What is GATT :

The General Agreement on Tariffs and Trade (GATT) was a legal agreement
aimed at promoting international trade by reducing or eliminating trade barriers
such as tariffs , quotas and elimination of preferences on a reciprocal and
mutually advantageous basis. Here is an overview of its origin and
development: It is a multilateral legal agreement regulating international trade ,

GATT is the outcome of the failure of negotiating governments to create the

International trade Organisation (ITO) .GATT was signed by 23 nations in
Geneva on October 30 the ,1947 and took effect from January 1,1948 . On
January 1st ,1995 WTO was established .The original GATT text 1947)is still
effective under WTO frame work ,subject to modification of GATT
1994 ,GATT and it successor WTO have successfully reduced the tariffs .The
original GATT members are 23 founding members were: Australia, Belgium,
Brazil, Burma, Canada, Ceylon, Chile, China, Cuba, Czechoslovakia, France,
India, Lebanon, Luxembourg, Netherlands, New Zealand, Norway, Pakistan,
Southern Rhodesia, Syria, South Africa, United Kingdom and the United States.
The membership increased to 100 countries in 1993 .Latest were 123

Fundamental principles of GATT

1. Non-Discrimination

a. Most-Favoured-Nation (MFN) Principle

 Each member country should treat all other member countries equally
regarding trade. If a member grants a trade concession to one country, it
must extend the same concession to all other GATT members.
 Exceptions to the MFN principle include regional trade agreements and
preferential treatment for developing countries.

b. National Treatment Principle

 Imported goods should be treated no less favorably than domestically

produced goods once they enter the domestic market. This principle
ensures that internal taxes and regulations do not unfairly disadvantage
imported products.

2. Transparency

 GATT requires member countries to publish their trade regulations and

maintain transparency in their trade policies. This principle aims to
provide a predictable and stable trading environment.
3. Reciprocity

 This principle involves mutual exchange of concessions in trade

negotiations. Countries agree to mutually reduce trade barriers, ensuring a
balance of benefits among trading partners.

4. Binding and Enforceable Commitments

 Member countries commit to bound tariffs, meaning they agree not to

increase tariffs above a negotiated level. These commitments are legally
binding, providing stability and predictability in international trade.

5. Tariff Reduction and Elimination

 A core objective of GATT was to progressively reduce tariffs and other

trade barriers. This was achieved through successive rounds of
negotiations, leading to significant reductions in tariffs globally.

6. Prohibition of Quantitative Restrictions

 GATT generally prohibits the use of quantitative restrictions such as

quotas and embargoes. Trade should primarily be regulated through
tariffs rather than quantitative limits, ensuring transparency and fairness.

7. Fair Competition

 GATT includes provisions to ensure fair competition, addressing issues

such as anti-dumping (selling products below cost to gain market share)
and subsidies that distort trade.

8. Safeguards

 Under specific conditions, countries can take temporary measures to

protect their domestic industries from sudden surges in imports. These
safeguard measures are subject to strict rules to prevent abuse.

9. Special and Differential Treatment for Developing Countries

 Recognizing the diverse levels of economic development, GATT includes

provisions for special and differential treatment for developing countries.
These measures aim to enhance their participation in global trade,
allowing them more flexibility in implementing GATT rules.

10. Dispute Settlement

  GATT established mechanisms for resolving trade disputes between
member countries. Although the dispute settlement process was less
formal than the WTO's, it provided a foundation for resolving conflicts
through negotiation and consultation.

