A second source of resonance from the past crisis is the use of customs protection. At Camp David, the temporary 10% import surcharge was introduced as a strategic negotiating instrument to force surplus countries to adapt. It managed to secure the Smithsonian agreement in December 1971 – a compromise on the appreciation of the dollar, yen and European currencies and the expansion of exchange margins – but in the end, the only solution to the problem of imbalances in the Bretton Woods system was variable exchange rates (Irwin 2015). Today, the use of tariffs as a threat to force trading partners (notably China) to change their industrial policy risks the same kind of reaction that ultimately derailed the Camp David strategy; The Smithsonian agreement lasted only a few months, and the underlying fiscal and monetary imbalances worsened. It also raises the spectre of a trade war as it took place in the 1930s and greatly exacerbated the Great Depression. The Bretton Woods Agreement of 1944 established a new global monetary system. It replaced the gold standard with the US dollar as the world currency. In this way, it established America as a dominant power in the global economy. After the agreement was signed, America was the only country capable of printing dollars. The agreement created the World Bank and the International Monetary Fund (IMF), U.S.-backed organizations that would oversee the new system. The Bretton Woods Agreement is one of those turning points in the development of modern financial systems and created the dollar as the standard currency for world trade after World War II.
While the Bretton Woods system ended under the Nixon administration, the financial institutions created by the agreement – the International Monetary Fund and the World Bank – remain permanent elements of twenty-first century finances. The Bretton Woods system was implemented as a more stable substitute for the gold standard, according to which all currencies were convertible into gold. According to the new agreement, the dollar was the norm for international transactions, the value of which was set at 1/35 of an ounce of gold. The fact that the United States held a large part of the world`s gold reserves allowed the dollar to assume its new role as the standard currency on which stock markets were based. By studying an international financial career, specialists learn about the impact of international agreements such as Bretton Woods and the institutions they have created. The establishment of a sound international financial strategy implies anticipating the effects of announcements and measures taken by central banks, carried out in the same way by national governments and international bodies. The Bretton Woods countries decided not to give the IMF the power of a world central bank.