal systems should
  have different accounting principles.
• Time and the natural development of the
  countries' economies would be necessary to bring
  accounting principles into closer harmony.
• That is, the natural evolution of accounting
  principles within each nation would tend to
  narrow the alternatives, and this would reduce
  the degree of diversity from country to country.
  
• Other forces, including international competition
  for investment and loan, would also work to
  reduce diversity.

32
Two Approaches to Convergence

• 2. The more dominant view posits that formal
  action should be taken to reduce diversity.
• This view looks to organizations for standard
  setting with multi-country authority.
• This is the problem! Enforcement?
• For a country to voluntarily give up their own
  accounting destinies and delegate to others the
  power to set accounting standards represents a
  reduction in the national sovereignty.

33

• Some who interpret convergence as implying the
  use of a single set of financial reporting
  standards worldwide favor the use of
  International Accounting Standards, as
  promulgated by the International Accounting
  Standards Board (IASB)

34
IASC

• International Accounting Standards Committee
• The concept was introduced as early as 1904 with
  the First International Congress of Accountants
  in St. Louis.
• But it wasn't until 1973 that the International
  Accounting Standards Committee (IASC) was founded
  by the leading professional accounting bodies in
  9 nations
• Australia, Canada, France, Germany, Japan,
  Mexico, the Netherlands, the UK, and the US.
• Members are not nations, but rather accounting
  bodies within nations are members.
• In the US, the AICPA is a member, not the FASB or
  the SEC.
• In this way, no nation completely surrenders its
  accounting sovereignty to the IASC.
• Now, accounting bodies from over 91 nations are
  members.

35

• Recently, the IASC was restructured. The IASC is
  the foundation that oversees the International
  Accounting Standards Board IASB.

36
IASB

• The International Accounting Standards Board is
  an independent, privately-funded accounting
  standard setter based in London, UK. Board
  Members come from nine countries and have a
  variety of functional backgrounds. The Board is
  committed to developing, in the public interest,
  a single set of high quality, understandable and
  enforceable global accounting standards that
  require transparent and comparable information in
  general purpose financial statements. In
  addition, the Board cooperates with national
  accounting standard setters to achieve
  convergence in accounting standards around the
  world.

37

• IASC was be established as an independent
  foundation. The foundation has two main bodies,
  the Trustees and the Board, as well as a Standing
  Interpretations Committee and Standards Advisory
  Council. The Trustees would appoint the Board
  members, exercise oversight and raise the funds
  needed, whereas the Board would have sole
  responsibility for setting accounting standards.

38
IASC, IASB

• Objectives
• 1. To formulate and publish international
  financial standards
• 2. To promote worldwide acceptance and
  observation
• 3. To facilitate a "common international
  approach" to the harmonization of accounting
  principles

39

• Develop and aid the implementation of
  international accounting standards that satisfy
  the needs of developing and newly industrialized
  countries
• Narrow the differences between international
  accounting standards and the various national
  accounting requirements with a goal of developing
  greater compatibility and easier comparability of
  financial reporting.

40

• The IAS Standards tend to follow the principles
  of true and fair value and full disclosure,
  consistent with the Type A view above.

41
IASC

• A conceptual framework (Framework for the
  Preparation and Presentation of Financial
  Statements) is being developed for guidance.
• objectives of financial statements,
• qualitative factors of financial information,
• the elements and the recognition criteria of
  financial statements.
• By the beginning of 1993, IASC had produced 31
  statements which are very similar in content and
  format to FASB statements.
• Member organizations have pledged to use their
  best efforts to have the standards adopted by
  their national authoritative standard setting
  bodies.

42
IOSCO Charge

• In July 1995, the IOSCO Technical Committee
  stated its agreement with the work plan, as
  follows
• The IASC Board has developed a work plan that
  the Technical Committee agrees will result, upon
  successful completion, in IAS comprising a
  comprehensive core set of standards.