Origin of GATT

1. Post-World War II Context:

o After World War II, there was a strong desire among nations to
foster economic cooperation to prevent future conflicts. This led to
the establishment of various international institutions like the
United Nations and the International Monetary Fund (IMF).
o Alongside these efforts, there was a need to create a system that
would facilitate international trade and economic recovery.
2. Havana Conference:
o In 1947, the United Nations Conference on Trade and Employment
was held in Havana, Cuba, which aimed to establish the
International Trade Organization (ITO). The ITO was supposed to
be a comprehensive body to oversee international trade.
o However, the ITO failed to materialize as the United States
Congress did not ratify its charter.
3. GATT Formation:
o To fill the void left by the failed ITO, the General Agreement on
Tariffs and Trade was signed on October 30, 1947, by 23 countries
and came into effect on January 1, 1948.
o GATT was meant to be a temporary measure, but it became the
main framework governing international trade for several decades.
The General Agreement on Tariffs and Trade (GATT) was established in 1947
to promote international trade by reducing or eliminating trade barriers such as
tariffs or quotas. Over time, eight rounds of negotiations were held under
GATT, which eventually led to the creation of the World Trade Organization
(WTO) in 1995. Here are the eight rounds of GATT negotiations:
1. Geneva Round (1947)
Location: Geneva, Switzerland
Participants: 23 countries
Outcome: Established the GATT with 45,000 tariff concessions
affecting $10 billion in trade.
2. Annecy Round (1949)
Location: Annecy, France
Participants: 13 countries
Outcome: Led to further tariff reductions and the accession of ten
more countries to GATT.
3. Torguay Round (1950-1951)
Location: Torguay, United Kingdom
Participants: 38 countries
Outcome: Achieved approximately 8,700 tariff concessions, resulting
in a 25% reduction in tariffs.
4. Geneva Round (1956)
Location: Geneva, Switzerland
Participants: 26 countries
Outcome: Concessions covered around $2.5 billion in trade.
5. Dillon Round (1960-1962)
Location: Geneva, Switzerland
Participants: 26 countries
Outcome: Named after U.S. Undersecretary of State Douglas Dillon,
this round resulted in tariff reductions worth $4.9 billion.
6. Kennedy Round (1964-1967)
Location: Geneva, Switzerland
Participants: 62 countries
Outcome: Named after U.S. President John F. Kennedy, it led to tariff
reductions worth $40 billion and included discussions on anti-
dumping measures.
7. Tokyo Round (1973-1979)
Location: Tokyo, Japan
Participants: 102 countries
Outcome: Addressed not only tariffs but also non-tariff barriers and
improved the GATT system with agreements on subsidies, technical
barriers to trade, and import licensing.
8. Uruguay Round (1986-1994)
 Location: Punta del Este, Uruguay (opening) and Geneva,
Switzerland (closing)
Participants: 123 countries
Outcome: The most comprehensive of all rounds, it led to the creation
of the WTO and covered issues such as services, intellectual property,
and agriculture.

These rounds progressively expanded the scope of international trade

negotiations and laid the groundwork for the establishment of the WTO, which
now oversees global trade rules.
The uruguay round -september,1986 -December 1993

The worsening trade environment led to the need for a ministerial level of
conference to settle discriminatory practices being held within the GATT .Trade
ministers launched the GATT at punta de Este, Uruguay on 28 th January
1987 ,from April 12-15 ,1994 ministers met at Marrakesh, morocco to ratify the
results of the Uruguay round .The WTO came in to existence on January
1 ,1995

The first 6 round were concerned almost exclusively with multilateral reduction
of tariff .With successful lowering of Tariff ,non-tariff barriers trade become the
subject of great concern

The Tokyo round ,the 7th round was comprehensive effort to deal with
tariff .and nontariff measures .In addition to tariff reduction of about 1/3 in
major industrial markets, the Tokyo round produced a series of new or
reinforced coded dealing with variety of non-tariff practices, including codes on
subsidies and countervailing duties, technical barriers to trade, import licencing
procedures on the dumping ,government procurement and customs valuation
The uruguay round Final act strings together 25 agreements ,declarations and
decisions in the good sector alone, including the agreements on TRIPS,GATS
and establishing WTO .Thus uruguay round extends the multilateral trade to
three new areas, namely investments, intellectual property rights and to impose
“cross retaliation” across these sectors to ensure effective enforcement of the
prescribed obligations.

Differences between GATT &WTO

 GATT was a set of rules agreed upon by nations, but WTO is an

institutional body

 GATT was only a forum to discuss, but WTO is a proper international

organisation with headquarters, staff etc
 Although GATT was designed to serve multilateral agreements ,GATT
negotiations created selective trading and caused fragmentations among
members .so the WTO expended its scope from traded goods to include
trade with in the service sector and intellectual property rights.

World Trade Organisation(WTO)

The WTO is an international trade organisation established to supervise

and liberalise world trade .The uruguay round of GATT (1986-93) led to
the establishment of WTO.The members of GATT signed an agreement
of uruguay round in April 1994 in Morocco for establishing a new
organisation name WTO .The WTO was officially constituted in
January 1995 .It is an permanent organisation established by international
treaty approved by participating countries. It has international status like
International Monetary Fund(IMF),International Bank for
Reconstruction & development(IBRD),but it is not an agency of UNITED
Nations Organisation(UNO).
Membership
Nearly 153 members accounting for over 97% of world trade .Around 30
others are negotiating membership. The WTO agreements were ratified
by all the members’ parliament

Meetings

The top-level decision-making body is ministerial conferences. It meets at

least once in every 2 years.
Under Ministerial conferences ,comes General council(meets several
times in a year) have head quarters at Geneva .The General council
meets as a Trade policy review body and dispute settlement body .Below
General council, the Goods council ,service council and intellectual
property council called TRIPS. Apart from from this there are several
specialised committees ,working groups and working parties .These
committees deal with individual agreements and other areas such as
environment ,development ,member ship application and Regional trade
agreement .
secretariat
the WTO secretariat is in Geneva having 600 staff and headed by director
general .budget roughly about 200 million swiss franks
duty -to supply technical support to various committees and councils and
ministerial conference. to supply technical assistance to developing
countries, to analyse world trade and explain WTO affairs to the public
 and media. Legal assistance in the dispute settlement process and advises
governments wishing to become members of WTO.

