GATT AND WTO

What is the General Agreement On

Tariffs And Trade
• The General Agreement on Tariffs and Trade
(GATT) was created after World War II to aid
global economic recovery through
reconstructing and liberalizing global trade.
GATT's main objective was to reduce barriers
to international trade through the reduction
of tariffs, quotas and subsidies. It has since
been superseded by the creation of the World
Trade Organization (WTO).
BREAKING DOWN General Agreement
On Tariffs And Trade
• The General Agreement on Tariffs and Trade
(GATT) was formed in 1947 with a treaty signed
by 23 countries, and signed into international law
on January 1, 1948. GATT remained one of the
focal features of international trade agreements
until it was replaced by the creation of the World
Trade Organization on January 1, 1995. By this
time, 125 nations were signatories to its
agreements, which covered about 90% of global
trade.
• The aim behind GATT was 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 between
nations, and the framework enabled a number of
multilateral negotiations for the reduction of
tariff barriers. GATT was regarded as a significant
success in the post-war years
• Purpose
• The purpose of GATT was to eliminate harmful
trade protectionism. That had sent global
trade down 66% during the Great Depression .
4 GATT restored economic health to the world
after the devastation of the Depression and
World War II.
 Three Provisions

• GATT had three main provisions. The most

important requirement was that each
member must confer most favored nation
status to every other member. All members
must be treated equally when it comes to
tariffs. It excluded the special tariffs among
members of the British Commonwealth and
customs unions. It permitted tariffs if their
removal would cause serious injury to
domestic producers.
• Second, GATT prohibited restrictions on the number of
imports and exports . The exceptions were:
• When a government had a surplus of agricultural
products If a country needed to protect its balance of
payments because its foreign exchange reserves were
low Emerging market countries that needed to protect
fledgling industries In addition, countries could restrict
trade for reasons of national security. These included
protecting patents, copyrights, and public morals.
• The third provision was added in 1965,
addressing developing countries joining the
GATT. Developed countries agreed to
eliminate tariffs on imports from developing
countries to boost those economies. Lower
tariffs had benefits for developed countries, as
well. As the GATT increased middle-class
consumers throughout the world, there as an
increased demand for trade with developed
countries.
 What are the Important Salient
Features of the Uruguay Round?
• Agreement on Agriculture: The tariffs
resulting from transformation of non-tariff
barriers, as well as other tariffs on agricultural
products are to be reduced on an average by
36 per cent in the case of developed countries
over 6 years and 24 per cent in the case of
developing countries over 10 years period.
The least developed countries need not make
any commitment for reduction.
 Agreement on Trade in Textiles and
Clothing :

• This provide for phasing out the import quotas

on textiles and clothing in force under the
Multi-Fibre Arrangements since 1974, over a
span of 10 years, i.e., by the end of the
transition period on January 1, 2005
 Agreement on Market Access
• The member nations will cut tariff on
industrial and farm goods by an average of
about 37 per cent.
 Agreement on TRIMs :

• The agreement on Trade Related Investment Measures

(TRIMs) calls for introducing national treatment of foreign
investments and removal of quantitative restrictions. It
identifies 5 investment measures which are inconsistent
with the GATT provisions on according national treatment
and on general elimination of qualitative restrictions.
• These are measures which are imposed on the foreign
investors such as the obligation to use local inputs, to
produce for exports as a condition, to obtain imported
goods as inputs, to balance foreign exchange outgo on
importing inputs with foreign exchange earnings through
export, and not to export more than a specified proportion
of the local production.
 Agreements on TRIPs :

• Trade Related Intellectual Property Rights

(TRIPs) pertain to patents and copyrights.
Whereas earlier on-process patents were
granted to food, medicines, drugs and
chemical products, the TRIPs agreement now
provides for granting product patents also in
all these areas. Protection will be available for
20 years for patents and 50 years for
copyrights.
 Agreement on Services
• For the first time, trade in services like
banking, insurance, travel, maritime
transportation, mobility of labour, etc., has
been brought within the ambit of GATT. The
GATS (General Agreement on Trade in
Services) provides a multilateral framework on
principles and services which should govern
trade in services under conditions of
transparency and progressive liberalization.
• It spells out certain obligations like grant of
MFN status to the other member nations with
regard to trade in services, maintenance of
transparency and also a commitment for
liberalization in general terms.
 Disputes Settlement Body :

