General Agreement on Tariffs and Trade

The GATT was established to set out regulations to eliminate or limit the most
costly and inefficient characteristics of the pre-war protectionist period, notably
quantitative trade barriers like trade restrictions and quotas. The agreement
also established a mechanism for resolving international commercial disputes,
as well as a framework for multilateral tariff reduction discussions. In the post-
war years, the GATT was seen as a great success. Trade without discrimination
was one of the GATT’s major accomplishments. Every GATT signatory was to be
treated on an equal footing with the others.

The ‘most-favoured-nation’ concept, as it is known, has been carried over into

the WTO. As a result, once a nation had negotiated a tariff reduction with a few
other countries (generally its most significant trade partners), the same
reduction would be applied to all GATT members. There were escape provisions
in place, allowing nations to negotiate exclusions if tariff reduction would
disproportionately hurt domestic producers. When it came to determining
tariffs, most countries used the most-favoured-nation approach, which virtually
supplanted quotas. Other broad requirements were consistent customs laws and
each signatory nation’s commitment to negotiate tariff reductions upon
another’s request. Contracting nations might change agreements if their local
producers incurred disproportionate losses as a result of trade concessions,
according to an escape clause.

History behind the General Agreement on Tariffs and

Trade
The GATT’s main focus was on resolving individual trade concerns affecting
specific commodities or trading states, although large multilateral trade
conferences were conducted on a regular basis to hammer out tariff reductions
and other issues. From 1947 to 1993, seven such “rounds” were held, beginning
with those in Geneva in 1947 (concurrent with the signing of the general
agreement), Annecy, France, in 1949, Torquay, England, in 1951, and Geneva
in 1956 and again in 1960–62. The Kennedy Round (1964–67), the Tokyo
Round (1973–79), and the Uruguay Round (1986–94) were the most important
rounds, all held in Geneva. These agreements were successful in lowering
average tariffs on industrial goods throughout the world from 40% of their
market value in 1947 to less than 5% in 1993.

The Uruguay Round was the most comprehensive collection of trade

liberalization accords ever negotiated by the GATT. At the end of the round, a
global trade deal was signed that dropped tariffs on industrial products by an
average of 40%, decreased agricultural subsidies, and contained ground-
breaking new accords on services trade. The agreement also established the
World Trade Organization (WTO) as a new and stronger global organization
tasked with monitoring and regulating international trade. With the completion
of the Uruguay Round on April 15, 1994, GATT ceased to function. The WTO
established its principles and the numerous trade agreements achieved under
its auspices.

The 550-page “Final Act Embodying the Results of the Uruguay Round of
Multilateral Trade Discussions,” signed by ministers in Marrakesh on April 15,
1994, comprised of legal provisions outlining the results of the negotiations
since the Round began in Punta del Este, Uruguay, in September 1986. The
Final Act also included texts of ministerial decisions and declarations that
explained important terms of the agreements. With two notable exceptions, the
final act covered all of the bargaining topics mentioned in the Punta del Este
Declaration. The first was the outcome of “market access discussions,” in which
individual nations had made legally enforceable pledges to decrease or abolish
certain tariffs and non-tariff trade obstacles. National schedules, which were an
important element of the Final Act, were used to record these concessions. The
second was the “first pledges” on service trade liberalisation. These
liberalisation pledges were also included in national schedules.

Uruguay Round Protocol (GATT 1994)

The outcomes of market access talks in which countries agreed to abolish or
lower tariff rates and non-tariff barriers to goods trade are documented in
national schedules of concessions appended to the Uruguay Round
Protocol, which is an important element of the Final Act. On the day that the
Agreement establishing the WTO entered into effect for a Member, the schedule
appended to the Protocol dealing with that member became a Schedule to the
GATT 1994 relating to that member. The Protocol has five appendices:

1. Appendix I Section A: Agricultural Products: Tariff concessions on a

Most-Favoured Nation basis;
Appendix I Section B: Agricultural Products: Tariff Quotas;

