ASSIGNMENT ON: GENERAL AGREEMENTON TARIFFS
AND TRADE
(GATT)
Table of Contents
General Agreement on Tariffs and Trade.................................................................................................................3
First Phase :.................................................................................................................................................5
Second Phase :...........................................................................................................................................5
Third Phase :................................................................................................................................................5
OBJECTIVES OF GATT :.............................................................................................................................5
OBJECTIVES OF GATT :.............................................................................................................................5
FUNDAMENTAL PRINCIPLES OF GATT :...............................................................................................5
OTHER FUNCTIONS OF GATT :...............................................................................................................5
OTHER FUNCTIONS OF GATT :...............................................................................................................5
Did GATT succeed? :.................................................................................................................................6
Slide 20:........................................................................................................................................................6
Slide 21:........................................................................................................................................................6
Slide 22:........................................................................................................................................................6
Slide 23:........................................................................................................................................................6
Slide 24:........................................................................................................................................................6
Difference between GATT & WTO............................................................................................................................7
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General Agreement on Tariffs and
Trade
GATT Stands for General Agreement on Tariffs and Trade. The GATT provided global trade
rules as well as a framework for trade disputes from 1948 to 1994. It was one of three
Bretton Woods organizations developed after World War II.
The GATT secretariat consists of international trade specialists and an administrative staff.
Tariff conferences and sessions are usually held at GATT headquarters in Geneva,
Switzerland.[1] http://www.sweetliberty.org/gatt.htm
It is a set of multilateral trade agreements aimed at the abolition of quotas and the
reduction of tariff duties among the signing nations. The first round of negotiations
impacted one fifth of world trade; there were 23 founding members. Originally signed by
23 countries at Geneva in 1947, GATT became the most effective instrument in the massive
expansion of world trade in the later 20th century. By 1995, when GATT was replaced by
the World Trade Organization (WTO), 125 nations had signed its agreements, which
governed 90 of world trade. GATT's most important principle was trade without
discrimination, in which member nations opened their markets equally to one another.
Once a country and its largest trading partners agreed to reduce a tariff, that tariff cut was
automatically extended to all GATT members. GATT also established uniform customs
regulations and sought to eliminate import quotas. It sponsored many treaties that
reduced tariffs, the last of which, signed in Uruguay in 1994, established the WTO. [2]
http://www.answers.com/topic/general-agreement-on-tariffs-and trade#ixzz2ntpQt94b
The goal of GATT founders was to liberalize world trade, specifically by reducing
protective tariffs.
Corporations often argue for more open trade in order to have access to new markets.
Labor often argues for trade restrictions in order to protect domestic jobs. Because trade
agreements must be approved by governments, this tension sets up political conflict.
http://uspolitics.about.com/od/politicaljunkies/g/GATT.htm
UN agency for promotion of free trade between signatory countries. GATT instituted a
rule-based multilateral trading system for trade in both goods and services through a
series of negotiations (called 'rounds'). It succeeded in achieving reduction in the average
tariff on manufactured goods from 40 percent to about 5 percent in the industrialized
nations, and in obtaining varying degrees of promised reductions from less developed
nations.
Its approach was based on two non-discriminatory principles, the (1) Most favored nation
and national treatment, and (2) Reciprocity. It worked to eliminate all non-tariff barriers
and import quotas, and advocated use of countervailing duties to fight dumping and to
negate the effects of subsidies. On January 1, 1995, after the culmination of Uruguay
Round, GATT was replaced by World Trade Organization (WTO).
http://www.businessdictionary.com/definition/General-Agreement-on-Tariff-and-Trade-
GATT.html
Purpose of GATT
According to the Preamble of GATT, main objective was the “Reduction of Barriers to
International Trade” This was achieved through the Reduction of Tariff barriers
Quantitative Restrictions Subsidies on trade through a series of agreements. Although,
other objectives of the contracting parties include,
raising standards of living
ensuring full employment
a large and steadily growing volume of real income and effective demand
developing the full use of the resources of the world
Expanding the production and exchange of goods.
The General Agreement on Tariffs and Trade (GATT) was first signed in 1947, was designed -
To provide an international forum
That encouraged free trade between member states
By regulating and reducing tariffs on traded goods
Providing a common mechanism for resolving trade disputes.
OBJECTIVES OF GATT :
To expand International trade by liberating trade.
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Build an International trading system
to ensure orderly and equitable expansion of world trade and contribute to the
prosperity of US.
Reduce foreign export subsides, tariff and non-tariff barrier and internal supports.
Cuts costs by 50 – 100% on important electronic items
To strengthen and clarify rules for agricultural trade.
To reduce subsidization for agricultural production.
Expansion of production and international trade.
Better utilization of resource of the world.
History :
3 Phases
First Phase :
From 1947 until the Torquay Round. Commodities which would be covered by the agreement and
freezing existing tariff levels
Year Place/name Subjects covered
1947 Geneva Tariffs
1949 Annecy Tariffs
1951 Torquay Tariffs
Second Phase :
A second phase, encompassing three rounds, from 1959 to 1979. Focused on reducing tariffs
Second Phase
Year Place/name Subjects covered
1960-1961 Geneva Tariffs
Dillon Round
1964-1967 Geneva Tariffs and anti-dumping measures
Kennedy Round
1973-1979 Geneva Tariffs, non-tariff measures, “framework”
Tokyo Round agreements
Third Phase :
The Third phase, consisting only of the Uruguay Round from 1986 to 1994. Extended the
agreement fully to new areas such as intellectual property, services, capital, and agriculture. Out of
this round the WTO was born.