43

• Completion of the comprehensive core standards
  that are acceptable to the IOSCO Technical
  Committee to recommend endorsement of IAS for
  cross-border capital raising an listing purposes
  in all global markets.
• The goal is for 40 core standards.

44

• The project was completed late in 1998.
• IOSCO, the International Organization of
  Securities Commissions, has agreed to consider
  these standards for registering and listing
  shares.Within IOSCO, the key commissions are
  those in Canada, Japan, and the US. These
  countries are the most restrictive with regard to
  to the use of (or reconciliation to) domestic
  GAAP.

45
IOSCO

• May 30, 2002--IOSCO Annual Conference encourages
  cooperation to achieve convergence
• http//www.iasc.org.uk/cmt/0001.asp?s896113sc7
  5E9A0E3-85F3-4F1C-B03E-5C65B88F506Dn4083

46
Adopters of IASCs

• Some countries have adopted IASC standards with
  few amendments (Nigeria, Malaysia, Russia). Such
  adoptions can be advantageous to countries with
  developing market economies.
• Stock exchanges in more than 30 countires (but
  not the US) allow international standards, at
  least for foreign registrants.

47
US POLICIES

• Under current US regulations, any issuer who
  wishes to access the US equity market must
  conform to SEC rules, including filing
  reconciliations of income and shareholders equity
  with US GAAP on Form 20-F.
• IF the SEC were to accept IAS for cross-border
  listings, these form 20-F reconciliations would
  presumably disappear for IAS users.

48
Why Would a Non-US Issuer Object to
Reconciliations?

• Out of pocket costs to prepare
• Disclosure of proprietary information, including
  reserves, segment data, and Form 10-Q

49
Why might the SEC insist?

• Possible belief that US GAAP is superior
• Investor protection under US securities laws,
  accounting rules and enforcement mechanisms
• Emphasis on individual investor. IS this
  important any more? Funds, and the effects of
  online brokerages. 65 of trades are individual
  investors.

50
SEC Decision

• The SEC is a voting member of the IOSCO Technical
  Committee that endorsed the IASC core standard
  project.

51
SEC Decision

• The broad policy decision is whether to allow IAS
  for cross-border capital raising.
• Complete acceptance and complete rejection are
  not the only options
• Partial acceptance? (early vs. late?)
• Continue to require some reconciliations?
• What would acceptance of current standards imply
  for subsequent standards?

52
SEC Criteria

• Comprehensiveness
• High quality, including Transparency, Full
  Disclosure, and Comparability
• Rigorous interpretation and application
• These criteria (presumably) derive from the
  investment framework of US standard setting, with
  its focus on the role of accounting in capital
  allocation decision

53
IASC

• Consider the structure and decision process
• IASC standards have been criticized for imprecise
  language, and PURPOSEFUL ambiguity
• No mechanisms for ascertaining what constitutes
  compliance. (Recent establishment of the
  Standing Interpretatins Committee to assist in
  application of IAS)

54

• Under the old structure, More than 91 people
  could attend (and could speak) at each meeting
  meetings were held only about four times per year.

55
IASC

• Some feel that the current IASC standards fall
  short by allowing too many free choices of
  accounting treatments and by lack of any comment
  on some important aspects of financial reporting.
  

56
Assessment

• The FASBs comparison project identified 225
  instances of differences between US GAAP and IAS,
  but there is no measure of materiality of the
  differences.
• How do we distinguish between uniformity and
  equivalence?

57

• Uniformity--Identical
• Equivalence--of equal usefulness in terms of
  relevance and reliability
• Example, are LIFO and FIFO, with note disclosure
  of the LIFO reserve equivalent?
• The user must make a conversion--does this affect
  comparability?

