The General Agreement on Tariffs and Trade (GATT) was a multilateral treaty created to facilitate international trade and reduce trade barriers among its contracting parties. Established in 1947, GATT aimed to provide a common institutional framework for the conduct of international trade relations regarding goods.
Historical Context and Evolution
Pre-GATT Trade Landscape
Before GATT, international trade faced numerous barriers, including high tariffs, quotas, and other protectionist measures that emerged especially after the Great Depression and during World War II. There was a growing realization that such barriers impeded economic recovery and growth.
Formation and Initial Impact
GATT was negotiated during the United Nations Conference on Trade and Employment and was signed by 23 countries in Geneva on October 30, 1947. It came into effect on January 1, 1948. Its primary purpose was to reduce tariffs and other trade barriers and to eliminate discriminatory treatment in international commerce.
Transition to WTO
On January 1, 1995, GATT was replaced by the World Trade Organization (WTO), which expanded the scope to include trade in services, intellectual property rights, and trade-related investment measures. The WTO also provided a more robust framework for dispute resolution.
Key Principles and Provisions
Most Favored Nation (MFN)
One of the cornerstones of GATT is the Most Favored Nation principle, which requires countries to apply the same tariff rate to all trading partners.
National Treatment
Under the National Treatment principle, imported goods should be treated no less favorably than domestically produced goods once they have passed customs.
Reduction of Trade Barriers
GATT focused on the gradual reduction of tariffs through successive rounds of negotiations. Each round aimed at broader reductions and covered more complex and sensitive sectors.
Types of GATT Rounds
Geneva Round (1947)
The initial GATT agreement was a product of this round, involving tariff reductions among the original 23 signatories.
Kennedy Round (1964-1967)
Named after U.S. President John F. Kennedy, this round introduced significant tariff cuts, anti-dumping measures, and for the first time, dealt seriously with agricultural products.
Tokyo Round (1973-1979)
Aimed at tackling non-tariff barriers and establishing a framework for dealing with subsidies and countervailing duties.
Uruguay Round (1986-1994)
This crucial round led to the creation of the WTO. It expanded the scope of trade negotiations to include services and intellectual property, and introduced binding dispute settlement mechanisms.
Examples of GATT in Action
Trade Liberalization
One of the most notable successes of GATT was the extensive tariff reductions achieved through multiple negotiation rounds, contributing to a significant boom in international trade.
Settlement of Trade Disputes
GATT provided a platform for resolving trade disputes among member countries, though less robust than the mechanism currently used by the WTO.
Applicability and Current Relevance
Legacy and Continuing Influence
While GATT no longer exists as a standalone entity, its principles and frameworks continue to underpin the WTO agreements and the global trade system.
Comparative Framework: GATT vs. WTO
GATT focused primarily on goods, while the WTO covers a broader range of areas including services, intellectual property, and more rigorous dispute resolution.
Related Terms and Definitions
- Tariff: A tax imposed on imported goods and services.
- Quota: A limit on the quantity of a good that can be imported or exported.
- Protectionism: The practice of shielding a country’s domestic industries from foreign competition.
FAQs
What was the main purpose of GATT?
How did GATT become WTO?
Why is the Most Favored Nation principle important?
References
- WTO. (n.d.). The GATT years: from Havana to Marrakesh. World Trade Organization. Retrieved from https://www.wto.org/english/thewto_e/gattmem_e.htm
- Irwin, D. A. (2002). Free Trade Under Fire. Princeton University Press.
Summary
The General Agreement on Tariffs and Trade (GATT) was a foundational treaty in the history of international trade. Its establishment marked a significant step toward reducing trade barriers, promoting economic cooperation, and laying the groundwork for the World Trade Organization. Despite being replaced by the WTO, GATT’s impact on shaping the modern trading system remains profound, with its principles continuing to influence global trade policies today.
