The General Agreement On Tariffs and Trade (GATT) Was First Signed in 1947. - Was Designed

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• 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.
GATT ???
A Treaty, not an Organization
• Was the outcome of the failure of negotiating
governments to create the ITO
• The Bretton Woods Conference introduced the
idea for an organization to regulate trade as part
of a larger plan for economic recovery after
World War II
• As governments negotiated the ITO, 15
negotiating states began parallel negotiations for
the GATT as a way to attain early tariff reductions
• Once the ITO failed in 1950, only the GATT
agreement was left.
Objective
• The GATT's 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
Principles
1. Trade Liberalization
• Liberalization
1. liberal view
- free market
- limited government
- more optimistic about state cooperation
- trade is a positive sum game
• Increase trade
- reduce tariffs
2. Nondiscrimination
• Most Favored Nation
- A trade advantage given to one GATT member must be extended to
every other GATT member
• National Treatment
- A member must treat foreign products at least as favorably as domestic
products (i.e. taxes, regulations)
3. Reciprocity
• A state benefiting from another state’s trade concessions should provide
roughly equal benefits in return
4. Safeguards and Contingent Measures
• Limit of imports that may cause harm to a state’s industry or economy
Dispute
• What causes a dispute?
– When a member country of the WTO believes another
member country is violating an agreement or a
commitment that has been set within the WTO.
• Agreements are those negotiated under the Rounds of
GATT/ WTO
• How is it resolved?
– The Dispute Settlement Body composed of member
governments (all WTO members) work together to set
an agreement.
 Continual reductions in tariffs helped
encourage 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.
Gatt in danger
• Non-Tariff Barriers
-not covered in GATT rules
• Agriculture had been an exception to restrictions on
import quotas and export subsidies
• Agriculture and Textiles mostly excluded from regulations
• Easy to circumvent regulations (VER)
• Dispute Settlement procedures weak
• U.S. and other Developed Countries (DCs) wanted
scope to go beyond trade in goods to trade in services,
intellectual property and investment
• Most Less Developed Countries (LDCs) did not agree to
negotiations in the Tokyo Round
• GATT’s success in reducing tariffs to a low
level, with a series of economic decline 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 two-sided market-
sharing arrangements with competitors and to
go aboard on a subsidies race to maintain their
holds on agricultural trade
• Both these changes damaged GATT’s
credibility and effectiveness.
• The problem was not just a weakening
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
• 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.
WTO origin
• The General Agreement on Trade and Tariff (GATT)
came into existence in 1947

• It sought substantial reduction in tariff and other barriers


to trade and to eliminate discriminatory treatment in
international commerce.

• India signatory to GATT 1947 along with twenty two


other countries

• Eight rounds of negotiations had taken place during five


decades of its existence
CONTD..
• WTO Came into existence on 1-1-1995 with the conclusion of
Uruguay Round Multilateral Trade Negotiations at Marrakesh on
15th April 1994, to :

– Transparent, free and rule-based trading system

– Provide common institutional framework for conduct of trade relations


among members

– Facilitate the implementation, administration and operation of


Multilateral Trade Agreements

– Rules and Procedures Governing Dispute Settlement

– Trade Policy Review Mechanism

– Concern on Non-trade issues such as Food Security, environment,


health, etc.

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