58
IFAC

• International Federation of Accountants
• 1977 - Two objectives
• 1. To arrange future international congresses
• 2. To achieve international technical, ethical,
  and educational guidelines for the accounting
  profession
• that is, to promote a coordinated, worldwide
  accounting profession with harmonized standards
• Main work to date
• Issuing auditing and professional guidelines and
  issues and the enhancement of the quality of the
  accountancy profession.
• Five standing committees
• Auditing, Education, Ethics, Public Sector,
  Management, Financial.

59
IFAC and IASC

• Interactions between IFAC and IASC
• IASC is sole source for issuing international
  accounting standards
• IFAC nominated all members on IASC board and
  contribute 10 of IASC's budget.
• IFAC is "spokesperson for the worldwide
  accounting profession"

60
European Community

• The roots of the European Community can be traced
  back to 1948 and the establishment of the
  Organization for European Economic Cooperation to
  administer the Marshall Plan.
• The Marshall Plan was an aid program designed to
  rebuild Europe economically after WWII.
• In 1952, the European Coal and Steel Community
  was established among France, Germany, Italy,
  Belgium, the Netherlands, and Luxembourg.

61
European Community

• From this beginning, the Common Market evolved in
  1957 with the signing of the Treaty of Rome.
• The same 6 countries participated in the new
  union, joined by Great Britain, Denmark, and
  Ireland in 1973, Greece in 1981, and Spain and
  Portugal in 1986.
• The belief supporting the Common Market is that
  cross-country economic integration is necessary
  for Europe to compete with the US (and formerly
  with the USSR).

62
European Community

• The first step was Customs Union, which involved
  the abolition of national import tariffs and
  restrictions.
• This union was achieved in the late 60s, and a
  common external trade policy was implemented.
• The remaining two steps are Economic Union, which
  involves the harmonization of national social,
  fiscal, and monetary polices.
• This phase is in process.
• The third phase is political union which is
  envisioned as a "United States of Europe."

63
European Community

• The European Community has made convergence of
  accounting standards a part of the second level
  of integration.
• Each nation in the EC has its own approach to
  accounting, and these are often on opposite ends
  of the accounting spectrum.
• The convergence of accounting standards within
  the EC is being carried out by means of EC
  directives, which, when approved by the EC's
  Council of Ministers, become binding on the
  member nations.

64
European Community

• The nations must change their own national
  legislation, typically within 18-36 months, to
  comply with the directive.
• However, a great deal of time (up to 10 years)
  can elapse from the initial conception of a
  directive to its final approval!
• The EC Commission consults with the EC Accounting
  Study Group, which is composed of representatives
  from the leading professional accounting
  organizations of the EC countries.

65
European Community

• The EC has also established an Accounting
  Advisory Forum made up of users, preparers, and
  standard setters as a consultative group.
• This body is expected to work with the IASC.
• Historically the EC has tended to ignore the
  IASC, but they are making efforts to bridge this
  gap.

66
European Community

• There have been directives that relate to
  accounting and financial reporting
• 4, 5 (withdrawn), 7, 8, and 11.
• The 4th is outlined in great detail in your book.
• The 7th Directive dealt with consolidation
  concepts
• instead of following the traditional legal basis
  in defining a group, it concentrated on economic
  factors, such as dominance and dependence among
  entities.
• For example, as US firm with EC operations would
  have to prepare an EC consolidation for its EC
  operations--a broader perspective than commonly
  used in the US.

67
European Community

• The 8th Directive is primarily concerned with the
  qualification and training of auditors performing
  statutory audits.
• It initially dealt with auditor independence.
• This issue was eventually excluded because
  agreement could not be reached.
• The final version of the directive simply states
  that an auditor should be a "person of good
  repute," and should carry out audits with
  "professional care," and should follow the
  appropriate national standards for independence.
• The 11th Directive concerns disclosure
  requirements for a branch located in an EC
  country with its parent company based in another
  company.