Year Place/name Subjects covered
1986-1994 Geneva Tariffs, non-tariff measures, rules, services, intellectual
Uruguay Round property, dispute settlement, textiles, agriculture,
creation of WTO, etc.
http://www.authorstream.com/Presentation/prachi.agg15-135976-gatt-international-
business-education-ppt-powerpoint/
GATT Round
GATT members have engaged in eight intensive series of multilateral trade negotiations.
Since the fifth series of negotiations (Dillon Round), multilateral negotiations under the
GATT have been called the “XX Round Negotiations” or simply the “XX Round.”
During the Doha Ministerial Conference, it was decided to launch a new series of
negotiations. This series of negotiations is called the Doha Development Agenda, because
some developing countries oppose the word “Round.” Figure II-4 outlines a brief history of
trade liberalization negotiations.
Tariffs were gradually reduced over the course of several negotiating rounds. In addition,
trade rules other than tariffs were developed. In particular, the Uruguay Round produced
landmark results, including the strengthening of trade rules and the development of
binding dispute settlement procedures.
GATT round negotiations
http://www.meti.go.jp/english/report/downloadfiles/2011WTO/2-0Overview.pdf
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FUNDAMENTAL PRINCIPLES OF GATT :
1. Non Discrimination: No member country shall discriminate between members of
GATT. Exceptions are allowed.
2. Prohibition of Quantitative Restrictions
3. Concept of consultation aims to avoid damage to trading interests of contracting
parties.
4. GATT provides frame work within which the negotiations can be held for reduction of
tariff another barrier to trade and structure for embodying results of such negotiations
OTHER FUNCTIONS OF GATT :
OTHER FUNCTIONS OF GATT Most Favored function status: Matters related to the
tariff and related matters granted to any of the trading partner. Ensures that any tariff
reduction or any other trade concession is extended to all GATT parties. National
treatment: GATT members must give imported goods treatment equal to that of
domestic goods. No restrictions on charges like rates may be applied to imported
goods unless equally treated.
OTHER FUNCTIONS OF GATT :
OTHER FUNCTIONS OF GATT Protection through tariff : Prohibits quantitative
restrictions / Quotas. Contracting parties are expected to provide protection by means
of tariffs which are transparent and subject to negotiations in the GATT. Dispute
Settlement: Procedures from Uruguay round negotiations provides more automatic and
effective resolution of disputes between member nations.
http://www.authorstream.com/Presentation/padmaviji82-786755-gatt/
Did GATT succeed?
Slide 20:
Continual reductions in tariffs helped spur very high rates of world trade growth during
the 1950s and 1960s — around 8% a year on average Trade growth consistently out-
paced production growth The rush of new members during the Uruguay Round
demonstrated recognition of multilateral trading system as the anchor for development
and an instrument of economic and trade reform.
But…..
Slide 22:
GATT’s success in reducing tariffs to a low level, with a series of economic recessions
1970-80’s drove governments to devise other forms of protection for sectors facing
increased foreign competition High rates of unemployment and constant factory
closures led governments in Western Europe and North America to seek bilateral
market-sharing arrangements with competitors and to embark on a subsidies race to
maintain their holds on agricultural trade Both these changes undermined GATT’s
credibility and effectiveness.
Slide 23:
The problem was not just a deteriorating trade policy environment. By the early 1980s
the General Agreement was clearly no longer as relevant to the realities of world trade
as it had been in the 1940s . World trade had become far more complex and important
than 40 years before The globalization of the world economy was underway Trade in
services — not covered by GATT rules Ever increasing international investments
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Slide 24:
Factors convinced GATT members that a new effort to reinforce and extend the
multilateral system should be attempted. That effort resulted in the Uruguay Round, the
Marrakesh Declaration and the creation of the WTO.
Evaluation of GATT
1. When GATT was signed in the year 1947 only 23 nations were party to it. In the 1986,
there were 117 were members. One of the principle achievement of GATT was the
establishment of forum for continuing consultation.
2. GATT achieved considerable liberalization, few exception are as follow as:-
Agricultural trade was an exception to the liberalizations. Trade in agricultural
became progressively more distorted by the support given to the farmers in
agricultural sectors.
Another exception was textile: trade in textile was restricted by MFA. under MFA
import of textile items, to number of developed countries was restricted by
quota.
Developing countries with balance of payment problem have been generally
exempted from liberalization.
3. The average level of tariff on manufactured products in industrial countries was brought
down from 40% in 1947 to 3% in 1986.
4. The export of developing countries gained significantly less from the GATT agreement
then did the export of developed countries
Difference between GATT & WTO
GATT WTO
1) It Stands for General Agreement on 1) ) It Stands for World Trade Organization
Tariffs and Trade
2) GATT was adhoc and provisional. 2) WTO is permanent.
3) GATT has contracting parties. 3) WTO has members.
4) GATT system allows existing domestic, 4) WTO does not permit this.
legislation to continue even if it violated
GATT agreement.
5) GATT was less powerful and dispute 5) WTO is more powerful and dispute
settlement mechanism was less efficient. settlement mechanism was more efficient
References
1. http://www.sweetliberty.org/gatt.htm
2. http://www.answers.com/topic/general-agreement-on-tariffs-and trade#ixzz2ntpQt94b
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