objective
to improve the standard of living of people in the member countries
to ensure full employment and broad increase in effective demand .
to enlarge production and trade of goods
to increase the trade of services
to ensure optimum utilization of resources
to protect environment
to accept the concept of sustainable development

Functions of WTO

to implement rules and provisions related to trade policy mechanism

to provide platform to member countries to decide future strategies
related to trade & tariff
to provide facilities for implementation, administration ,operation of
multilateral and bilateral agreement of world trade
to administer the rules and processes related to dispute settlement
to ensure the optimum use of world resources
to assist international organisation such as ,IMF,IBRD for establishing
coherence in universal economic policy determination

Scope of WTO

The World Trade Organization (WTO) is a global international organization that regulates
international trade between nations. Established on January 1, 1995, it succeeded the General
Agreement on Tariffs and Trade (GATT). The scope of the WTO is broad and encompasses
various aspects of trade, including goods, services, and intellectual property. Here are the
main areas covered by the WTO:

1. Trade in Goods

 GATT 1994: The WTO incorporates and extends the General Agreement on Tariffs
and Trade (GATT) principles and agreements. It includes commitments to reduce
tariffs, eliminate trade barriers, and ensure non-discriminatory treatment of goods.
 Agriculture: The Agreement on Agriculture addresses subsidies and market access
issues in the agricultural sector.
 Textiles and Clothing: The Agreement on Textiles and Clothing (ATC) aimed to
integrate this sector into GATT rules over a 10-year period, ending in 2005.
 Anti-Dumping Measures: The Agreement on Implementation of Article VI of GATT
(Anti-Dumping Agreement) outlines rules for investigating and taking action against
dumping (selling goods below cost to gain market share).
  Subsidies and Countervailing Measures: This agreement regulates the use of
subsidies and the actions countries can take to counter the effects of subsidized
imports.
 Safeguards: The Agreement on Safeguards allows countries to take emergency
measures to protect domestic industries from sudden increases in imports.

2. Trade in Services

 General Agreement on Trade in Services (GATS): This agreement covers

international trade in services, including financial services, telecommunications, and
transportation. GATS aims to create a credible and reliable system of international
trade rules in services, ensure fair and equitable treatment of all participants, and
promote trade in services through gradual liberalization.

3. Intellectual Property

 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS):

This agreement sets minimum standards for the protection and enforcement of
intellectual property rights, including copyrights, trademarks, patents, geographical
indications, and trade secrets. It aims to reduce distortions and impediments to
international trade while promoting effective protection of intellectual property rights.

4. Trade-Related Investment Measures

 Agreement on Trade-Related Investment Measures (TRIMs): This agreement

prohibits trade-related investment measures that are inconsistent with basic GATT
principles, such as national treatment and the prohibition of quantitative restrictions.

5. Dispute Settlement

 Dispute Settlement Understanding (DSU): The WTO provides a structured process

for resolving trade disputes between member countries. The DSU establishes a panel
and appellate review process to ensure that trade disputes are settled based on WTO
rules.

6. Trade Policy Review Mechanism

 This mechanism allows for regular reviews of national trade policies to ensure
transparency and understanding among member countries. The reviews provide
opportunities for constructive dialogue and assessment of the impact of trade policies
on the multilateral trading system.

7. Technical Barriers to Trade

 Agreement on Technical Barriers to Trade (TBT): This agreement aims to ensure

that technical regulations, standards, and conformity assessment procedures do not
create unnecessary obstacles to trade. It promotes the use of international standards to
facilitate trade.
8. Sanitary and Phytosanitary Measures

 Agreement on the Application of Sanitary and Phytosanitary Measures (SPS):

This agreement ensures that food safety, animal, and plant health regulations are
based on scientific principles and do not unjustifiably restrict trade.

9. Trade Facilitation

 Trade Facilitation Agreement (TFA): This agreement aims to simplify, modernize,

and harmonize export and import processes, reducing trade costs and enhancing the
efficiency of global trade.

10. Development and Technical Assistance

 The WTO provides technical assistance and training to developing countries to help
them build their trade capacity and integrate into the global trading system. It also
includes special provisions for least-developed countries (LDCs) to support their
economic development.

Summary

The scope of the WTO is extensive, covering various dimensions of international trade, from
goods and services to intellectual property and investment measures. Its comprehensive
framework aims to create a stable and predictable trading environment, promoting global
economic growth and development. Through its agreements, dispute settlement mechanisms,
and trade policy reviews, the WTO strives to ensure fair and open trade practices among its
member countries.