PROJECT REPORT

ON

“GENERAL AGREEMENT ON TARIFFS AND TRADE”

Submitted To:

Dr. Shekhar Das

Faculty Member
IMS GHAZIABAD

Submitted By:

VIBHAV GUPTA (BM010163)

INSTITUTE OF MANAGEMENT STUDIES

C-238, Buladshahr Road, Lal Quan, Ghaziabad-201009,

Website: www.ims-ghaziabad.ac.in
INTRODUCTION

The General Agreement on Tariffs and Trade (typically abbreviated GATT) was
negotiated during the UN Conference on Trade and Employment and was the outcome of
the failure of negotiating governments to create the International Trade Organization
(ITO). After World War II, the allies, most notably the United States, wanted the major
nations, of the world to recover from the effect of the war as fast as possible. To ensure
this, the following three major steps were made, their main purpose being were to
liberalize international trade and payment.
• Plans for a cross national system-, and standard of payment were instituted. To ensure
the proper functioning of such a standard a financial organization was created,
called the International Monetary Fund, commonly abbreviated as the IMF.

• As a result of the War, European countries and Japan had their infrastructure
devastated. These countries were in desperate need of additional investments and
capital to rebuild their factories and production plants. To ensure the free flow of
capital, the International Bank for Reconstruction and Development (abbreviated
as IBRD, now called World Bank) was established.

• Free trade was to be overseen by the International Trade Organization, abbreviated as 
ITO, which was also born during this time.

The General Agreement on Trade and Tariffs (abbreviated as GATT) as drawn up and
agreed to during an international  conference at Geneva, Switzerland, which was held in
1947. GATT served as the draft charter for the ITO. The US started negotiations with 22
countries, resulting in the by these countries to the regulation of  45,000 tariff rates.
GATT was officially launched on January 1, 1948, by the signature of 23 contracting
parties. The United States Congress, however, in 1950 did not ratify GATT, which was to
establish the ITO

Major GATT Provisions

Tariffs

All signing parties of GATT were obligated to utilize a non-discriminatory, most favored
nation treatment (MFN) to all other contracting parties regarding tariffs.

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Exceptions
• Existing tariffs. One example for this was between those of the British Commonwealth
(these were nations formerly under colonialist rule).

• In the event of a threat of serious damage to domestic producers of a GATT country,

GATT provided an escape clause to that contracting party.

Quantitative Restrictions

GATT generally prohibits quantitative import and export restrictions.

Exceptions
• Agriculture - when a government needs to remove surplus of agricultural-, and
fisheries products. An example for this is the US.

• Balance of payments – ensuring the balance of payments. Important when the foreign
exchange reserve of a country is low.

• Developing countries – LDCs are allowed the use of import quotas to protect and
develop their infant industries.

• National Security – Certain export products need strategic controls.

• Patents, Copyrights, Public Morals.

Special Provisions to enhance the development of the Trade of Developing Countries

As of 1965, the contracting parties added Part IV (Trade and Development) to the
Agreement.
• GATT gives high priority to reduction/elimination of tariffs on products of LDCs.

• To refrain from introducing tariffs and NTBs to such imports.

• To refrain from imposing internal taxes to discourage consumption of primary products

from LDCs.

• Not expecting reciprocal commitments from LDCs.

Other Provisions

• Provisions eliminating concealed protection such as customs valuation. For Example,

American Selling Price valuation. By ASP, and ad valorem tariff is imposed on
the domestic price.

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• Procedure issues: each member is entitled to a single vote, decisions are made by
majority vote (over 50% wins). 2/3 (75%) majority is required to waive
obligations. Settlements of disputes.

Over 100 countries are now GATT contractors. These countries are responsible for about
95-90% of world trade.

Accomplishments of GATT

• No major, worldwide wars have been incured since 1948 (Choi: Increased trade
promotes world peace, as members are financially interested in peace).
Establishment of the World Trade Organization (WTO) at the Uruguay  Round.
GATT held a total of 8 rounds,

Annecy Round - 1949

The second round took place in 1949 in Annecy, France. 13 countries took part in the
round. The main focus of the talks was more tariff reductions, around 5000 in total.

Torquay Round - 1951

The third round occurred in Torquay, England in 1950. Thirty-eight countries took part in
the round. 8,700 tariff concessions were made totaling the remaining amount of tariffs to
¾ of the tariffs which were in effect in 1948. The contemporaneous rejection by the U.S.
of the Havana Charter signified the establishment of the GATT as a governing world
body.

Geneva Round - 1955-1956

The fourth round returned to Geneva in 1955 and lasted until May 1956. Twenty-six
countries took part in the round. $2.5 billion in tariffs were eliminated or reduced.

Dillon Round - 1960-1962

The fifth round occurred once more in Geneva and lasted from 1960-1962. The talks
were named after U.S. Treasury Secretary and former Under Secretary of State, Douglas
Dillon, who first proposed the talks. Twenty-six countries took part in the round. Along
with reducing over $4.9 billion in tariffs, it also yielded discussion relating to the creation
of the European Economic Community (EEC).

Kennedy Round - 1964-1967

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Kennedy Round took place from 1964-1967.

Tokyo Round - 1973-1979

Reduced tariffs and established new regulations aimed at controlling the proliferation of
non-tariff barriers and voluntary export restrictions. 102 countries took part in the round.
Concessions were made on $190 billion worth.

Uruguay Round - 1986-1994

The Uruguay Round began in 1986. It was the most ambitious round to date, hoping to
expand the competence of the GATT to important new areas such as services, capital,
intellectual property, textiles, and agriculture. 123 countries took part in the round.

Agriculture was essentially exempted from previous agreements as it was given special
status in the areas of import quotas and export subsidies, with only mild caveats.
However, by the time of the Uruguay round, many countries considered the exception of
agriculture to be sufficiently glaring that they refused to sign a new deal without some
movement on agricultural products. These fourteen countries came to be known as the
"Cairns Group", and included mostly small and medium sized agricultural exporters such
as Australia, Brazil, Canada, Indonesia, and New Zealand.
The Agreement on Agriculture of the Uruguay Round continues to be the most
substantial trade liberalization agreement in agricultural products in the history of trade
negotiations. The goals of the agreement were to improve market access for agricultural
products, reduce domestic support of agriculture in the form of price-distorting subsidies
and quotas, eliminate over time export subsidies on agricultural products and to
harmonize to the extent possible sanitary and phytosanitary measures between member
countries.
Problems with GATT

• GATT has failed in significantly liberalizing trade of agricultural products. This was
one of the major goals at the Uruguay Round.

• It has been partially successful in the regulation of trade practices adopted by member
countries in response to BP difficulties. For example, the United States in 1971
imposed a 10% additional charge on its imports, thereby doubling its average
duties.

• Steady erosion of the MFN principle by the EC. Article 24 permits member countries
to form a CU or a FTA. The EC adopted VILs to keep out agricultural products,
lowered duties to many African and Mediterranean countries, which are not

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 extended to other GATT contracting parties.

• GATT condoned managed trade for textiles, largely due to US pressure, and
automobiles (VERs).

• GATT is an executive agreement under the Protocol of Provisional Application. What

this means is that the contracting parties are not obligated to abide by those rules
that were inconsistent with their domestic laws at the time of entry of the
contracting party into GATT. Many countries bypass or sidestep rules and
provisions by deliberately narrowly defining commodities because of tariff
purposes.