General Agreement on Tariffs and Trade (GATT)

The General Agreement on Tariffs and Trade (GATT) was originally created by the Bretton Woods Conference as part of a larger plan for economic recovery after World War II. The GATT s main p!rpose was to red!ce barriers to international trade. This was achieved thro!gh the red!ction of tariff barriers" #!antitative restrictions and s!bsidies on trade thro!gh a series of different agreements. The GATT was an agreement" not an organi$ation. %riginally" the GATT was s!pposed to become a f!ll international organi$ation li&e the World Ban& or I'( called the International Trade %rgani$ation. )owever" the agreement was not ratified" so the GATT remained simply an agreement. The f!nctions of the GATT have been replaced by the World Trade %rgani$ation. What is the p!rpose of GATT* According to the +reamble of GATT" the ob,ectives of the contracting parties incl!de"

raising standards of living ens!ring f!ll employment a large and steadily growing vol!me of real income and effective demand developing the f!ll !se of the reso!rces of the world e-panding the prod!ction and e-change of goods.

The +reamble also states the contracting parties belief that .reciprocal and m!t!ally advantageo!s arrangements directed to the s!bstantial red!ction in tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce/ wo!ld contrib!te toward these goals. Importantly" .free trade/ is not the stated ob,ective of GATT. The role of GATT in integrating developing co!ntries into an open m!ltilateral trading system is also of ma,or conse#!ence. The increasing participation of developing co!ntries in the GATT trading system and the pragmatic s!pport provided to them thro!gh the fle-ible application of certain r!les helped developing co!ntries to both e-pand and diversify their trade. It co!ld now be said that a great n!mber of these co!ntries have already become f!ll partners in the system as can be witnessed by their active participation in the 0r!g!ay 1o!nd. The tas& of helping to integrate f!rther the least2developed co!ntries is one of the challenges that lies ahead in the WT%. 3imilarly" the f!ll integration of co!ntries with economies in transition into the trading system m!st be achieved in order to strengthen economic interdependence as a basis for greater prosperity and world peace. These negotiations were critical to ens!re the f!t!re health of the world economy and the trading system. The globali$ation of the world economy over the past decade has created a greater reliance than ever on an open m!ltilateral trading system. (ree trade has become the bac&bone of economic prosperity and development thro!gho!t the world. +artly as a res!lt of this" there has been a shift in trade policy mechanisms from border meas!res to internal policy meas!res" s!bstantially affecting the management of trade relations. The 0r!g!ay 1o!nd so!ght to establish a new balance in rights and obligations among trading nations as a res!lt of this phenomenon. We are grad!ally moving towards a global mar&etplace" and for that" we need a global system of r!les for trade relations among partners in that mar&et place. The challenges that we face are therefore enormo!s. The only way bac& from this globali$ation in the world economy wo!ld be thro!gh depression and event!al chaos. We therefore have no choice b!t to move forward. In doing so" however" we m!st be s!re to preserve to the highest e-tent possible the spirit and tradition of the GATT" which to a large e-tent was the &ey to its s!ccess.

World Trade %rgani$ation (WT%)

The World Trade %rgani$ation (WT%) is an international organi$ation that establishes r!les for international trade thro!gh consens!s among its member states. It also resolves disp!tes between the members" which are all signatories to its set of trade agreements. The WT% states that its aims are to increase international trade by promoting lower trade barriers and providing a platform for the negotiation of trade and to their b!siness. +rinciples of the trading system The WT% disc!ssions sho!ld follow these f!ndamental principles of trading. 4. A trading system sho!ld be free of discrimination in the sense that one co!ntry cannot privilege a partic!lar trading partner above others within the system" nor can it discriminate against foreign prod!cts and services. 5. A trading system sho!ld tend toward more freedom" that is" toward fewer trade barriers (tariffs and non2tariff barriers). 6. A trading system sho!ld be predictable" with foreign companies and governments reass!red that trade barriers will not be raised arbitrarily and that mar&ets will remain open. 7. A trading system sho!ld tend toward greater competition. 8. A trading system sho!ld be more accommodating for less developed co!ntries" giving them more time to ad,!st" greater fle-ibility" and more privileges. Subjects of WTO 4. Agric!lt!re 5. 3ervices 6. 9on2agric!lt!re 7. Intellect!al +roperty 1ights 8. Trade investment" competition" policy" government proc!rement and trade facilities :. Trade r!les ;. <isp!te settlements =. Trade and environment >. Trade" finance and debt 4?. Trade and technology transfer 44. @lectronic commerce Role of WTO in Globalization 4. WT% plays an important role in the principle of trade witho!t discrimination in the free mar&et trade. Most-favoured-nation (MFN): treating other people equally. 0nder the WT% agreements" co!ntries cannot normally discriminate between their trading partners. Grant someone a special favo!r (s!ch as a lower c!stoms d!ty rate for one of their prod!cts) and yo! have to do the same for all other WT% members. 5. National treatment: Treating foreigners and locals equally. Imported and locally2prod!ced goods sho!ld be treated e#!ally A at least after the foreign goods have entered the mar&et. 6. Freer trade - gradually, through negotiation B Cowering trade barriers is one of the most obvio!s means of enco!raging trade. The barriers concerned incl!de c!stoms d!ties (or tariffs) and meas!res s!ch as import bans or #!otas that restrict #!antities selectively. 7. redicta!ility - through !inding and transparencyB With stability and predictability" investment is enco!raged" ,obs are created and cons!mers can f!lly en,oy the benefits of competition A choice and lower prices. The m!ltilateral trading system is an attempt by governments to ma&e the b!siness environment stable and predictable. 8. romoting fair competitionB The WT% is sometimes described as a .free trade/ instit!tion" b!t that is not entirely acc!rate. The system does allow tariffs and" in limited circ!mstances" other forms of protection. 'ore acc!rately" it is a system of r!les dedicated to open" fair and !ndistorted competition. :. "ncouraging development and economic reformB The WT% system contrib!tes to development. %n the other hand" developing co!ntries need fle-ibility in the time they ta&e to implement the system s agreements.