The General Agreement on Tariffs and Trade (GATT), signed in 1947 by 23 countries, aimed to minimize barriers to international trade by eliminating or reducing quotas, tariffs, and subsidies. It was a step towards fostering economic recovery after World War II and promoting global trade.
GATT evolved over time, eventually leading to the establishment of the World Trade Organization (WTO) in 1995. By then, the treaty had grown to include 125 nations, covering approximately 90% of global trade.
The Council for Trade in Goods, also known as the Goods Council, now oversees GATT-related matters. It includes representatives from all WTO member countries and addresses issues such as market access, agriculture, subsidies, and anti-dumping measures.
Key Milestones of the Journey
- Initial Signing in 1947: GATT was signed by 23 countries and became effective on January 1, 1948.
- Goal: Facilitate easier international trade and abolish undesirable prewar trade practices.
- Eight Rounds of Negotiations: Between April 1947 and December 1993, significant steps were taken to reduce trade barriers.
- Creation of WTO in 1995: GATT integrated into the World Trade Organization, extending its scope.
Equal Treatment of Nations in Trade
One of GATT’s crowning achievements was promoting trade without discrimination. Known as the ‘Most-Favored-Nation Principle,’ it ensured that any tariff concession agreed upon between two countries would apply to all GATT signatories. Escape clauses allowed for exceptions should domestic industries face significant harm.
This principle remains a cornerstone of international trade, showing the continued impact of GATT through the workings of the WTO today.
Historical Foundations of GATT
GATT ran eight rounds of meetings, from April 1947 to December 1993. Key milestones include:
- First Meeting (1947, Geneva): Introduced tax concessions impacting over $10 billion in trade.
- Second Meeting (1949, Annecy): Expanded by 5,000 further tax concessions.
- Third Meeting (1950, Torquay): Involved 38 countries and led to around 9,000 tariff reductions.
- Fourth Meeting (1956, Geneva): Reduced tariffs by $2.5 billion, with Japan’s first involvement.
The cycle of negotiations continued, addressing issues like anti-dumping measures and the Multifibre Arrangement (MFA) for textiles. The Uruguay Round (1986-1993) was pivotal, leading to the establishment of the WTO in 1994.
Achieving Overall Tariff Reduction
Average global tariffs dropped from 22% in 1947 to approximately 5% post-Uruguay Round. The Doha Development Round, starting in 2001, is the latest round aiming to favor developing nations with lower barriers and improved trade regulations.
Purpose of the General Agreement on Tariffs and Trade (GATT)
GATT’s establishment aimed to eradicate protectionism, foster freer trade, and revive economic prosperity post-World War II.
Was GATT a Free Trade Agreement?
Yes, GATT’s essential goal was to pave the way for a world where countries exchange goods and services freely, without quotas or discriminatory tariffs.
Transition to the World Trade Organization (WTO)
Despite GATT’s successes, it was viewed as lacking a coherent institutional structure, operating as a legal agreement rather than a full organization. The WTO incorporated GATT’s principles with an enhanced framework, particularly for intellectual property, and boasted a more efficient dispute resolution system.
The Bottom Line
GATT’s framework for free trade catalyzed a shift away from the protectionist shadows of the pre-war era, fostering globalization and economic expansion that defined the latter half of the 20th century.
Related Terms: World Trade Organization, Most-Favored-Nation Principle, Free Trade, Quotas, Trade Barriers.
References
- World Trade Organization. “The Text of the General Agreement on Tariffs and Trade”.
- Encyclopœdia Britannica. “General Agreement on Tariffs and Trade”.
- World Trade Organization. “Current WTO Chairpersons”.
- World Trade Organization. “Council for Trade in Goods”.
- World Trade Organization. “Fiftieth Anniversary of the Multilateral Trading System”.
- World Trade Organization. “Basic Purpose and Concepts: 1.6 Most-Favoured-Nation Treatment”.
- World Trade Organization. “On the Effects of GATT/WTO Membership on Trade”.
- World Trade Organization, Documents Online. “Statement Made by H.E. Mr. Toru Haguiwara, Ambassador Extraordinary and Plenipotentiary of Japan at the Public Session on 19 January 1956”.
- Cornell Law School, Legal Information Institute. “General Agreement on Tariffs and Trade (GATT)”.
- World Trade Organization. “The Doha Round”.
- Institute for Agriculture and Trade Policy. “WTO and GATT — Are They the Same?”
- Georgetown Law Library, Research Guides, Treatise Finders, and Tutorials. “From the GATT to the WTO: A Brief Overview”.
