General Agreement on Tariffs

and Trade

D. MAHESH - Assistant Professor - School of Management,

Karpagam University, Coimbatore
• The General Agreement on Tariffs and
Trade (GATT) was first signed in 1947.

• Was designed
– To provide an international forum
– That encouraged free trade between
member states
– By regulating and reducing tariffs on
traded goods
– Providing a common mechanism for
resolving trade disputes.

D. MAHESH - Assistant Professor - School of Management, Karpagam University.

 GATT ???
A Treaty, not an Organization

• Was the outcome of the failure of negotiating

governments to create the ITO
• The Bretton Woods Conference introduced the
idea for an organization to regulate trade as part
of a larger plan for economic recovery after World
War II
• As governments negotiated the ITO, 15
negotiating states began parallel negotiations for
the GATT as a way to attain early tariff reductions
• Once the ITO failed in 1950, only the GATT
agreement was left.
D. MAHESH - Assistant Professor - School of
Management, Karpagam University.
Objective
“Reduction
• The GATT's main objective was the
of Barriers to International Trade”

• This was achieved through the Reduction of

– Tariff barriers
– Quantitative Restrictions
– Subsidies on trade through a series of
agreements

D. MAHESH - Assistant Professor - School of

Management, Karpagam University.
History
• 3 Phases

– First Phase , from 1947 until the Torquay

Round

– A second phase, encompassing three

rounds, from 1959 to 1979

– The Third phase, consisting only of the

Uruguay Round from 1986 to 1994

D. MAHESH - Assistant Professor - School of

Management, Karpagam University.
 First Phase
• Commodities which would be covered by the
agreement and freezing existing tariff levels

Year Place/name Subjects covered

1947 Geneva Tariffs

1949 Annecy Tariffs

1951 Torquay Tariffs

D. MAHESH - Assistant Professor - School of

Management, Karpagam University.
Second Phase
• Focused on reducing tariffs

Year Place/name Subjects covered

1960-1961 Geneva Tariffs

Dillon Round
1964-1967 Geneva Tariffs and anti-dumping
Kennedy measures
Round
1973-1979 Geneva Tariffs, non-tariff
Tokyo Round measures, “framework”
agreements

D. MAHESH - Assistant Professor - School of

Management, Karpagam University.
Third Phase
Extended the agreement fully to new areas such as
intellectual property, services, capital, and agriculture.
Out of this round the WTO was born.

Year Place/name Subjects covered

1986-1994 Geneva Tariffs, non-tariff

Uruguay Round measures, rules,
services, intellectual
property, dispute
settlement, textiles,
agriculture, creation of
WTO, etc
D. MAHESH - Assistant Professor - School of
Management, Karpagam University.
 ROUNDS

NAME START DURAT COUN SUB. ACHIVEMENTS

ION TRIES COVERED
1.GENEVA APRIL 7 23 TARIFFS SIGNING OF GATT,
MONTHS 45,000 TARIFF
1947 CONCESSIONS
AFFECTING $10
BILLION OF
TRADE.

2. APRIL 5 13 TARIFFS COUNTRIES

ANNECY EXCHANGED SOME
1949 MONTHS
5000 TARIFF
CONCESSIONS.

D. MAHESH - Assistant Professor - School of

Management, Karpagam University.
 ROUNDS CONT…

NAME START DURATION COUN SUB. ACHEVEMENTS

TRIES COVERED
3. SEPT. 1950 8 MONTHS 38 TARIFFS COUNTRIES
TORQUAY EXCHANGED SOME
8700 TARIFF
CONCESSIONS,
CUTTING THE
TARIFFS BY 25%

4. GENEVA JAN. 1956 5 MONTHS 26 TARIFFS, $2.5 BILLION IN

II ADMISSION TARIFF REDUCTION
OF JAPAN

5. DILLON SEPT. 1960 11 MONTHS 26 TARIFFS TARIFF CONCESSION

WORTH $4.9 BILLION
OF WORLD TRADE.

D. MAHESH - Assistant Professor - School of

Management, Karpagam University.
 ROUNDS CONT…
NAME START DURATIO COUNT SUB. ACHIVEMENTS
N RIES COVERED
6. MAY 37 MONTHS 62 TARIFFS & TARIFF CONCESSION
KENNED 1964 ANTIDUMPIN WORTH $40 BILLION
Y G OF WORLD TRADE

7. SEPT. 74 MONTHS 102 TARIFF, NON TARIFF REDUCTION

TOKYO 1973 TARIFF WORTH $190 BILLION
MEASURES, ACHIEVED.
“FRAMEWORK

”
AGREEMENTS

8. SEPT. 87 MONTHS 123 TARIFFS,NON CREATION OF WTO, &

URUGUA 1986 TARIFFS,RULE EXTENDED THE RANGE OF
Y S, TRADE

SERVICES,IP, NEGOTIATION,LEADING
DISPUTE TO THE REDUCTION IN

SETTLEMENT, TARIFFS(ABOUT 40%).

D. MAHESH - Assistant Professor - School of
TEXTILES,AGR
Management, Karpagam University.
Did GATT succeed?

D. MAHESH - Assistant Professor - School of Management,

Karpagam University.
 Continual reductions in tariffs helped spur very
high rates of world trade growth during the
1950s and 1960s — around 8% a year on average

 Trade growth consistently out-paced

production growth

 The rush of new members during the Uruguay

Round demonstrated recognition of multilateral
trading system as the anchor for development and
an instrument of economic and trade reform.

D. MAHESH - Assistant Professor - School of

Management, Karpagam University.
 But…….

D. MAHESH - Assistant Professor - School of Management,

Karpagam University.
• GATT’s success in reducing tariffs to a low level, with a series
of economic recessions 1970-80’s drove governments to
devise other forms of protection for sectors facing increased
foreign competition

• High rates of unemployment and constant factory closures led

governments in Western Europe and North America to seek
bilateral market-sharing arrangements with competitors and
to embark on a subsidies race to maintain their holds on
agricultural trade

• Both these changes undermined GATT’s credibility and

effectiveness.

D. MAHESH - Assistant Professor - School of

Management, Karpagam University.
• The problem was not just a deteriorating trade policy
environment.
By the early 1980s the General Agreement was clearly no
longer as relevant to the realities of world trade as it had been
in the 1940s

• World trade had become far more complex and important than
40 years before
• The globalization of the world economy was underway
• Trade in services — not covered by GATT rules
• Ever increasing international investments

D. MAHESH - Assistant Professor - School of

Management, Karpagam University.
• Factors convinced GATT members that a new
effort to reinforce and extend the multilateral
system should be attempted.

That effort resulted in the Uruguay Round, the

Marrakesh Declaration, and the creation of the
WTO.

D. MAHESH - Assistant Professor - School of

Management, Karpagam University.
 Thank You

D. MAHESH - Assistant Professor - School of Management,

Karpagam University.