<P> The disastrous effects of the Smoot--Hawley tariff proved difficult for Herbert Hoover's 1932 re-election campaign . Franklin D. Roosevelt became the 32nd U.S. president and the Democratic Party worked to reverse trade protectionism in favor of trade liberalization . As an alternative to cutting tariffs across all imports, Democrats advocated for trade reciprocity . The U.S. Congress passed the Reciprocal Trade Agreements Act in 1934, aimed at restoring global trade and reducing unemployment . The legislation expressly authorized President Roosevelt to negotiate bilateral trade agreements and reduce tariffs considerably . If a country agreed to cut tariffs on certain commodities, the U.S. would institute corresponding cuts to promote trade between the two nations . Between 1934 and 1947, the U.S. negotiated 29 such agreements and the average tariff rate decreased by approximately one third during this same period . The legislation contained an important most - favored - nation clause, through which tariffs were equalized to all countries, such that trade agreements would not result in preferential or discriminatory tariff rates with certain countries on any particular import, due to the difficulties and inefficiencies associated with differential tariff rates . The clause effectively generalized tariff reductions from bilateral trade agreements, ultimately reducing worldwide tariff rates . </P> <P> As the inception of the United Nations as an intergovernmental entity slowly began formalizing in 1944, delegates from 44 of its early member states met at a hotel in Bretton Woods, New Hampshire for the United Nations Monetary and Financial Conference, now commonly referred to as the Bretton Woods conference . Delegates remained cognizant of the effects of the Great Depression, struggles to sustain the international gold standard during the 1930s, and related market instabilities . Whereas previous discourse on the international monetary system focused on fixed versus floating exchange rates, Bretton Woods delegates favored pegged exchange rates for their flexibility . Under this system, nations would peg their exchange rates to the U.S. dollar, which would be convertible to gold at $35 USD per ounce . This arrangement is commonly referred to as the Bretton Woods system . Rather than maintaining fixed rates, nations would peg their currencies to the U.S. dollar and allow their exchange rates to fluctuate within a 1% band of the agreed - upon parity . To meet this requirement, central banks would intervene via sales or purchases of their currencies against the dollar . Members could adjust their pegs in response to long - run fundamental disequillibria in the balance of payments, but were responsible for correcting imbalances via fiscal and monetary policy tools before resorting to repegging strategies . The adjustable pegging enabled greater exchange rate stability for commercial and financial transactions which fostered unprecedented growth in international trade and foreign investment . This feature grew from delegates' experiences in the 1930s when excessively volatile exchange rates and the reactive protectionist exchange controls that followed proved destructive to trade and prolonged the deflationary effects of the Great Depression . Capital mobility faced de facto limits under the system as governments instituted restrictions on capital flows and aligned their monetary policy to support their pegs . </P> <P> An important component of the Bretton Woods agreements was the creation of two new international financial institutions, the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). Collectively referred to as the Bretton Woods institutions, they became operational in 1947 and 1946 respectively . The IMF was established to support the monetary system by facilitating cooperation on international monetary issues, providing advisory and technical assistance to members, and offering emergency lending to nations experiencing repeated difficulties restoring the balance of payments equilibrium . Members would contribute funds to a pool according to their share of gross world product, from which emergency loans could be issued . Member states were authorized and encouraged to employ capital controls as necessary to manage payments imbalances and meet pegging targets, but prohibited from relying on IMF financing to cover particularly short - term capital hemorrhages . While the IMF was instituted to guide members and provide a short - term financing window for recurrent balance of payments deficits, the IBRD was established to serve as a type of financial intermediary for channeling global capital toward long - term investment opportunities and postwar reconstruction projects . The creation of these organizations was a crucial milestone in the evolution of the international financial architecture, and some economists consider it the most significant achievement of multilateral cooperation following World War II . Since the establishment of the International Development Association (IDA) in 1960, the IBRD and IDA are together known as the World Bank . While the IBRD lends to middle - income developing countries, the IDA extends the Bank's lending program by offering concessional loans and grants to the world's poorest nations . </P> <P> In 1947, 23 countries concluded the General Agreement on Tariffs and Trade (GATT) at a UN conference in Geneva . Delegates intended the agreement to suffice while member states would negotiate creation of a UN body to be known as the International Trade Organization (ITO). As the ITO never became ratified, GATT became the de facto framework for later multilateral trade negotiations . Members emphasized trade reprocity as an approach to lowering barriers in pursuit of mutual gains . The agreement's structure enabled its signatories to codify and enforce regulations for trading of goods and services . GATT was centered on two precepts: trade relations needed to be equitable and nondiscriminatory, and subsidizing non-agricultural exports needed to be prohibited . As such, the agreement's most favored nation clause prohibited members from offering preferential tariff rates to any nation that it would not otherwise offer to fellow GATT members . In the event of any discovery of non-agricultural subsidies, members were authorized to offset such policies by enacting countervailing tariffs . The agreement provided governments with a transparent structure for managing trade relations and avoiding protectionist pressures . However, GATT's principles did not extend to financial activity, consistent with the era's rigid discouragement of capital movements . The agreement's initial round achieved only limited success in reducing tariffs . While the U.S. reduced its tariffs by one third, other signatories offered much smaller trade concessions . </P>

The international monetary fund was formed to provide for the short-term flow of money