DR.

SHAKUNTALA MISHRA
NATIONAL REHABILITATION
UNIVERSITY

CLASS-B.COM LL.B.(HONS.)
SEMESTER-7th
SUBJECT- INTERNATIONAL TRADE
LAW
SUBMITTED TO- SHAMBHAVI MA’AM
SUBMITTED BY-DIVYA SRIVASTAVA
 ACKNOWLEDGEMENT

I pay my deep sense of gratitude to my teacher for encouraging me to

the highest peak and for providing me the opportunity to prepare this
assignment on “Recognition of a State”. I am immensely obliged to my
friends for their elevating inspiration, encouraging guidance and kind
supervision in the completion of my assignment.

Working on this assignment was a source of immense knowledge to

me. I acknowledge with deep sense of gratitude, the encouragement
and inspiration received from my faculty members and colleagues. I
would also like to thank my parents for their love and support. I feel to
acknowledge my indebtedness and deep sense of gratitude to my guide,
my teacher, Shambhavi Ma’am whose valuable guidance and kind
supervision given to me throughout the course.
 TOPIC

THE GENERAL AGREEMENT

ON TARIFFS AND TRADE

(GATT)
 CONTENTS

➢ Introduction
➢ History of GATT
➢ Objectives of GATT
➢ Functions of GATT
➢ Principles of GATT
➢ The GATT Conferences
➢ GATT and the World Trade Organization
➢ Conclusion
➢ Bibliography
 INTRODUCTION

The General Agreement on Tariffs and Trade (GATT) is a

multilateral trade treaty among countries to regulate international
trade and tariffs in accordance with specific rules, norms or code of
conduct. The world witnessed a regime of rigorous and extensive
trade barriers during 1930’s and the period of Second World War.
The United States and its allies in Western Europe thought of creating
conditions for liberal trade after the War.
There was a proposal to create International Trade Organisation (ITO)
to secure a reduction in tariffs and barriers to trade. At the UN
Conference on Trade and Employment held in Havana in 1948, 53
countries adopted a Charter to create ITO. But the Havana Charter
could not be ratified by the US Congress and the proposal was
abandoned.

Simultaneously the negotiations were going on among 23 countries to

relax trade and tariff restrictions at Geneva in 1947. Apart from
agreeing upon certain trade concessions, these countries evolved a
multilateral treaty which incorporated in advance the commercial
policy clauses of the Havana Charter. This treaty was signed on
October 30, 1947 and became effective on 1st January 1948. This
treaty is known as the General Agreement on Tariffs and Trade
(GATT). Since 1947, there have been eight rounds of negotiations
among the member countries of the GATT for the promotion of free
trade. The Uruguay Round of GATT negotiations culminated in the
creation of World Trade Organisation (WTO) which came into
existence on January 1, 1995. It has now fully replaced GATT. The
GATT was created to form rules to end or restrict the most costly and
undesirable features of the pre-war protectionist period, namely
quantitative trade barriers such as trade controls and quotas. The
agreement also provided a system to arbitrate commercial disputes
among nations, and the framework enabled a number of multilateral
negotiations for the reduction of tariff barriers. The GATT was
regarded as a significant success in the post-war years.
One of the key achievements of the GATT was that of trade without
discrimination. Every signatory member of the GATT was to be treated
as equal to any other. This, is known as most favoured nation principle,
and it has been carried through into the WTO. A practical outcome of
this was that once a country had negotiated a tariff cut with some other
countries (usually its most important trading partners), this same cut
would automatically apply to all GATT signatories. Escape clauses did
exist, whereby countries could negotiate exceptions if their domestic
producers would be particularly harmed by tariff cuts. The General
Agreement on Tariffs and Trade, known as the GATT, is one-third of
the Bretton Woods system that was created after World War II to ensure
a stable trade and economic world environment.
 HISTORY OF GATT

After World War II, the United Kingdom (UK) and the United States
(US) submitted proposals to the Economic and Social Council
(ECOSOC) of the United Nations regarding the establishment of an
international trade body that was to be named the International Trade
Organization (ITO). That is, perhaps, why the GATT is often referred
to as a UN related body and its documents are sometimes mistakenly
referred to as UN documents. The GATT held eight rounds of meetings
between April 1947 and December 1993. Each of the conferences had
significant achievements and outcomes.

