Introduction:
“The General Agreement on Tariffs and Trade (GATT), signed on Oct. 30, 1947, by 23 countries, was a legal agreement minimizing barriers to international trade by eliminating or reducing quotas, tariffs, and subsidies while preserving significant regulations.”[1] The GATT intended to boost the economic recovery after the Second World War by reconstructing and liberalizing the global trade.
“The GATT went into effect on Jan. 1, 1948”.[2] “Since that beginning, it has been refined, eventually leading to the creation of the World Trade Organization (WTO) on January 1, 1995, which absorbed and extended it.”[3] “By this time 125 nations were signatories to its agreements, which covered about 90% of global trade”.[4]
The Council for Trade in Goods (Goods Council) is accountable for GATT and consists of representatives from all the member countries of WTO. As of October 2020, the chairperson is the Swedish Ambassador Mr Mikael Anzén. “The council has 10 committees that address subjects including market access, agriculture, subsidies, and anti-dumping measures”.[5]
Objectives of GATT
The Common Tax and Trade Agreement was a multinational treaty that established the rules for international trade. The GATT layer can be linked to its objectives.
1. To improve the quality of life of the people,
2. Ensuring full employment and a large and continuous volume of real income and active demand.
3. Tap the full use of earth’s resources.
4. Increasing global production capacity and international trade.
Principles of GATT
In achieving the objectives outlined above, GATT has adopted the following principles.
- Non-discrimination,
- Price protection,
- A solid foundation for trade, too;
- Reasoning
1. Non-discrimination
International trade shouldn’t be done on the basis of discrimination. No member state will discriminate against GATT members in international trade. For this reason, the policy of the “Most Popular Nation” (MFN) was introduced. This means that “each nation will be treated fairly as the most favoured nation”. All contracting parties should consider others to be the most desirable when applying and regulating import and export taxes and expenses. As for size limits, it should be delivered without preference.
Exclusions from the principle of non-discrimination: However, certain variations in this basic rule must be allowed. There is no objection to the creation of free trade centres or custom unions. Such integration should facilitate consistent trade between the areas used. They should not raise barriers to trade in other parties. GATT allows its members to pursue anti-dumping and export-oriented measures. However, such measures should be used only in invading countries.
2. Tax protection Only
GATT rules restrict measurement limits. Domestic industries should only be protected by tax rates. Limits on trading should be limited to volatile prices.
The exception: The exception to this policy is given to countries that suffer from poor balance of payment status. Developing countries are no exception. Import restrictions may apply to agricultural and fishery products if its domestic production is subject to the same limited production.
3. A solid Foundation for Trade
GATT seeks to provide a stable and unpredictable trading platform. It binds negotiated price levels between contracting countries. Commitment commitments prevent the rise in joint prices; however, there is a condition for the re-negotiation of binding prices. Reimbursement for high prices is discouraged by the requirement that any increase is compensated.
4. Reasoning
Member countries should consult on trade issues and issues. Members who feel frustrated that their rights under GATT may be demanding compensation. Independent expert panels have been established under the auspices of the GATT council. Panel members are drawn from countries that have no direct interest in the disputes being investigated. They look at trade disputes between members. The panel process aims to live satisfactorily among members.
Achievements of GATT
One of the major achievements of the GATT was of trade without discrimination. Every single member of the GATT was treated equally to each other. This setup is known as the most favoured nation principle. An effective outcome of this principle was that whenever a country negotiated a tariff cut with some other country, this same cut would automatically apply to all the other member countries. Though escape clauses existed, and countries could negotiate exceptions if their domestic producers would be particularly harmed by tariff cuts.
Majority of the member countries adopted for the most – favoured nation principle in setting tariffs, which largely replaced quotas. Tariffs were steadily cut in negotiating rounds. The tariff rate was around 22% when GATT was first signed in Geneva in 1947. The Uruguay Round also negotiated the creation of the WTO, a formal organization that has absorbed and extended GATT.
History of GATT
The GATT hosted eight rounds of meetings between April 1947 and December 1993. Each conference was successful with significant results.
- “The first meeting was in Geneva, Switzerland, and included 23 countries. The focus in this opening conference was on tariffs. The members established tax concessions touching over US$10 billion of trade around the globe”.[6]
- “The second series of meetings began in April 1949 and were held in Annecy, France. Again, tariffs were the primary topic. Thirteen countries were at the second meeting, and they accomplished an additional 5,000 tax concessions reducing tariffs”.[7]
- “Starting in September 1950 the third series of GATT meetings occurred in Torquay, England. This time 38 countries were involved, and almost 9,000 tariff concessions passed, reducing tax levels by as much as 25%”.[8]
- “Japan became involved in the GATT for the first time in 1956 at the fourth meeting along with 25 other countries. The meeting was in Geneva, Switzerland, and again the committee reduced worldwide tariffs, this time by US$2.5 billion”.[9]
This series of meetings with reduced prices will continue, adding new GATT provisions to the process. The average tax rate dropped from about 22%, while the GATT was first signed in Geneva in 1947, to about 5% at the end of the Uruguay Round, which was held in 1993, which also negotiated the establishment of the WTO.
In 1964 the GATT began working to curb violent pricing policies. These policies are known as dumping. Over the years, countries have continued to attack global issues, including dealing with agricultural conflicts and working to protect intellectual property.
Conclusion
Because of the difficulties the recent trade negotiations have encountered, trade officials, sometimes enthusiastic, return to simple trade negotiations of the past. However, although the 1940s were a golden age for international institutional building, the negotiations that led to GATT were not easy. The road from James Meade’s draft “International Commercial Union” in 1942 to the 1947 conference in Geneva was fraught with pitfalls, delays, and obstacles. The International Trade Organization’s ambitious plans were eventually abandoned. It was replaced by a smaller and shorter agreement in a trade policy that had many weaknesses. However, GATT survived the time trial.
The delegates who were tasked with rebuilding the international trade system and payments were rare. It is not uncommon to see some major economic minds actively participating in international travel, and working in partnership with political parties to achieve the integration of international cooperation and the barrier to economic cohesion. It was at Henry Cabot Lodge where the phrase “the U.N. program was designed to avoid taking us to hell, but it will not take us to heaven” is said. The Bretton Woods and GATT facilities are designed as first steps.
The negotiation record adequately supports the view that GATT is the final product of transatlantic negotiations.
References:
[1] Library of Congress. “General Agreement on Tariffs and Trade,” https://www.loc.gov/law/help/us-treaties/bevans/m-ust000004-0639.pdf Pages 639–640. Accessed Nov. 5, 2020.
[2] Supra 1
[3] World Trade Organization. “The Uruguay Round.” https://www.wto.org/english/thewto_e/minist_e/min98_e/slide_e/ur.htm Accessed Nov. 5, 2020.
[4] Britannica. “General Agreement on Tariffs and Trade.” https://www.loc.gov/law/help/us-treaties/bevans/m-ust000004-0639.pdf Accessed Nov. 5 2020.
[5] World Trade Organization. “GATT and the Goods Council.” https://www.wto.org/english/tratop_e/gatt_e/gatt_e.htm Accessed Nov. 5, 2020.
[6] World Trade Organisation. “Fiftieth Anniversary of the Multilateral Trading System.” Accessed Nov. 5, 2020
[7] Supra 6
[8] Supra 6
[9] Supra 6
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