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GATT, the General Agreement on Tariffs and Trade, began as a post–World War II document to negotiate policies on international trade. After forty-seven years it culminated in 22,500 pages of text, and an ambitious set of trade- liberalization agreements covering goods, services, and intellectual property. GATT established and was replaced by the World Trade Organization in 1994.
The General Agreement on Tariffs and Trade (GATT) was a relatively informal document created after the World War II to coordinate polices on international trade. Its major aims were the abolition of quotas, reduction of tariff barriers, and promotion of nondiscriminatory free trade. Its origins trace back to 1947 when twenty-three states met in Geneva and negotiated a statement of principles for international trade. This agreement originally was intended to be part of a draft charter for an International Trade Organization (ITO), the third leg of the Bretton Woods economic order, along with the International Monetary Fund and World Bank. The “Havana Charter” of the ITO contained the GATT, as well as provisions relating to employment, commodity agreements, restrictive business practices, international investment, and services. The 1947 GATT, which consisted of negotiated trade concessions and rules of conduct, entered into force as the GATT Protocol of Provisional Application on 1 January 1948, although the rest of the Havana Charter never was ratified, primarily because of opposition in the U.S. Congress. For forty-seven years, the ever-expanding group of contracting parties to the GATT (128 states in 1994) treated the instrument as if it were a permanent commitment, though actually it was merely a provisional legal agreement. A small secretariat and administrative staff for the GATT was created in 1955 in Geneva, though not as a formal international organization. These personnel were tasked with implementing trade objectives of participating states, namely to apply a nondiscriminatory, most favored nation approach toward trade relations, with tariff reductions presumably based on the principle of reciprocity.
From its creation until 1994, the GATT states engaged in eight negotiating sessions, called “rounds,” to reduce tariffs and produce in piecemeal fashion rules to govern international trade. Nontariff barriers were dealt with after 1965, among them antidumping measures, subsidies, countervailing duties, import licensing procedures, and selective government procurement. These agreements were contracted by only a few of the GATT members, mainly those who were members of the Organization for Economic Cooperation and Development (OECD).
The final GATT negotiating session, the Uruguay Round, proved the most prolonged and most comprehensive. It lasted from 1987 through 1994 and established a legal institution—the World Trade Organization—to replace the GATT of 1947 with all its amendments. Established by the Marrakesh Protocol on 1 January 1995, the WTO is a multilateral institution charged with administering rules of trade among member countries. Legally it embodies an international intergovernmental organization, possessing international personality (that is, the WTO possesses international legal rights and duties, with the capacity to bring or defend legal claims between states) and competence in its own right independent of its member governments. Consequently, the WTO enjoys legal privileges and immunities necessary for the exercise of its mandate. As a body of legal rules, the WTO contains the GATT of 1994 and other non-goods-related agreements.
The WTO represents the preeminent international body dealing with the rules of trade between states. The 153 members of the WTO in 2009 account for more than 97 percent of world trade, and its decisions affect nearly all the goods and services moving in international commerce. At its core are the WTO agreements, which operate as the ground rules for international commerce and trade policy. The main objectives of the WTO agreements are to assist trade to flow freely, achieve liberalization through negotiation, act as a forum for trade negotiations, and ensure impartial settlement of disputes. Succinctly put, the WTO’s aim is to facilitate the free, fair flow of trade in a predictable fashion for its member states.
The WTO provides both a code of rules and a forum for governments to discuss and resolve trade disputes and to continue negotiations toward expanding world trade opportunities. The WTO includes all the GATT provisions for trade in goods, plus rules developed for trade in services and intellectual property, as well as rules and procedures governing the settlement of disputes. It operates as the principal international body concerned with multilateral negotiations on the reduction of trade barriers and other measures that distort competition. In this regard, drawing heavily from the GATT legacy, the WTO embraces five fundamental principles that establish the foundation of the modern multilateral commercial system: (1) nondiscrimination through most-favored-nation treatment (MFN); (2) freer fair trade; (3) more predictable trade policies; (4) encouraging open and fair competition; and (5) concessionary treatment for less developed countries.
The WTO’s rules, called agreements, were negotiated during the GATT’s Uruguay Round. These rules run some thirty thousand pages in sixty agreements and separate commitments (called schedules), and set out acceptable procedures for customs duties and opening markets. Through these agreements WTO members operate in a nondiscriminatory trading system that upholds their rights and obligations. Each state is guaranteed that its exports will be treated fairly and consistently by other members of the WTO. The Uruguay Round produced 22,500 pages of text that list individual countries’ commitments to cut and bind customs duty rates on imports of goods, which entailed the most ambitious set of trade-liberalization agreements in the GATT’s history. The WTO agreements cover goods, services, and intellectual property. They articulate principles of liberalization and permissible exceptions. They prescribe special treatment for developing countries. They require governments to make their trade policies transparent. With the formal conclusion of the Uruguay Round on 15 April 1994, the GATT went out of existence.
Bibliography:
- Jackson, J. (2007). The Jurisprudence of GATT and the WTO: Insights on Treaty Law and Economic Relations.). Cambridge: Cambridge University Press.
- Mavroidis, P. (2007). Trade in Goods: An Analysis of International trade Agreements. Oxford: Oxford Universnity Press.
- Swacker, F., et al. (1995). World trade without barriers: The World Trade Organization (WTO) and dispute resolution. Charlottesville, VA: Michie Butterworth.
- World Trade Organization website. (2016). Retrieved July 29, 2016, from https://www.wto.org/
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