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General Agreement on Tariffs and Trade

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General Agreement on Tariffs and Trade (typically abbreviated GATT) was created by the Bretton Woods Conference and is generally considered the precursor to the World Trade Organization. The GATT was part of a larger plan for economic recovery after World War II which included a reduction in tariffs and other international trade barriers.

On January 1, 1948 the agreement was signed by 23 countries: Australia, Belgium, Brazil, Burma, Canada, Ceylon, Chile, China, Cuba, the Czechoslovak Republic, France, India, Lebanon, Luxembourg, Netherlands, New Zealand, Norway, Pakistan, Southern Rhodesia, Syria, South Africa, the United Kingdom, and the United States.

This first version, developed in 1947 during the United Nations Conference on Trade and Employment in Havana, Cuba, is referred to as "GATT 1947". In 1994, GATT was updated ("GATT 1994") to include new obligations upon its signatories. One of the most significant changes was the creation of the World Trade Organization (WTO). The 75 existing GATT members and the European Communities became the founding members of the WTO on January 1, 1995. The other 52 GATT members rejoined the WTO in the following two years (the last being Congo in 1997). Following the founding of the WTO, 21 new non-GATT members have joined and 28 are currently negotiating membership. Of the original GATT members, only the SFR Yugoslavia has not rejoined. Since FR Yugoslavia, (renamed to Serbia and Montenegro and with membership negotiations later split in two), is not recognized as a direct SFRY successor state; therefore, its application is considered a new (non-GATT) one. The contracting parties who founded the WTO ended official agreement of the "GATT 1947" terms on Decemeber 31, 1995.

The GATT, as an international agreement, is similar to a treaty; under United States law it is classifed as a congressional-executive agreement. The agreement is based on the "unconditional most favored nation principle." This means that the conditions applied to the most favored trading nation (i.e. the one with the least restrictions) apply to all trading nations.

Historical roots of GATT and the failure of the ITO

While the United States has always participated in international trade, it did not take a leading role in global trade policy making until the Great Depression. One reason for this is that under the US Constitution the Congress has responsibility for promoting and regulating commerce, while the executive branch has responsibility for foreign policy. Therefore, trade policy became a tug-of-war between Congress and The Executive Branch in deciding the mix of trade promotion and protectionism. However, the United States began to experiment with the Reciprocal Trade Agreements Act of 1934 and in the hopes of expanding employment, Congress agreed to permit the executive branch to negotiate bilateral trade agreements.

During the 1930s, the amount of bilateral negotiation under this act was fairly limited, and consequently did little to expand global. Near the end of the Second World War U.S. policy makers began to experiment on a broader level. In the 1940s, working with the British government, the United States developed two innovations to expand and govern trade among nations; the General Agreement on Tariffs and Trade (GATT) and the International Trade Organization (ITO). GATT was a temporary multilateral agreement designed to provide a framework of rules and a forum to negotiate trade barrier reductions among nations. Based on the Reciprocal Trade Agreements Act it allowed the executive branch negotiating power over trade agreements with temporary authority from Congress. At the time it functioned as a provisional, but promising trade system.

How GATT and WTO differ

Whereas GATT was a set of rules agreed upon by nations, the WTO was an institutional body. The WTO expanded its scope from traded goods to trade within the service sector and Intellectual Property Rights. Although it was designed to serve multilateral agreements, during several "Rounds" of GATT negotiations (particularly the Tokyo Round) plurilateral agreements created selective trading and caused fragmentation among members. WTO arrangements are generally a multilateral agreement settlement mechanism of GATT.[1]

"Rounds" of GATT trade negotiations

GATT signatories occasionally negotiated new trade agreements that all countries would enter into. Each set of agreements was called a "round". In general, each agreement bound members to reduce certain tariffs. Usually this would include many special-case treatments of individual products and with exceptions or modifications for each country.

  1. Geneva Round (1948): 23 countries. GATT enters into force.
  2. Annecy Round (1949): 13 countries.
  3. Torquay Round (1951): 38 countries.
  4. Geneva Fourth Round (1956): 26 countries. Tariff reductions. Strategy set for future GATT policy toward developing countries, improving their positions as treaty participants.
  5. Dillon Round (1962): 26 countries. Tariff reductions. Named after C. Douglas Dillon, then U.S. Undersecretary of State.
  6. Kennedy Round (1967): 62 countries. Tariff reductions. This was an across-the-board reduction rather than a product-by-product specification, for the first time. Anti-dumping agreement (which, in the United States, was rejected by Congress).
  7. Tokyo Round (1979): 102 countries. Reduced non-tariff trade barriers. Also reduced tariffs on manufactured goods. Improvement and extension of GATT system.
  8. Uruguay Round (1986): 125 countries. Created the World Trade Organization to replace the GATT treaty. Reduced tariffs and export subsidies, reduced other import limits and quotas over the next 20 years, agreement to enforce patents, trademarks, and copyrights (TRIPS), extending international trade law to the service sector (GATS) and open up foreign investment. It also made major changes in the dispute settlement mechanism of GATT.
  9. Doha Round: see [[[WTO]].

See also

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