GATT

Definition

The General Agreement on Tariffs and Trade (GATT) is a multilateral treaty aimed at promoting international trade by reducing or eliminating trade barriers such as tariffs and quotas. Established in 1947, GATT set the framework for trade negotiations and established principles that governed international commerce, fostering economic interdependence among countries through cooperative trade policies.

5 Must Know Facts For Your Next Test

1. GATT was established in 1947 and was a key framework for facilitating international trade until the establishment of the WTO in 1995.
2. The main principles of GATT include most-favored-nation (MFN) treatment and national treatment, which aim to ensure non-discriminatory trade practices among member countries.
3. GATT led to several rounds of negotiations, with the Uruguay Round being the most significant, resulting in the creation of the WTO.
4. The agreement helped to significantly reduce tariffs on a wide range of goods, fostering an environment conducive to global trade expansion.
5. GATT also encouraged countries to engage in bilateral and multilateral trade agreements, furthering economic interdependence among nations.

Review Questions

• How did GATT contribute to the establishment of economic interdependence among member countries?
  • GATT contributed to economic interdependence by promoting international trade through the reduction of tariffs and other trade barriers. By establishing rules for fair competition and ensuring that member countries treated each other equally under the most-favored-nation principle, GATT fostered a cooperative environment. This encouraged nations to rely on each other for goods and services, creating a network of interdependent economies that benefitted from increased trade.
• Evaluate the impact of GATT on global trade patterns following World War II.
  • GATT had a profound impact on global trade patterns after World War II by facilitating a significant reduction in tariffs and promoting free trade principles. This led to an increase in international commerce as countries became more interconnected economically. The agreement laid the groundwork for future trade negotiations and organizations, ultimately contributing to globalization and altering traditional trade routes as nations sought competitive advantages in their exports.
• Assess the long-term effects of GATT's principles on modern international trade agreements.
  • The long-term effects of GATT's principles are evident in today's international trade agreements which continue to emphasize non-discrimination and transparency. These principles have been integrated into newer frameworks like the WTO, influencing how countries negotiate terms for trade. Additionally, the legacy of GATT has shaped contemporary discussions around trade liberalization and economic policy, as nations strive to balance domestic interests with the benefits of participating in an interconnected global economy.

Related terms

WTO:

The World Trade Organization (WTO) is an international organization that succeeded GATT in 1995, providing a forum for negotiating trade agreements and resolving trade disputes.

Tariffs:

Tariffs are taxes imposed on imported goods, which can create trade barriers and influence the prices of products in domestic markets.

Trade Liberalization: Trade liberalization refers to the process of reducing restrictions on international trade, allowing for more free flow of goods and services between countries.