General Agreement On Tariffs And Trade

(GATT)
CATHERINE N. M
CONTENT
Introduction
Formation of GATT
Provision
GATT Activities
GATT History
GATT Achievements
 Benefits
Failures
Conclusion
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Introduction
What Is the General Agreement on Tariffs and Trade (GATT)?
• GATT was a legal agreement for minimizing barriers to international
trade by eliminating or reducing, tariffs quotas and subsidies while
preserving significant trade regulations.
• The purpose of GATT was to eliminate harmful trade protectionism that
had sent global trade down 65 percent during the Great Depression
• It was also intended to boost economic recovery after World War II
through reconstructing and liberalizing global trade
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Formation
• GATT was formed October 30, 1947 in Geneva, with a treaty signed by
23 member countries,
• The GATT went into effect on January 1, 1948
• It held eight rounds in total from 1947 to September 1986, each with
significant achievements and outcomes.
• In 1995 the GATT was absorbed into the World Trade Organization
(WTO), which extended it
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Formation..
Member Countries
The original 23 GATT members were Australia; Belgium; Brazil; Burma, now
called Myanmar; Canada; Ceylon, now Sri Lanka; Chile; China; Cuba;
Czechoslovakia, now Czech Republic and Slovakia; France; India; Lebanon;
Luxembourg; Netherlands; New Zealand; Norway; Pakistan; Southern
Rhodesia, now Zimbabwe; Syria; South Africa; the United Kingdom and the
United States. The membership increased to more than 100 countries by
1993.
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Provision/Necessities
GATT had three main provisions.
i. Each member must confer most favored nation status to every other
member, equal treatment of members on tariffs.
ii. GATT prohibited restriction on the number of imports and exports,
exceptions were:
• When a government had a surplus of agricultural products.
• If a country needed to protect its balance of payments
• Emerging market countries that needed to protect fledgling industries.
• On reasons of national security eg. protecting patents, copyrights etc.
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Provision/Necessities…
iii. Developed countries to eliminate tariffs on imports of developing
countries to boost their economies, this was added in 1965, because
more developing countries joined GATT.
• It was also in the stronger countries' best interests in the long run.
• It would increase the number of middle-class consumers throughout the
world.
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Activities of GATT
• To form rules to end or restrict the most costly and undesirable features
of the pre-war protectionist period, i.e trade barriers such as trade
controls and quotas.
• To Provided a system to settle commercial disputes between member
nations.
• Provide framework to enabled a number of multilateral negotiations for the
reduction of tariff barriers.
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History
The GATT held eight rounds of meetings and each of them had significant
achievements and outcomes.
• The first meeting was in Geneva, Switzerland, and included 23 countries
with the focus on tariffs. They established tax concessions touching
over US$10 billion of trade around the globe.
• The second series of meetings began in April 1949 held in Annecy,
France with tariffs as the primary topic, 13 countries attended and
accomplished an additional 5,000 tax concessions reducing tariffs.
• Another meeting occurred in Torquay, England with 38 countries
involved, and almost 9,000 tariff concessions passed, reducing tax levels
by as much as 25%.
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History..
• In 1956 the fourth meeting was held along with 25 countries and Japan Joined
this time. The meeting was in Geneva, Switzerland, and again the committee
reduced worldwide tariffs, this time by US$2.5 billion.
• In 1964 the GATT began to work toward curbing destructive pricing policies i.e
dumping. The countries have continued to attack global issues, including
addressing agriculture disputes and working to protect intellectual property
• This series of meetings continued and average tariff rate fell from around 22%,
in 1947, to around 5% by the end of the Uruguay Round, concluded in 1993.
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Achievements
• Trade without discrimination.
• Equal treatment of very signatory member of GATT.
• When a Country had negotiated a tariff cut with some other countries, this
same cut would automatically apply to all GATT signatories.
• Allowance for escape clauses, whereby countries could negotiate
exceptions if their domestic producers would be particularly harmed by
tariff cuts.
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Achievements…
• The average tariff rate fell from around 22% when GATT was first signed in
Geneva in 1947, to around 5% by the end of the Uruguay Round (concluded
1993).
• The Uruguay Round also negotiated the creation of the WTO, a formal
organization that has absorbed and extended GATT.
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 Benefits of GATT to International Trade

• Reduced tariffs, this boosted world trade by 8 percent a year during the 1950s and
1960s. Trade grew from $332 billion in 1970 to $3.7 trillion in 1993.
• Its success attracted more countries to join GATT since by 1995 there were 128
members, generating at least 80 percent of world trade.
• GATT promoted world peace.
• By showing how free trade works, GATT inspired other trade agreements.
• GATT improved communication, It provided incentives for countries to learn English,
the language of the world's largest consumer market
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GATT Failures
• Low tariffs destroyed some domestic industries, contributing to high
unemployment in those sectors.
• GATT did not address the trade of services
• GATT reduced the rights of a nation to rule its own people. The
agreement required them to change domestic laws to gain the trade
benefits. For example, India had allowed companies to create generic
versions of drugs without paying a license fee.
• Destabilized small, traditional economies.
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Conclusion
• A new set of negotiations was initiated at a conference in Uruguay in 1986
which focused on other impediments to international transactions, such as
those affecting trade in services or intellectual property.
• It led to the replacement of GATT by the WTO in 1995, whereas GATT
focused almost exclusively on goods (though much of agriculture and textiles
were excluded), WTO encompassed all goods, services, and intellectual
property, as well as some investment policies.
• The combined share of international trade GATT members came to exceed 80
percent of the global total