GATT

Definition

The General Agreement on Tariffs and Trade (GATT) was a multilateral treaty established in 1947 aimed at promoting international trade by reducing or eliminating trade barriers such as tariffs and quotas. It played a vital role in shaping global economic policies and agreements, influencing Japan's post-World War II economic growth and integration into the international community.

5 Must Know Facts For Your Next Test

1. GATT was created after World War II to foster economic cooperation and prevent the kind of protectionist policies that contributed to the Great Depression.
2. Japan joined GATT in 1955, which marked a significant step in its recovery and reintegration into the global economy after the war.
3. The GATT rounds of negotiations, particularly the Uruguay Round (1986-1994), were crucial in expanding the agreement's scope to include services and intellectual property.
4. By promoting free trade, GATT helped Japan to become one of the world's leading economies, significantly boosting its exports.
5. GATT laid the foundation for the eventual establishment of the WTO, which now includes stricter enforcement mechanisms for trade agreements.

Review Questions

• How did GATT influence Japan's economic recovery and growth after World War II?
  • GATT significantly influenced Japan's economic recovery by providing a framework for international trade that reduced barriers such as tariffs. By joining GATT in 1955, Japan gained access to markets around the world, allowing it to increase its exports and integrate into the global economy. This participation not only facilitated foreign investment but also encouraged domestic industries to become more competitive on an international scale, leading to rapid economic growth during the post-war era.
• Evaluate the impact of GATT negotiations on global trade practices, especially during the Uruguay Round.
  • The Uruguay Round was a landmark series of negotiations under GATT that expanded its focus from just goods to include services, intellectual property, and agricultural products. This shift had profound implications for global trade practices as it set new rules that encouraged trade liberalization across various sectors. The outcome of these negotiations helped create a more comprehensive framework for international commerce, leading directly to the establishment of the WTO, which strengthened enforcement of trade agreements and addressed issues that were previously under-regulated.
• Analyze the long-term effects of GATT on international relations and economic policies among member countries.
  • GATT's establishment laid crucial groundwork for fostering cooperation among member countries through mutually beneficial trade agreements. Over time, it led to increased interdependence between nations as countries relied on each other for goods and services. This interdependence has played a key role in shaping diplomatic relations and has encouraged countries to pursue more open and collaborative economic policies. However, it has also led to tensions over trade imbalances and protectionist sentiments in various nations, highlighting the complex dynamics of global trade relations today.

Related terms

WTO:

The World Trade Organization (WTO) is the successor to GATT, established in 1995, which aims to oversee and facilitate international trade agreements and resolve trade disputes between member countries.

Tariff: A tariff is a tax imposed by a government on imported goods, which can influence trade patterns by making foreign products more expensive compared to domestic ones.

Trade Liberalization: Trade liberalization refers to the process of reducing government restrictions on international trade, allowing for greater market access and competition.