General Agreement on Tariffs and Trade

INTRODUCTION
GATT is the short form for General Agreement on Trade and Tariffs. It was Multilateral Agreement signed by 23 nations which laydown certain rules for conducting International Trade. It was established on 1st January 1948 .At this time it was considered as interim agreement to fill the gap of International Trade Organization(ITO). GATT was transformed into a WTO with effect from January 1995 .

OBJECTIVES
Its important objectives
1. Raising standard of living. 2. Ensuring full employment and a large and a steadily growing volume of real income and effective demand 3. Developing full use of the resources of the world. 4. Expansion of production and international trade.

Basic Principles of GATT:

1. The Most Favored Nation(MFN) clause:

It implies that any reduction in the import duties of a GATT member must be applied simultaneously and unconditionally to imports from all other GATT countries. It applies similarly to duties on exports. This rule basically requires non-discrimination in trade policies. 2. The use of tariffs :


Although GATT does not specially encourage protection through tariff it does permit the protection of domestic industries through import tariff.

The GATT contains a clause which stabilizes the tariff of member countries so as to prevent disturbance of trade flows by frequent change in import duties.

3. Tariff bargaining :
The principal supplier of a certain product should ask importing countries to reduce tariffs on that product. In return, those countries would expect counter offers, and negotiations would continue till satisfactory agreement was reached. The Kennedy Round negotiations witnessed the use of new technique linear bargaining.

4. Consultation:
A basic principle of GATT is that member-countries should consult one another on trade matters and problems. They can call on GATT for a fair settlement of cases in which they feel that their rights under the GATT are being withheld or compromised by other members.

5. Quantitative restrictions:
Quantitative restriction on trade, such as imports quotas and import licensing, are strictly forbidden by the GATT unless when they become necessary to reinforce domestic output restriction measures in agriculture and fisheries or to apply standards and other technical regulations.

FUNCTIONS OF GATT:
 NEGOTIATIONS UNDER GATT  SAFEGUARDS  TRADE NEGOTIATIONS AMONG DEVELOPING COUNTRIES

 THE URUGUAY ROUND:

Uruguay round is the name which the eight and the latest round of the multilateral trade negations (MTN) held under the auspices of GATT is popularly known as UR because it was launched in Uruguay in September 1986. It access for NAMA Products in the developed country Discussion taken place in following areas  Trade in services  TRIPS  TRIMS

Following the UR agreement GATT was converted from a provisional agreement into a formal international organization called WTO with effect from Jan 1 1995

GATT AND WTO:

Following the UR Agreement, GATT was converted from a provisional agreement into a formal international organization called World Trade Organization with the effect from January 1 1995. WTO now serves as a single institutional frame work encompassing GATT and all the results of the Uruguay Round.

The old GATT system allowed under what was known as the grandfather of clause, existing domestic legislation to continue even if it violated a GATT agreement that a member country had accepted by be in a signatory to GATT.

DIFFERENCE BETWEEN GATT AND WTO

GATT was adhoc and provisional. GATT had contracting parties. WTO and its agreements are permanent. WTO has members. WTO does not permit this.

GATT system allowed existing domestic legislation to continue even if it violated a GATT agreement. GATT was less powerful, dispute settlement system was slow and less efficient, its ruling could be easily block

WTO is more powerful than GATT, dispute settlement mechanism is faster and more efficient, very difficult to block the rulings.

CONCLUSION

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