GATT ( General Agreement on Trade and Tariff)

The GATT was created after World War II to aid global economic recovery
through reconstructing and liberalizing global trade

The GATT was formed in 1947 with a treaty signed by 23 countries and signed in
to international law on 1 January 1948. GATT remained one of the focal features
of international trade agreements until it was replaced by the creation of the WTO
on Jan 1st 1995.

By this time 125 nations were signatories to its agreement , which covered about
90% of Global trade GATT was established with the objectives to reduce barriers
to international trade through the reduction of tariffs, quotas and subsidies .

The GATT was first discussed during the United nations Conference on Trade and
employment and was the outcome of the failure of negotiating governments of
create the international trade organization.
GATT was signed by 23 nations in Geneva on 30th October 1947 and took effect
on 1st January 1948. It remained in effect until the signature by 123 nations in
Marrakesh on 14th April 1994 of the Uruguay Round Agreement which
established WTO on 1st January 1995 .
According to its preamble , its purpose was the substantial reduction of tariff and
other trade barrier and the elimination of preferences on a reciprocal and mutually
advantageous basis
Objectives of GATT are as follows
The primary objectives of GATT was to expand international trade by liberalizing
so as to bring about all round economic prosperity .
 To encourage full employment and large and steadily growing volume of
real income and effective demand
 To reduce the existing trade barriers and tariff
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  To improve the world production and exchange of goods
 To eliminate discrimination in international trade
 To ensure the full use of world resources
 To expand international trade by mutual cooperation
 To ensure a steady improvement in the living standards of people in member
countries
 To settle the dispute through consultation within the framework of GATT
GATT has certain conventions and general principles governing international trade
among countries that follows the GATT agreement
Any proposed change in the tariff or any type of commercial policy of a member
country should not be undertaken without the consultation with the other parties
to the agreement
The countries that adhere to get work towards the reduction of tariff and other
barriers to the international trade should be negotiated within the frame work of
GATT.
Principles of GATT
GATT has adopted following principles
1. Non- discrimination
2. Protection through tariffs
3. A state basis of trade and
4. Consultation
Non- discrimination
The international trade should be conducted on the basis of non-discrimination .no
member country shall discriminate between the members of GATT in the conduct
of international trade. On the basis the principle Most Favored Nation ( MFN) was

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enunciated . This means that each nation shall be treated as good as the most
favored nation
Protection through Tariffs
GATT rules prohibit quantitative restrictions .Domestic industries should be
protected only through customs and tariffs .Restrictions on trade should be limited
to the less rigid tariffs.
A stable basis of trade
GATT seeks to provide a stable and predictable basis for trade. It binds the tariffs
levels negotiated among the contracting countries. Binding tariffs prevents the
unilateral increase in tariff, but still there is a provision for renegotiation of bound
tariffs
Consultation
The member countries should consult one another on trade matters and problems.
The members who feel aggrieved that their rights under GATT are withheld can
call for a fair settlement. Panels of independent experts have been formed under
the GATT council. The panel procedure aims at mutually satisfactory settlement
among members
Defects of GATT
No enforcement Authority
There was no enforcement authority to oversee the compliance ( fulfillment) of
GATT regulations by contracting parties and to settle their trade disputes.
Problems in the formulations of General Rules
The member of GATT are much diversely in nature they had varied in economic
and political motives and they were able at different stages of development . These
reasons created difficulty in framing and implementing uniform general rules of
conduct concerning trade, tariffs and payments
Less benefits for the LDCs
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The most of the members of GATT were in the category of the LDCs. The GATT
had provided less benefit to these countries. At present there are no restrictive trade
arrangements in the world. The GATT also not given any compensation to the
LDCs on account of damage to their economies caused by the actions of developed
countries
Quantitative Trade Restrictions
Even though the 1993 agreement of GATT disapproved the adoptation of
quantitative trade restrictions and the substitutions of tariff in their place , it did not
prohibit the contracting parties from taking recourse to them