• Settlement of disputes under GATT was a never ending

process. There was ample scope for procedural delays,
objections could be raised at each stage of the dispute
settlement process, and penal reports could be
rejected by the offending party.
• The Disputes Settlement Body (DSB) set up under WTO
seeks to plug these loopholes and thus provides
security and predictability to the multilateral trading
system. It has now been mandatory to settle disputes
in 18 months and it will be final
 WTO Agreement on Agriculture India
• What is Agreement on Agriculture (AOA):
• The Agreement on Agriculture was formed on April
1994 at Marrakesh, Morocco as a part of the final Act
of the Uruguay Round of multilateral trade
negotiations which came into force on 1st Jan. 1995.
This was a result of the long drawn talks on General
agreement on Tariffs and Trade (GATT) aimed at
opening up of International markets and also to reform
world trade which was highly distorted. A major reason
for the formation of the Agreement on Agriculture was
the need to reduce excessive surplus production in
agricultural sector in the global commodity markets
during the 1980`s and early 1990`s.
• This was caused by the rising levels of support and
protection in a number of developed countries as some
of the largest agricultural exporters competed on the
basis of their government`s ability to subsidised
production and exports of agriculture while limiting
access to their markets to keep out foreign agricultural
products from their domestic markets. Therefore the
core objective of AOA was to establish a fair and
market oriented trading system which was to be
implemented for a period of 6 years in developed
countries and 9 years in developing countries. With
this, agriculture was brought under the new rules of
world trading system for the first time.
• There are 3 main features of the Agreement:
• 1. Market Access
• 2. Domestic support.
• 3. Export subsidy.
• The market access required that tariffs for
agricultural product fixed by individual countries
be reduce to equivalent tariff in order to allow
free trade and encourage liberalisation in world
trade. Under this, the AOA required the
conversion of all non tariff barriers into tariff
barriers. This process was known as Tariffication.
This was to be implemented for a period of 6
years for the developed countries and 10 years
for the developing countries, least developed
countries were exempted from undertaking such
reductions.
• Domestic support was targeted to reduce the
subsidies given by governments within their
country for agricultural production and related
activities. The total domestic support should
be below the level of de minimize within a
maximum period of 3 years for
developedcountries and 5 years for
developing countries. This was to reduce price
distortion and unfair competition in
agricultural world trade.
• Export subsidy aims to reduce subsidies of
export related to agricultural products and to
ban the introduction of new subsidies. This
aimed to protect small and marginal farmers
in home countries especially in developing
countries.
 Doha Declaration
• The Doha Declaration on the TRIPS
Agreement and Public Health was adopted by
the WTO Ministerial Conference of 2001 in
Doha on November 14, 2001. It reaffirmed
flexibility of TRIPS member states in
circumventing patent rights for better access
to essential medicines .
• In the Doha Declaration, governments agreed that:
• The TRIPS Agreement does not and should not prevent
Members from taking measures to protect public
health. Accordingly, while reiterating our commitment
to the TRIPS Agreement, we affirm that the Agreement
can and should be interpreted and implemented in a
manner supportive of WTO Members' right to protect
public health and, in particular, to promote access to
medicines for all. In this connection, we reaffirm the
right of WTO Members to use, to the full, the
provisions in the TRIPS Agreement, which provide
flexibility for this purpose.
• We recognize that WTO Members with insufficient or
no manufacturing capacities in the pharmaceutical
sector could face difficulties in making effective use of
compulsory licensing under the TRIPS Agreement. We
instruct the Council for TRIPS to find an expeditious
solution to this problem and to report to the General
Council before the end of 2002
• These provisions in the Declaration ensure that
governments may issue compulsory licenses on patents
for medicines, or take other steps to protect public
health.
 Current status

• In 2005, WTO members reached agreement

on an amendment to the TRIPS Agreement to
make permanent the temporary waiver
contained in the August 30 WTO Decision,
which itself fulfilled the requirement of
Paragraph 6 of the Doha Declaration on the
TRIPS Agreement and Public Health of
November 14, 2001.
• This decision created a mechanism to allow
WTO members to issue compulsory licences to
export generic versions of patented medicines
to countries with insufficient or no
manufacturing capacity in the pharmaceutical
sector.
• In 2008 a decision was made to extend the
deadline for accepting the TRIPS agreement
amendment. The deadline was extended until
31 December 2009 or "such later date as may
be decided by the Ministerial Conference."
The General Council further extended the
deadline in 2011 to 31 December 2013.