What is General Agreement on Tariffs and Trade (GATT)?

International

What is General Agreement on Tariffs and Trade (GATT)?

17 Jul 2023 Zinkpot 152

General Agreement on Tariffs and Trade (GATT) was an international trade agreement signed in 1947, the purpose of which was to liberate trade by reducing tariffs and reducing quotas among member countries.
It was created to establish regulations to remove the costly and inefficient characteristics of the pre-war protectionist period like trade quotas and controls. 23 nations were its signatories and it came into effect on January 1, 1948.
GATT was intended to boost the economic recovery after the disastrous World War 2 by reconstructing global trade.
The member nations had to remove all the trade discriminations. The seven rounds of negotiations from 1947 to 1993 reduced the average tariffs on industrial goods from 40% to 5%.
GATT was replaced by WTO in 1995. It remained in effect until the signature by 123 nations in Marrakesh on April 14, 1994, of the Uruguay Round Agreements, which established the World Trade Organization (WTO) on January 1, 1995. There were many reasons for this replacement:
1. GATT was an ad hoc provisional agreement. On the other hand, WTO has goals and existence that are full and permanent.
2. GATT used to deal with trade in goods but the WTO also deals with intellectual property and covers services at the same time.
3. The dispute settlement of WTO is faster in comparison to GATT. Moreover, its rulings cannot be blocked.
4. WTO has a strong legal basis as its agreements are permanent and all the member countries have approved it in their Parliaments which wasn’t the case under GATT.
5. WTO is far better than GATT in comparison. GATT lacked a proper institutional structure whereas WTO provides a more institutional framework for implementing its principles.
6. There has been a rapid proliferation of bilateral and regional free-trade agreements around the world, raising concerns for GATT.