• The first meeting was in Geneva, Switzerland, and included 23

countries. The focus in this opening conference was on tariffs.
The members established tax concessions touching over US$10
billion of trade around the globe.
• The second series of meetings began in April 1949 and were held
in Annecy, France. Again, tariffs were the primary topic. Thirteen
countries were at the second meeting, and they accomplished an
additional 5,000 tax concessions reducing tariffs.
• Starting in September 1950 the third series of GATT meetings
occurred in Torquay, England. This time 38 countries were
involved, and almost 9,000 tariff concessions passed, reducing
tax levels by as much as 25%.
 • Japan became involved in the GATT for the first time in 1956 at
the fourth meeting along with 25 other countries. The meeting
was in Geneva, Switzerland, and again the committee reduced
worldwide tariffs, this time by US$2.5 billion.

This series of meetings and reduced tariffs would continue, adding new
GATT provisions in the process. The average tariff rate fell from
around 22%, when the GATT was first signed in Geneva in 1947, to
around 5% by the end of the Uruguay Round, concluded in 1993, which
also negotiated the creation of the WTO.

In 1964 the GATT began to work toward curbing predatory

pricing policies. These policies are known as dumping. As the years
have passed, the countries have continued to attack global issues,
including addressing agriculture disputes and working to
protect intellectual property.
 OBJECTIVES OF GATT

The framework of the principles of GATT specified the objectives of

the GATT:

i. To encourage full employment and large and steadily growing

volume of real income and effective demand;
ii. To ensure the full use of world resources;
iii. To bring about the expansion of world production and exchange;
iv. To bring about a steady improvement in the living standards of
people in member countries; and
v. To settle the disputes through consultation within the framework
of GATT.

For the achievement of these objectives, the preamble of the GATT

agreement requires the members to enter “into reciprocal and mutually
advantageous arrangement directed to the substantial reduction of
tariffs and other barriers to trade and the elimination of discriminating
treatment in international commerce.”
 FUNCTIONS OF GATT

In fulfilment of its objectives, GATT adopted certain measures:

1) Most Favoured Nation clause

The “Most favoured Nation clause is one of the significant provisions

adopted by GATT. Under the concept of Most Favoured Nation, all
contracting parties of the agreement would be treated as most favoured
nations. The principal objective is that the benefits extended to one
should also be extended to all contracting parties. There should be no
discrimination among nations. Trading should be carried on the
principle of non-discrimination and reciprocity. This clause
discouraged the member countries from granting any new trade
concessions unless those were mutually agreed upon. However, many
escape clauses were found. Under specific circumstances, less
developed countries were allowed to exercise the right to discriminate.
For example, dumping and export subsidy might be countered by trade
measures only against the offending country. Moreover, special
concessions were allowed for trade with former colonies of less
developed western countries.
2) Trade negotiations under GATT
From 1947 to 2001, GATT has organized 12 trade negotiations. The
following table shows various negotiations of GATT and WTO since
1947.
 3) Tariff and Non-tariff measures
Tariff measures
Tariffs were the important obstacle to international trade. Therefore,
GATT encouraged negotiations for the reduction of hig4 tariffs, the
participating countries agreed to cut tariff of thousands of industrial
products. Reduction of tariff was on reciprocal and mutually
advantageous basis. Article 11 of the GATT provided that all
concessions granted by contracting parties must be entered in a
schedule of concessions. Once a concession was included in the
schedule of concessions, it could not be withdrawn except under
specified circumstances.
Non-tariff measures
Post-World War II witnessed reduced distorting effects of non-trade
barriers world trade. The Tokyo Round held during 1973 — 1979
tackled the problems of non-tariff barriers under more effective
international discipline. All the agreements provide for special and
more favourable treatment for developing countries. The negotiations
led to the following non-tariff measures:

▪ restriction on use of subsidies.

