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General Agreement on Tariffs and Trade

General Agreement on Tariffs and Trade

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General Agreement on Tariffs and Trade

I INTRODUCTION

General Agreement on Tariffs and Trade (GATT), a treaty signed at the Geneva Trade Conference in 1947 by representatives of 23 non-Communist nations, including the United States. The major achievement of this agreement was the formation of an international forum dedicated to the expansion of multilateral trade and the conciliation and settlement of international trade disputes. This replaced the proposed formation of a United Nations (UN) International Trade Organization, which failed to arise due to Cold War tensions. Going into effect in January 1948, the treaty was accepted by an increasing number of nations. By 1988, 96 nations, representing a predominant share of world trade, adhered to GATT as full contracting parties, with others participating under various arrangements, including de facto treaty acceptance. GATT members have sponsored eight specially organized rounds of trade negotiations from 1947. The seventh conference, the Tokyo Round, was completed in 1979. The eighth round of trade negotiations, the Uruguay Round, began in late 1986 and was finally concluded three years late in 1994, with final agreements that included the supersession of GATT by the World Trade Organization (WTO).

General Agreement on Tariffs and Trade

II TRADE POLICIES

GATT members studied and proposed policies to minimize new and existing trade barriers, including reducing import tariffs and quotas and abolishing preferential trade agreements between member countries. Tariff concessions were negotiated on the principle of reciprocity. A concession made on an item applied to all contracting parties, though a country could request an escape clause in order to withdraw its original concession in case a tariff reduction causes serious injury to its domestic industry. A basic foundation of GATT was the principle of nondiscriminatory trade relations between member nations. Countries under GATT’s jurisdiction agreed to a policy of most-favored-nation status among members. These nations agreed to treat all other GATT members equally. All tariffs, whether or not determined by a concession, were included under this policy. GATT members, in theory, advocated the abolition of all nontariff barriers to trade. The first attempt to reduce such barriers was made during the Kennedy Round talks (1962-1967). Much emphasis was placed on further reducing these barriers during the Tokyo Round and the Uruguay Round.

III REVISIONS TO GATT

The first major revisions to the treaty were ratified in 1955. Member nations agreed on stronger provisions regarding the treatment of subsidies designed to reduce imports or increase exports. During the 1960s, GATT was revised to reflect the increased interest by developed countries in the trade problems of developing nations. On the basis of these reforms, developing countries were no longer bound by reciprocity to tariff concessions made by other contracting parties. The Uruguay Round of GATT produced the most far-reaching revision: the replacement of GATT by the WTO.

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IV GATT AND THE WTO

Though created to replace GATT, the WTO, in fact, incorporates the original treaty provisions and later amendments into its own organization in a revised and improved form called “GATT 1994”. The WTO extends the original GATT mandate into new areas, such as trade in services and intellectual property, and provides an international legal framework for enforcement of GATT provisions. Since the WTO administered the Final Act of the Uruguay Round, it effectively perpetuates the organization and decisions of GATT in a new and strengthened form. GATT itself was simply a provisional treaty serviced by an impromptu secretariat, but it has been effectively transformed into a full international organization with greatly enhanced powers.


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