2. Appendix II: Tariff Concessions on a Most-Favoured Nation Basis on

Other Products;
3. Appendix III: Preferential Tariff: Part II of Schedules (if applicable);
 4. Appendix IV: Concessions on Non-Tariff Measures: Part III of
Schedules;
5. Appendix V: Agriculture Products: Commitments Limiting
Subsidisation: Part IV of Schedules,

1. Section I: Domestic Support: Total AMS Commitments,

2. Section II: Export Subsidies: Budgetary Outlay and Quantity, Reduction
Commitments
3. Section III: Commitments Limiting the Scope of Export Subsidies.
Except as otherwise indicated in a Member’s Schedule, the tariff reduction
agreed upon by each member for non-agricultural items shall be implemented
in five equal rate reductions. The first such decrease will take effect on the day
the World Trade Organization (WTO) Agreement enters into force. Each
succeeding decrease will take effect on January 1 of the following year, with the
final rate taking effect no later than four years after the WTO Agreement enters
into force. Participants may, however, implement a reduction in fewer phases or
at earlier dates than those specified in the Protocol.

The staging of reductions for agricultural goods, as stipulated in Article 2 of

the Agreement on Agriculture, was to be carried out as was indicated in the
relevant portions of the schedules. A related decision on Least-Developed
Country measures specified, among other things, that these countries would not
be obliged to make any obligations or concessions that are incompatible with
their unique development, financial, and trade needs. It also permitted them to
complete their schedules of concessions and promises under Market Access and
Services by April 1995 rather than 15 December 1993, in addition to other more
specific provisions for flexible and favourable treatment.

Agreements that were responsible for the formation of the

World Trade Organization
The World Trade Organization (WTO) accord asks for a unified institutional
framework that includes the GATT, as amended by the Uruguay Round, all
agreements negotiated under its auspices, and the Uruguay Round’s entire
outcomes. A ministerial conference meets at least once every two years to lead
the organization. On a regular basis, a General Council monitors the
agreement’s operation and ministerial decisions. This General Council serves as
a Dispute Settlement Body and a Trade Policy Review Mechanism and has
developed subsidiary bodies such as a Goods Council, a Services Council, and
a TRIPs Council to deal with the complete spectrum of trade concerns covered
by the WTO.
What led to replacement of GATT with WTO?

1. GATT indicates an international multilateral agreement, approved by

23 countries to promote global exchange and annihilate cross-country
exchange obstacles. In reality, WTO is an international organization,
which replaced GATT and manages the guidelines of global exchange
between parts countries.
2. While GATT is a basic understanding, there is no institutional presence,
yet has a little secretariat. Then again, WTO is a long-lasting
foundation alongside a secretariat. GATT was only a multilateral
agreement consisting of a set of rules and regulations. The institutional
structure was missing.
3. GATT does not deal with trade in services and intellectual property
rights (IPR).
4. GATT does not have a robust Dispute Settlement mechanism. The
question settlement arrangement of GATT was slower, less
programmed, and powerless to tie-ups. In contrast to the WTO, whose
question settlement framework is exceptionally successful.
5. GATT was less representative in nature as it had no members from
newly independent countries or other socialist nations. Hence, it was
sometimes seen as promoting the interests of the West.
6. GATT responsibilities are momentary, and following 47 years the public
administration can settle on a decision to regard it as an exceptionally
durable responsibility or not. Then again, WTO commitments and
obligations are durable, since the absolute starting point.
7. The importance of WTO is more comprehensive than that of WTO as
the principles of GATT are involved just when the business is made in
commodities. Rather than, WTO whose regulations are appropriate to
administrations and parts of shielded innovation alongside the
developments.
8. GATT arrangement is multilateral, yet the plurilateral arrangement is
added to it later. It has failed to curb several restrictions on trade.
Conversely, WTO arrangements are simply multilateral and help in
curbing trade restrictions.
9. The enactment is permitted to proceed in GATT, while the equivalent is
beyond the domain of possibilities on account of WTO.