▪ technical barriers.
▪ import licensing procedures.
▪ government procurement.
▪ custom valuation.
▪ permission of anti-dumping code.
 4) Settlement of disputes
GATT aimed at the smooth settlement of disputes among the
contracting parties. GATT allows the member countries to settle
problems among them by consulting one another on matters of trade.
Initially, the contracting parties should resolve the disputes by holding
talks on bilateral basis. In case of failure, the dispute may be referred
to panels of independent experts formed under GATT council. The
panel members are drawn from countries which have no direct interest
in the disputes. If the offending parties does not act upon the panel’s
decision, the aggrieved party is authorized to withdraw all concessions
offered to the offending party. Since the panel procedure ensures
mutually satisfactory settlement, members make increased use of the
panel.
 PRINCIPLES OF GATT

1. Most-Favoured-Nation (MFN) Treatment

This is the fundamental principle of the GATT and it is not a
coincidence that it appears in Article 1 of the GATT 1947. It states that
each contracting party to the GATT is required to provide to all other
contracting parties the same conditions of trade as the most favourable
terms it extends to any one of them, i.e., each contracting party is
required to treat all contracting parties in the same way that it treats its
“most-favoured nation”.

2. Reciprocity
GATT advocates the principles of “rights” and “obligations”. Each
contracting party has a right, access to markets of other trading partners
on a MFN basis but also an obligation to reciprocate with trade
concessions on a MFN basis. In a way, this is closely associated with
the MFN principle.

3. Transparency
Fundamental to a transparent system of trade is the need to harmonize
the system of import protection, so that barriers on trade can be reduced
through the process of negotiations. The GATT therefore, limited the
use of quotas, except in some specific sector such, as agriculture and
advocated import regimes that are based on “tariff-only”. In addition,
the GATT and now the WTO, required many notifications from
contracting parties on their agricultural and trade policies so that these
can be examined by other parties to ensure that they are GATT/WTO
compatible.

4. Tariff Binding and Reduction

When GATT was established, tariffs were the main form of trade
protection and negotiations in the early years focused primarily upon
tariff binding and reduction. The text of the 1947, GATT lays out the
obligations on the contracting parties in this regard.
 THE GATT CONFERENCES

Since 1947, there have been eight conferences or the ‘Rounds’ of

global trade negotiations under the GATT.

1)Geneva Conference

The First GATT Conference or round of negotiations was held at

Geneva in April 1947. This round of negotiations included 123 sets of
bilateral negotiations and the results of this conference included-
i) complete elimination of certain duties and preferences.
ii) scaling down of duty preferences.
iii) the binding of duties at the existing levels.
iv) the binding of duty-free treatment.

2)Annecy Conference

The Second GATT Conference was held in 1949 at Annecy (France).

By that time 10 more countries had joined the GATT raising the
number of contracting parties to 33. In this round of trade negotiations
147 sets of bilateral negotiations converting about 500 items were
completed.
3)Torquay Conference

The Third GATT Conference was held in 1950-51 at Torquay

(England). Six new countries had joined the agreement by then. This
meet could not make much headway. Out of about 400 bilateral trade
negotiations, only 147 could be completed. The United States did not
come forward with any more tariff concessions, as it insisted that it
had already done much.

4)Geneva Conference

The Fourth GATT Conference was held in 1955-56 at Geneva

(Switzerland). At this conference although the United States granted
concessions in respect of her imports to the tune of 900 million
dollars and secured concessions on exports amounting to 400 million
dollars, yet it was not a success. No country was satisfied and several
contracting parties had withdrawn from the negotiations.

5)Dillon Round or Conference

The Fifth GATT Conference was held in 1960-61 again at Geneva

and also known as Dillon Round. At this conference, the LDC’s
pointed out that the limit to which they could extend concessions on
the basis of the principle of reciprocity has been already crossed and
they were no more in a position to follow that principle. They also
pointed out that the developed countries had avoided negotiations on
products which were of vital interest to them (the LDC’s). The latter
wanted to have some unilateral tariff concessions from the developed
countries.

