Everything about The General Agreement On Tariffs And Trade totally explained
The
General Agreement on Tariffs and Trade (typically abbreviated
GATT) was the outcome of the failure of negotiating governments to create the
International Trade Organization (ITO). The
Bretton Woods Conference had 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. The GATT's main objective was the reduction of barriers to international
trade. This was achieved through the reduction of
tariff barriers,
quantitative restrictions and
subsidies on trade through a series of agreements. The GATT was a treaty, not an organization. The functions of the GATT were taken over by the
World Trade Organization which was established during the final round of negotiations in early 1990s.
The history of the GATT can be divided into three phases: the first, from 1947 until the
Torquay Round, largely concerned which commodities would be covered by the agreement and freezing existing tariff levels. A second phase, encompassing three rounds, from 1959 to 1979, focused on reducing tariffs. The third phase, consisting only of the
Uruguay Round from 1986 to 1994, extended the agreement fully to new areas such as
intellectual property,
services,
capital, and
agriculture. Out of this round the WTO was born.
GATT 1947
The precursor organization to the GATT, called the International Trade Organization (
ITO) was first proposed in
1947 during the
United Nations Conference on Trade and Employment. The negotiating countries of the
ITO began parallel negotiations for the GATT as a way to introduce early tariff cuts. Once the ITO failed to be implemented by the United States, the GATT was the only organization left. 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. 45,000 tariff concessions were made affecting over $10 billion in trade which comprised 20% of the total global market at the time.
GATT 1947 in the US
The GATT, as an international agreement, is a
treaty. Under
United States law it's classified as a
congressional-executive agreement. 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. The agreement is based on the "
unconditional most favored nation principle" This means that the conditions applied to the most favored trading nation (for example the one with the least restrictions) apply to all trading nations. In the US, there was large opposition against the International Trade Organization (which had been ratified in several countries), and thus President Truman never even submitted it to the Congress.
GATT 1949
The second round took place in 1949 in
Annecy, France. The main focus of the talks was more tariff reductions, around 5000 total.
GATT 1951
The third round occurred in
Torquay,
England in 1951. 8,700 tariff concessions were made totaling the remaining amount of tariffs to three-fourths of the tariffs which were in effect in 1948.
GATT 1955-1956
The fourth round returned to
Geneva in 1955 and lasted until May 1956. $2.5 billion in tariffs were eliminated or reduced.
GATT "Dillon" 1960-1962
The fifth round occurred once more in
Geneva and lasted from 1960 to 1962. The talks were named after U.S. Treasury Secretary and former Under Secretary of State,
Douglas Dillon, who first proposed the talks. Along with reducing over $4.9 billion in tariffs, it also yielded discussion relating to the creation of the
European Economic Community (
EEC).
GATT "Kennedy" 1964-1967
The sixth round was the last to take place in
Geneva from 1964 until 1967 and was named after the late
US President Kennedy in his memory. Concessions were made on $40 billion worth of tariffs. Some of the GATT negotiation rules were also more clearly defined.
GATT "Tokyo Round" 1973-1979
Reduced tariffs and established new regulations aimed at controlling the proliferation of non-tariff barriers and voluntary export restrictions. Concessions were made on $190 billion worth.
Uruguay Round 1986-1993
The
Uruguay Round began in 1986. It was the most ambitious round to date, hoping to expand the competence of the GATT to important new areas such as services, capital, intellectual property, textiles, and agriculture.
Agriculture was essentially exempted from previous agreements as it was given special status in the areas of import quotas and export subsidies, with only mild caveats. However, by the time of the Uruguay round, many countries considered the exception of agriculture to be sufficiently glaring that they refused to sign a new deal without some movement on agricultural products. These fourteen countries came to be known as the "
Cairns Group", and included mostly small and medium sized agricultural exporters such as
Australia,
Brazil,
Canada,
Indonesia, and
New Zealand.
The Agreement on Agriculture of the Uruguay Round continues to be the most substantial trade liberalization agreement in agricultural products in the history of trade negotiations. The goals of the agreement were to improve market access for agricultural products, reduce domestic support of agriculture in the form of price-distorting subsidies and quotas, eliminate over time export subsidies on agricultural products and to harmonize to the extent possible sanitary and phystosanitary measures between member countries.
GATT and the World Trade Organization
In
1993 the 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). Since the founding of the WTO, 21 new non-GATT members have joined and 29 are currently negotiating membership. As of October 2007, there were a total of 151 member countries in the WTO.
Of the original GATT members, only the
SFR Yugoslavia hasn't rejoined the WTO. Since
FR Yugoslavia, (renamed to
Serbia and Montenegro and with membership negotiations later split in two), isn't recognised 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
December 31,
1995.
Whereas GATT was a set of rules agreed upon by nations, the WTO is 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.
The debatable issue is recognition of human rights under GATT.
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, with exceptions or modifications for each country.
- Geneva Round (1947): 23 countries. GATT enters into force.
- Annecy Round (1949): 13 countries.
- Torquay Round (1950): 38 countries.
- Geneva Fourth Round (1956): 26 countries. Tariff reductions. Strategy set for future GATT policy toward developing countries, improving their positions as treaty participants.
- Dillon Round (1960-1961): 26 countries. Tariff reductions. Named after C. Douglas Dillon, then U.S. Undersecretary of State.
- Kennedy Round (1962-1967): 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).
- Tokyo Round (1973-1979): 102 countries. Reduced non-tariff trade barriers. Also reduced tariffs on manufactured goods. Improvement and extension of GATT system.
- Uruguay Round (1986-94): 123 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.
- Doha Round: see WTO.
Source: Jackson, John H.
The World Trading System Second Edition, page 74
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