68
European Community

• Post 1992 Europe
• In 1985, leaders of the EC promised that by the
  end of 1992 they would eliminate all of the
  bothersome internal barriers.
• Europe 1992 became a code word signifying the
  coming birth of an economic superpower, perhaps
  on its way to becoming one very powerful
  federation of interdependent countries.
• To a very large extent, this has occurred
  although not to the extent envisioned.

69
European Community

• New opportunities for businesses and consumers
  opened up on January 1, 1993 with the official
  launching of the Single European Market.
• Many barriers were removed and much harmonization
  of standards (including accounting standards) has
  been established in a process of creating a
  unified European economy.

70
European Community

• Internal customs checks have been eliminated.
• Banks licensed in any EC country may now offer
  their services anywhere within the EC
• although special licensing procedures are faced
  by banks from countries which have been slower in
  incorporating EC banking rules into national
  legislation.
• Capital adequacy and solvency standards applying
  to banks are the same throughout the EC.
• Restrictions on intra-EC capital movements and
  double taxation of affiliated companies have been
  eliminated, and a set of EC-wide merger controls
  have been established.

71
European Community

• Similar efforts are underway on behalf of the
  investment services and insurance industries.
• Labor mobility is being improved by mutual
  recognition of qualifications.
• Some 30 additional European Countries are
  knocking on the door to join the 12 countries now
  in the EC.
• A great many barriers still remain, and there are
  problems and disagreements.
• There is no easy way to enforce all aspects and
  there is no clear cut method to mediate disputes.

72
European Community

• The EC has also established an Accounting
  Advisory Forum made up of users, preparers, and
  standard setters as a consultative group.
• This body is expected to work with the IASC.
• Historically the EC has tended to ignore the
  IASC, but they are making efforts to bridge this
  gap.

73
Where Does the FASB Fit In?

• The attitude of the FASB toward the IASC has been
  characterized as benign neglect, uncooperative,
  uninterested, and less than enthusiastic.
• It has also been said that the FASB's idea of
  convergence has been to play the lead role.
• The FASB does keep in close touch with
  international accounting developments
• In 1991 they indicated a plan for increased
  involvement in international activities.
• The FASB's objective is to "create a body of
  superior international accounting standards
  accepted in all countries as GAAP for general
  purpose external financial statements.

74
Where Does the FASB Fit In?

• The board intends to work in the international
  arena through the following standard setting
  efforts
• 1. Intensify consideration of IASC and other
  standards
• 2. Engage in joint standard-setting activities
  with foreign counterparts to produce results
  consistent with IASC standards
• 3. Consider adopting some superior foreign
  standards in the US and to convince others to
  consider adopting superior US standards. Make
  joint choices where neither principles are
  superior.
• 4. Continue efforts to encourage equality of
  financial statement requirements for US and
  foreign issuers in their use of US markets.

75
Two International Pressure Sources for
Accounting and Audit Harmonization

• 1. Global Capital Markets
• 2. Global Trade in Goods and Services

76
Global Capital Markets

• More investors seek investment opportunities in
  other countries
• In 1975, 65 billion was the grand total for all
  transactions involving foreigners buying US
  securities and US citizens buying foreign
  securities.
• By 1989, that amount had grown 80 times to
  5.4 trillion!
• More securities are sold internationally.
• In 1990, more than 500 companies were listed on
  at least one stock exchange outside their home
  country, and there were more than 50 mutual funds
  specializing in single country investments.

77
Global Capital Markets

• More capital crosses borders for investment in a
  variety of industrial and other undertakings.
• In 1989, foreigners spent 65 billion to buy or
  establish 1,101 business in the US.
• Many European corporations with global operations
  wish to sell their securities in the countries
  where they have a business presence.
• On Monday, October 19, 1987, national stock
  markets crashed simultaneously because they were
  now part of a global market.

78
Global Capital Markets

• CONCERNS
• 1. The investor in foreign markets is exposed
  to greater risks since his/her funds are being
  allocated on the basis of nonuniform accounting
  information.
• 2. Opportunity cost in lost transactions to the
  local financial community of the country with
  more rigorous requirements.