6)Kennedy Round

The Sixth GATT Conference (1963-67), known as the Kennedy

Round, was held at Geneva. 54 countries participated in this round of
trade negotiations. The results of Kennedy Round included the tariff
reduction by the advanced countries like the U.S.A, the EEC
countries, Japan and Canada on an average to the extent of 35 percent.
The incidence of tariff reduction was not uniform in case of different
groups of commodities. The maximum tariff cut had occurred in case
of chemicals, paper etc. and it was the smallest in case of such
products as fuels, iron and steel, textiles and tropical products. In
addition, the deliberations were held on non-tariff barriers, agriculture
and tariff reduction on the exportable products of the LDC’s.
No doubt, the Kennedy Round of the GATT negotiations could make
a significant contribution in effecting substantial tariff cuts, yet the
achievement was still short of objective. The non- tariff barriers could
not be dismantled. However, there was greater awareness among the
advanced countries about the trade needs of the LDC’s. On the whole,
the Kennedy Round registered a remarkable advance.
7)Tokyo Round

The Seventh GATT Conference known as the Tokyo Round (1973-

79) was held at Tokyo. This conference deliberated upon the issues
including tariff reduction, removal or reduction of non-tariff barriers,
coordinated scaling down of all trade barriers in selected sectors, trade
liberalization in agriculture, multilateral system of safeguards, the
tropical products and special interests of the LDC’s.

8)Uruguay Round

The Uruguay Round began in 1986. It was the most ambitious round
to date, as of 1986, 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. The Uruguay Round was also the first set of multilateral trade
negotiations in which developing countries had played an active role.
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.
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.
 GATT AND THE WORLD TRADE
ORGANIZATION

In 1993, the GATT was updated ('GATT 1994') to include new

obligations upon its signatories. One of the most significant changes
was the creation of the World Trade Organization (WTO). The 76
existing GATT members and the European Communities became the
founding members of the WTO on 1 January 1995. The other 51 GATT
members re-joined the WTO in the following two years (the last
being Congo in 1997). Since the founding of the WTO, 33 new non-
GATT members have joined and 22 are currently negotiating
membership. There are a total of 164 member countries in the WTO,
with Liberia and Afghanistan being the newest members as of 2018.
Of the original GATT members, Lebanon and the SFR
Yugoslavia have not re-joined the WTO. Since FR
Yugoslavia,(renamed as Serbia and Montenegro and with membership
negotiations later split in two), is not recognised as a direct SFRY
successor state; therefore, its application is considered a new (non-
GATT) one. The General Council of WTO, on 4 May 2010, agreed to
establish a working party to examine the request of Syria for WTO
membership. The contracting parties who founded the WTO ended
official agreement of the "GATT 1947" terms on 31 December
1995. Montenegro became a member in 2012, while Serbia is in the
decision stage of the negotiations and is expected to become a member
of the WTO in the future.

Whilst GATT was a set of rules agreed upon by nations, the WTO is
an intergovernmental organization with its own headquarters and staff,
and its scope includes both traded goods and trade within the service
sector and intellectual property rights. Although it was designed to
serve multilateral agreements, during several rounds of GATT
negotiations (particularly the Tokyo Round) plurilateral agreements
created selective trading and caused fragmentation among members.
WTO arrangements are generally a multilateral agreement settlement
mechanism of GATT.
 CONCLUSION

The GATT is also an international agreement. However, it establishes

a regulatory structure which is different from that established by other
international agreements of the community. It is also far from obvious
that the GATT is intended to protect individual’s rights. In light of the
difficulties that recent multilateral trade negotiating rounds have
encountered, trade officials, sometimes with nostalgia, reflect back on
the easier trade negotiations of the past. Yet, although the 1940s was a
golden age of international institution building, the negotiations that led
to the GATT were never easy. The path from James Meade's draft plan
for an “International Commercial Union” in 1942 to the Geneva
conference in 1947 was fraught with pitfalls, delays, and obstacles. The
ambitious plans for an International Trade Organization were
eventually abandoned. In its place remained a smaller and shorter
agreement on commercial policy that had many weaknesses. Yet the
GATT survived the test of time.
 BIBLIOGRAPHY

1. www.economicsdiscussion.net
2. www.investopedia.com
3. www.cdcc.nl
4. accountlearning.com