79
Global Capital Markets

• SEC Commissioner Lochner took issue with US
  listing rules for foreign securities that require
  compliance with US GAAP
• Some companies apparently do not list in this
  country to avoid US GAAP compliance costs.
• The Commissioner believes
• Harmonized GAAP would provide investors with
  financial statements that are far more comparable
  than those they may be currently using.
• Harmonization would increase dramatically the
  willingness of foreign issuers to participate in
  US securities markets.

80
Global Capital Markets

• For sophisticated GAAP countries, there are
  serious economic consequences to a capital flight
  to less sophisticated markets
• 1.The protective mission of their securities
  regulators is thwarted by their investors'
  considerable flight to lower GAAP markets.
• 2.Their investors' choices may be suboptimal
  since they are based on financial statements
  lacking uniformity.
• 3.Their financial services industry loses
  transaction revenues.
• 4. Their cost of debt and equity capital
  increases.

81
Global Capital Markets

• According to the chair of the NYSE
• We've got to trade foreign securities here this
  is one industry in which this country is the
  leader of the world. And we're going to lose
  that leadership. Unless we get started this
  thing will pass us by. (WSJ, 1991)

82
Global Capital Markets

• The NYSE already trades over 100 foreign
  companies, but there are some 2,000 to 3,000 such
  companies that could qualify for listing.
• About 250 of these have stock market values about
  20 times the size of the average NYSE listing.
• Many of these firms don't meet NYSE listing
  standards because of the GAAP they use.
• The SEC is aware of this but is reluctant to ease
  accounting requirements because they fear it may
  introduce unwarranted greater risks in US
  securities markets.

83
Global Capital Markets

• Some foreign issuers see the tough US rules as
  valuable for those who meet them.
• 1990
• Compania de Telefonos de Chile listed on the NYSE
  and raised 100 million, followed shortly by
  another offering of 90 million.
• The company's CFO stated
• When we prepared for the issue in 1990, we made
  the decision to go for a public US offering. The
  accounting rules were far stricter, but by
  complying with them we gained credibility not
  only in the US but also in Europe and Asia. We
  wouldn't have been so successful in achieving
  financing if investors hadn't already known that
  we fully complied with the SEC and GAAP.

84
Global Capital Markets

• Despite accounting diversity, the international
  dimensions of capital markets have experienced
  tremendous growth.
• Diversity may not be insurmountable, but is it
  still serious enough to create strong pressures
  for its reduction or elimination?

85
Global Capital Markets

• Choi and Levich surveyed investment-related
  public.
• Groups surveyed
• Institutional investors, Corporate issuers,
  Rating agencies' representatives, Underwriters,
  Market regulators, an international financial
  data service, an organization working for
  increased accounting harmony
• FROM NY, Frankfurt, Tokyo, London, Zurich

86
Global Capital Markets

• Main findings
• Approximately half of the respondents felt that
  accounting diversity affects market decisions.
• The remaining respondents either had developed
  coping mechanisms which nullified the negative
  effects of accounting diversity or felt that the
  lack of accounting uniformity was not a
  significant problem.
• Choi and Levich concluded that accounting
  differences are important and affect the
  investment decisions of a significant number of
  market participants regardless of nationality,
  size, experience, scope of international
  activity, and organization structure.
• Restatement was not sufficient to remove the
  problem of lack of uniformity.

87
Global Trade in Goods and Services

• Growing willingness to try free market approaches
  to the trade of goods and services.
• This seems to be leading many nations to join in
  free trade zones or common markets.
• IT is somewhat of a halfway point between highly
  protected national markets and a free trade based
  global economy.
• GATT--General Agreement on Tariffs and Trade
  (1985)
• Participants agreed to vigorously decrease a host
  of protectionist practices
• NAFTA